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Railroads and Economy

Railroads in the north and Yucatán carried more export traffic than anything else, but those in the center-gulf and center-south relied mostly on domestic traffic. In the shadow of the export economy, domestic products did benefit from the wider markets, cheaper transport costs, and great factor mobility afforded by the railroad, as well as from the political stability, population growth, and urbanization of the Porfiriato. For haciendas producing pulque, for example, the railroad ultimately resulted in an 80 percent savings on shipping costs and a vastly expanded industry. Pulque shipments to Mexico City and to new markets elsewhere constituted an important traffic source for the Mexicano, Interoceánico, and Hidalgo y Nordeste Railroads. Throughout central Mexico, landowners responded rapidly to the arrival of the railroad, investing in new machinery, both diversifying and expanding their production of food crops and other goods for the newly accessible markets of the country's major cities. The arrival of the railroad occasioned the rapid development of cotton cultivation in La Laguna, which came to supply needed raw material to textile factories in the Guadalajara, Orizaba, and Puebla areas. Cheaper transport favored the emergence of a genuine process of industrialization for the first time in Mexico. According to scholar Stephen Haber, "By 1910 Mexico had well-developed beer, cotton and wool textile, basic chemical, iron and steel, paper, cement, shoe and boot, and cigarette industries."

Nevertheless, railroads provided the Porfirian economy a more reduced stimulus to growth than they had in the North Atlantic nations. In addition to concentrating benefits in mining and the export sectors, railroads transferred many of their potential multiplier effects abroad. The rail system relied heavily on imports of locomotives, rails, rolling stock, skilled labor, and even fuel. Wages to Mexicans constituted 40 to 55 percent of operating expenses, yet railroad salaries did not keep up with inflation, and the best wages went to foreign employees. Subsidies that the Mexican government paid rail lines were considerable, reaching perhaps 200,000,000 in pesos of 1900, a sum that does not include the interest generated by the portions of Mexico's foreign debt used to pay the subsidy. When interest payments and profit remittances are also included, it is likely that about 28 to 30 percent of the direct social savings gained from railroads in 1910 leaked abroad.