Protests in Michoacán, Mexico, Continue to Disrupt Rail and Road Traffic

Protests in Michoacán, Mexico, Continue to Disrupt Rail and Road Traffic

October 8th, 2021

For more than two months, teachers of the National Coordinator of Education Workers union have been halting rail traffic in the municipality of Uruapan, in the state of Michoacán, Mexico. The blockade began on July 18 in Caltzontzin, between the Port of Lazaro Cardenas and Morelia, when 25 to 30 teachers took to the railways to protest missed salary payments. Thousands of education workers across the state are still affected by the late salary payments.

Rail operations to and from the Port of Lazaro Cardenas, vital for cargo movement in Mexico, have been impacted significantly. Situated near major production and manufacturing centers in central Mexico, the protests have led to a lack of imported supplies needed for automotive production. As protests continue to disrupt port operations, the continuity of automotive supply chains in Mexico remains at risk.

Financial losses escalate due to constant stoppages

The issue has reached such a critical level that Kansas City Southern Mexico announced that it will stop investing in projects in Michoacán due to the lack of guarantees in the passage of cargo. Each day that the blockade continues, seven more trains are halted, each carrying approximately 5,500 tons of cargo. The Association of Industrialists of Michoacán estimates that for every 24 hours of halted rail traffic, MXN 50 million (USD 2.5 million; EUR 2.1 million) is lost. Shipping costs continue to increase at the Port of Lazaro Cardenas, as alternative transportation must now be found for inbound cargo.

In the last 15 months, the state of Michoacán has led Mexico in the number of hours of rail blockades accumulated. Compared to Michoacán’s 4,090 hours of accumulated blockades in the last 15 months, Veracruz, another key state for cargo transportation, amassed 37 hours. Coparmex, the Employers’ Confederation of the Mexican Republic, has estimated that MXN 2.8 billion (USD 139 million; EUR 119 million) has been lost during the current two-month halt in Michoacan. The most impacted industries have been automotive, steel, and grain. Petróleos Mexicanos (Pemex), and the chemical industry have also been affected, albeit less so than other sectors. 

Road blockades congest key highways and thoroughfares

Protests have expanded to major highways in Michoacán and other states. During the month of September, teachers stopped traffic on the Morelia-Uruapan highway several times. On one occasion, teachers seized several business vehicles, including cargo trucks, and set them on fire. Other road blockades were reported on the Morelia-Guadalajara and Purépero-Paracho highways. Disruptions to Federal Highway 15D, a key cargo route in Mexico, have also escalated as the teachers’ union took control of five different toll booths. In the state of Chiapas, toll booths on the San Cristóbal-Tuxtla Gutiérrez and the Arriaga-Ocozocoautla highways were also under the control of the teachers’ union.

Outlook

Representatives of the union have stated that teachers will not lift the blockade of the railway until the salary payments for August and the first half of September, a total of six weeks, are distributed. 30,000 teachers in Michoacán have not yet received these due salary payments. Demonstrations over the lack of salary have extended to other sectors of government workers as well. Judiciary workers in Michoacán shut the Morelia-Pátzcuaro highway on September 17 to demand payment for the first half of September. An estimated 2,500 employees from that department have also not been paid. Police unions in Michoacán have also had weeks without receiving their salaries, threatening demonstrations, and road blockades as well. As more time passes without pay for public service workers, the potential for future blockades and disruptions will only increase.

The state of Michoacán has had considerable fiscal challenges recently, which has resulted in these issues. In the case of the National Coordinator of Education Workers, it appears that the federal government will provide funds to pay the teachers and quell the long-term protests. This deal would guarantee funds for the teachers until December and has reportedly been agreed to by the state and federal government, although rival politicians have contested the resolution. Even if education workers are paid as part of this deal, the risk remains that other public service workers will escalate their claims and halt railways and roads in a similar effort to demand their due salaries.

Recommendations

Companies sending shipments through the Port of Lazaro Cardenas should be prepared for the risk of continual disruptions due to fiscal issues in the state of Michoacan. Supply chain managers should consider the recent instability of both rail and road transportation when making logistics decisions. Lack of salary payments will likely lead to more protests by public service workers, and the trend to block vital transportation routes will likely continue. Using Everstream Analytics’ Intelligence Monitoring capabilities, supply chain managers can better understand how the risk of political mobilizations can escalate into more significant impacts to business continuity. Everstream Analytics’ predictive abilities allow companies to stay ahead of disruptions to supply chains.

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