Kansas City SmartPort Brochure

SMARTPORT

AMERICA'S INLAND PORT BDLUTIDN

WWW.KCSMARTPORT.COM

TWO WORLDS... ONE ROUTE

Lazaro Cardenas-Kansas City
TransportBtion Corridor Offers
Opportunities for International Shippers;

GREATER ECONOMIC PROSPERITY FOR NORTH AMERICA

For those who live in Kansas City, the idea of receiving containers nonstop from the Far East by
way of Mexico may sound unlikely, but later this month that seemingly far-fetched notion will
become a reality.

Thanks to the evolving trade corridor between Lazaro Cardenas in the State of Michoacan,
Mexico and Kansas City, Missouri, USA, cities and towns from the Mexican coast through the
middle of America will soon benefit from greater participation in Asian-North American trade.

Lazaro Cardenas-Kansas City Corridor
Offers Faster Asian-North American Trade

The Lazaro Cardenas-Kansas City Corridor refers to a trade route linking Kansas City to key
Asia-Pacific markets via a ships-to-rail terminal at the port of Lazaro Cardenas in the State of
Michoacan, Mexico. Thanks to an innovative series of international agreements, infrastructure
improvements and new technologies, this corridor is a reality.

As the American economy expands and the
economies of the Far East ramp up production to
meet our demand for goods, the pace of
international trade will exceed the ability of
major West Coast ports such as Long Beach and
Los Angeles to accommodate the flow of goods
into the United States.

Additionally, congestion in these highly
populated areas will prevent expansion of
intermodal transportation facilities, straining the
already overburdened rails and roads linking
California to Chicago and the rest of the nation.

The United States imported more than $941
billion from APEC countries in 2004, and that
number is only expected to accelerate as the
American economy grows and demand for high-
quality, low-cost goods increases.

U.S. Imports for Consumption
from APEC Nations, 2004

(in 1,000s of Dollars)

Count^^H

H Imports^^^H

Canada

255,660,079 ^H

China

196,159,513 ^H

Mexico

154,958,771 ^H

Japan

129,534,698 ^H

Korea

45,064,177 ^H

Taiwan

34,461,963 ^H

Malaysia

28,070,070 ^H

Thailand

17,509,812 ^H

Singapore

14,848,243 ^H

Russia

11,636,955 ^H

Indonesia

10,778,296 ^H

Hong Kong

9,241,068 ^H

Philippines

9,144,222 ^H

Australia

7,563,612 ^H

Vietnam

5,161,066 ^H

All Others

12,002,085 ^H

Total ^^

941,794,629 ^H

In 2004, nearly $220 billion in cargo passed
through the ports of Long Beach and Los
Angeles alone.

The Port Authority of Long Beach estimates that
if aggressive trade projections hold, by the year
2020, the port will have to develop additional
freight handling facilities, requiring more than
450 acres of landfill, a move that could prove to
be cost-prohibitive and face serious opposition
from environmental groups and other
stakeholders.

The threat of future terror attacks, natural
disasters or labor strife spotlights the need for
redundancies in the system to ensure alternate
routes for cargo traffic in the event of unforeseen
emergencies.

The Lazaro Cardenas-Kansas City corridor will
offer much-needed capacity to meet forecasted
growth and enhance the overall security of
international trade in the years to come.

Decade of New Developments
Leads to Creation of Lazaro
Cardenas-Kansas City Corridor

In the past decade, a number of new
developments have contributed to making the
Lazaro Cardenas-Kansas City Corridor a reality.
Most notably, the Mexican government has taken
aggressive steps toward privatizing its
infrastructure and promoting business-friendly
partnerships to enhance international trade.

In 1995, the decision was made to decentralize
and partially privatize the nation's seaport
operations, creating the possibility for 100-
percent foreign investment in terminal ownership
and up to 49-percent foreign investment in each
port's Administracion Portuaria Integral (API or
Integrated Port Authority).

Source: Data compiled from tariff and trade data
from the U.S. Department of Commerce, U.S. Treasury
and the U.S. International Trade Commission.

This new ruling has attracted billions of dollars in
new infrastructure investment, including
development at Lazaro Cardenas, in Michoacan,
where Hong Kong-based Hutchison Port
Holdings, Ltd., the world's largest developer and
operator of deepwater ports, is in the midst of a
20-year, US$290 million program that will
expand the existing terminal to include a 1,481-
meter (4,887-foot) berth, and a channel 18 meters
(59 feet) deep capable of accommodating four
ultra large container vessels (ULCVs)
simultaneously.

