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Railroads and Material Progress

Directly and indirectly, railroads stimulated material progress in the Porfiriato through the impact of the foreign investment that became the motor of Mexican economic change. The successful construction and operation of foreignowned railroads in the early 1880s legitimized Mexico's reputation in the United States and Europe as a reliable and lucrative area for investment. By 1911 the United States accounted for 38 percent of all foreign investments in Mexico and 29.1 percent in Great Britain, their direct investments having risen 33- and 10-fold, respectively, since 1883. Transport and communications constituted a particularly strong sector for external involvement. Railroads comprised onethird of all foreign investments in 1911, while public services accounted for another 7 percent. U.S. and British investors were responsible for 42.3 and 35.5 percent, respectively, of the foreign capital in Mexican railroads by the end of the Porfiriato. British and Canadian capital dominated foreign investments in tramways and related electric power generation in Mexico City and a number of other urban centers throughout the country. Telephone service became another activity for foreign investors as the Compañía Telegráfica y Telefónica Mexicana, a subsidiary of Bell Telephone, received the first nationwide concession in the mid-1880s, and the Empresa de Teléfonos Ericsson brought Swedish capital in to compete for the Mexico City telephone market during the last four years of the Porfiriato. Additional independent telephone systems were managed by the railroads and recipients of statechartered concessions.

International traffic reaped the greatest share of the new transport savings. Export freight rates were about half those charged domestic freight, and by 1910 the export sector commanded over one-half the savings created by rail freight transport. Exports made up one-fifth of the transportable goods produced in Mexico, but used over one-half of the rail facilities. Domestic sectors created almost 80 percent of all transportable goods yet only employed about 47 percent of railroad capacity. The greatest share of railroad savings flowed to foreign investors in the Mexican mining industry. Over two-thirds of all rail freight consisted of mining industry freight plus all imports and exports. For U.S. entrepreneurs, the nexus between rail and mining exports proved particularly powerful, the two sectors constituting almost 80 percent of total investments from the United States in Mexico by 1911. Mining and smelting investments brought the great weight of U.S. corporate interests such the Guggenheims and the American Smelting and Refining Company to northern Mexico. They reoriented Mexico's international trade more toward the United States, opened new traffic routes by rail to the U.S. border and by sea through Tampico, and generally made northern Mexico a vastly more important economic and political force in Mexican life.