Improved connectivity attracts logistics parks and terminals to the State of Hidalgo

With the state capital, Pachuca, just 90 km north of Mexico City, Hidalgo’s location has long been a draw for investment. Economic growth in the country’s capital has attracted even more attention to the central state as it is the only flat territory that Mexico City and its suburbs can expand to. Its strategic location has brought transport and logistics infrastructure, as well as investment. In November 2017 Grupo Modelo – the Mexican branch of the world’s largest beer maker, Anheuser-Busch InBev – announced it would build a brewing and bottling plant in Apan. What is more, a plastics plant run by Grupo REYMA in Ciudad Sahagún is scheduled to commence production in 2019.

Both companies made it clear that Hidalgo’s transport networks were an important factor that played into the decision to undertake these projects. “The state’s connectivity and strategic location, as well as the desire to work with the people in Hidalgo, were the reasons why we decided to invest,” Damián Quintana Romo, director of public relations at Grupo REYMA, told local press in October 2018.

Geographical Endowment

Hidalgo’s proximity to one of the largest consumer markets in the world – Mexico City – has been key to the country’s economic growth. However, in recent years its connectivity to other cities has allowed Hidalgo to become something of an alternative to the capital. In 2009 the Arco Norte motorway, a bypass around the Mexico City metropolitan area, was opened. The motorway extends 223 km, stretching from Querétaro to Pachuca, then through to the Bajío Industrial Park in Puebla, an important hub for the automotive industry. The link between Puebla and Hidalgo – another one of the nation’s manufacturing centres – is of strategic importance for the manufacturing industry, as well as the transport and logistics sector, given the closely integrated supply chains that run throughout the Mexican states.

Construction of the Arco Norte brought a number of investments along its periphery, including the 840-acre Platah industrial park, which is located at the crossroads of the Arco Norte, and the main motorway between Mexico City and Pachuca. The project bills its location in the centre of Mexico as part of its strength in logistics efficiency and production response capacity.

As well as facilitating access between Hidalgo and the west of the country – including Mexico’s second-largest city, Guadalajara, and the Pacific ports – the Arco Norte also increased connectivity to the Carretera 57. Also known as the NAFTA Highway, Carretera 57 passes through central Mexico to the US via Tepeji del Río in Hidalgo.

Logistical Infrastructure

Taking advantage of these connectivities, a number of private companies have built logistics infrastructure in Hidalgo. The state is home to three logistics terminals — Distribution and Logistics Services in Tizayuca, Bulkmatic in Atitalaquía and the Intermodal Logistics Terminal of Hidalgo (TILH) in Tula — that provide a broad offering of multi-modal transport and storage services for a variety of products. These terminals benefit from the 800 km of railway lines that run through the state, and two of the five sites where Mexico’s two rail operators — Kansas City Southern de México (KCSM) and Ferromex — connect are in Hidalgo. Indeed, the TILH is the only intermodal logistics terminal where both cargo rail networks connect with the road links that criss-cross the country. “When companies decide to establish themselves in a location, the first thing they look at is connectivity and logistics,” Noé Paredes, director-general of Grupo UNNE, the local conglomerate that runs the TILH, told OBG. “In this respect, and in many others as well, Hidalgo is highly competitive.”

Room to Grow

Both Bulkmatic, a US-headquartered logistics company, and the TILH are expanding their facilities in Hidalgo as demand grows. Bulkmatic has plans for a fuel storage terminal. Initially, the terminal was slated to have a capacity of 900,000 barrels, but the company decided to increase its investment to $220m and boost capacity to 2.3m barrels based on indicative demand. Bulkmatic’s facility will connect with both the road network and KCSM railway. In the first half of 2019 Grupo UNNE opened its transloading multi-modal terminal at the TILH, offering the possibility for its clients to transfer products such as fuel and diesel from trains and trucks to other modes of transport.

A Natural Advantage

Hidalgo’s proximity to Mexico City and Veracruz — the country’s busiest port on the Gulf of Mexico — makes it an ideal transport and logistical crossroads. “Hidalgo is exceptionally attractive because it is safe and secure, as well as strategically located,” Francisco Orozco, commercial director for Mexico at Hutchison Ports, told OBG. “By going through Hidalgo, you can also avoid the traffic in Mexico City. Overall, there are very few places that couple a location like this with connection to both rail networks, allowing transport to access to both coasts.” While Hidalgo’s facilities face stiff competition from terminals in other parts of the country, such as Ferrovalle’s Pantaco terminal in Mexico City, APM Terminals’ facility in Cuautitlán Izcalli and the two terminals in Querétaro, Orozco said that he remains optimistic about the state’s economic prospects and attractiveness.

Road to Improvement

In any case, Hidalgo cannot rely solely on its location and notable improvements to its transport network are still needed. According to a May 2019 report from the OECD, around 62% of the state’s road network is unpaved, a figure higher than the national average of 53%.

The local business community highlights the motorway between Pachuca and the city of Huejutla de Reyes on the north-east tip of the state as among the most pressing priorities for road improvements. “This road development is a vital project because it not only offers us another road to the ports on the coast of the Gulf of Mexico, but it also improves connectivity for the agricultural activity taking place in the 200 km or so between Pachuca and Huejutla,” Edgar Espínola, president of the Business Coordinating Council of Hidalgo, told OBG.

President Andrés Manuel López Obrador, commonly known as AMLO, is committed to upgrading the highway and earmarked federal funds for the project. As of April 2019 three of the nine stages of construction were complete, according to officials in the state government. “The project is entering its most challenging stage of construction. We hope the promises surrounding the development are successfully fulfilled,” Espínola told OBG.

Airport Potential 

One of AMLO’s first acts as president was to cancel the proposed airport project in Texcoco, to the east of Mexico City, even though it was already one-third complete and had raised billions of dollars to finance its construction. Instead, the president proposed building a new airport at the Santa Lucía military air base in the north-east of the city, 10 km from the city of Tizayuca in Hidalgo. Although at the time of publication it was unclear whether the project will go ahead, a new major airport close to Hidalgo would undoubtedly generate significant economic activity for the state. “While the airport in Texcoco would have benefitted the state, a new airport in Santa Lucía would benefit us as well,” José Luis Romo Cruz, secretary of public policy of Hidalgo, told OBG. The local administration led by Omar Fayad Meneses, the governor of Hidalgo, has expressed support for AMLO’s plans for Santa Lucía, visiting the site with the president in April 2019. According to Romo, the state government is putting together a roadmap for the development of a new aerodrome in Pachuca after the facilities are moved from the existing site to complement the Santa Lucía project.

A major international airport at Hidalgo’s doorstep would increase the state’s logistical appeal, and experts expect it will lead to a wave of new industrial parks and warehouses. Independent of plans for the airport in Santa Lucía, a new airport could be built in Hidalgo, where 900 ha of land has been freed up in the Tizayuca Valley for this purpose.

The Path Ahead

Hidalgo’s attractiveness as a centre for transport and logistics is attracting companies that not only produce goods but also companies that have chosen the state as the base for their distribution centres, such as Mexican drug store chain Farmacias Guadalajara and Grupo Lala, a local dairy company. While Hidalgo’s logistics capacity has been central in its success in attracting the recent wave of investments, the state should continue upgrading its transport infrastructure, including its roads and air connections, to attract more companies from across the business spectrum and enhance its appeal as a destination for investment.