Plans also call for the expansion of the current
15-hectare (37.5 acre) shipyard to 102 hectares
(255 acres) with a static capacity of more than
70,000 TEUs (twenty -foot equivalent units) and
dynamic capacity of more than 2 million TEUs,
and employing upwards of 2,900 workers.

The three largest shipping companies, CP Ships,
APL and Maersk Sealand already have regularly
scheduled service into Lazaro Cardenas. Earlier

this year, the State of Michoacan donated a 180-
acre tract of land located adjacent to the Port of
Lazaro Cardenas for the purpose of developing
an industrial park to ensure orderly future
development at the port.

In 1997, the government-owned Ferrocarriles
Nacionales de Mexico (FNM) privatized the first
of its regional railroads, the Northeast Railway,
and Kansas City Southern teamed with
Transportacion Maritima Mexicana (TMM) to
create Transportacion Ferroviaria Mexicana
(TFM).

This partnership paved the way for a ships-to-rail
transportation system connecting the North
American interior to the Pacific Rim, establishing
an alternative trade route for shippers seeking to
avoid the West Coast bottleneck.

In 2002, Mexico hosted the APEC Summit and
subsequently launched a new program, the Trans-
Pacific Multimodal Security System (TPMSS).
This program has created greater transportation
infrastructure capacity, more cooperative customs
processes and greater security along the entire
supply chain, thus facilitating greater economic
growth along what has become the Lazaro
Cardenas-Kansas City Corridor.

Security is a primary component in the TPMSS,
which includes four major security programs: the
Business Anti-Smuggling and Security Coalition
(BASC), Container Security Initiative (CSI), the

U.S. -Mexico Smart Border plan and the U.S.
Customs Trade Partnership Against Terror.

While all four programs are focused on reducing
the threat of terror and smuggling of contraband
into North America, all have been designed to
Intelligent Transportation Systems (ITS) and best
practices to ensure that security does not unduly
slow the transport of goods to their destinations.

Security Screening a Primary
Concern for Intermodal Shipments

Shipments will be pre-screened in Southeast Asia
and the shipper will send advance notification to
Mexican and American Customs with the
corresponding "pre-clearance" information on the
cargo.

Upon arrival in Mexico, containers will pass
through multiple X-ray and gamma ray
screenings, allowing any containers with
anomalies to quickly be removed for further
inspection.

Container shipments will be tracked using
intelligent transportation systems (ITS) that could
include global positioning systems (GPS) or radio
frequency identification systems (RFID) and
monitored by the ITS on their way to inland
trade-processing centers in Kansas City and
elsewhere in the United States.

The Kansas City Connection

In March 2005, Kansas City signed a cooperative
pact with representatives from the Mexican State
of Michoacan and representatives from Lazaro
Cardenas to increase cargo volume between the
two cities.

Until recently, moving containers through Mexico
wasn't a competitive option for shippers, as
Mexican customs charged a "through bond" of up
to $100,000 per-container for shipments passing
through Mexican territory. The new rules allow
shippers to move as many containers as they like
for a single $55,000 bond. These savings could
make shipping containers through Lazaro
Cardenas up to 15 percent less expensive than
through Long Beach or Los Angeles.

Kansas City offers the opportunity for sealed
cargo containers to travel to Mexican port cities
such as Lazaro Cardenas with virtually no border
delays. It will streamline shipments from Asia
and cut the time and labor costs associated with
shipping through the congested ports on the West
Coast.

In April 2005, Kansas City Southern completed
purchase of a controlling interest in
Transportacion Ferroviaria Mexicana (TFM),
enabling TFM, The Kansas City Southern
Railway and The Texas Mexican Railway
Company to operate under common leadership,
creating a seamless transportation system
spanning the heart of North America known as
"The Nafta Railway."

The acquisition created a single 1,300-mile
railroad connecting the Midwestern United
States, central Mexico and Mexico's Pacific
seaports.

NAFTA
R a i

KCSR, Tex Mex, TFM

Operating Under Common Control

B3

The union of the three railroads will spur even
greater investment in cross-border transportation
infrastructure, implementation of advanced cargo
tracing and tracking systems, and improved
security.

Kansas City Southern is installing Spanish
language versions of its computer operating
system (MCS) in an effort to increase train
speeds, reduce waiting times at terminals and
enable the free flow of locomotives and rail cars
between the United States and Mexico via
Kansas City Southern's railroad bridge at Laredo,
Texas.

The Lazaro Cardenas-Kansas City Corridor
Offers Prosperity All Along the Way

The rail corridor also connects the major industrial centers of San Luis Potosi and Monterrey
to the rest of the world.

San Luis Potosi is located in the geographical center of Mexico and is equidistant from Lazaro
Cardenas and the Gulf of Mexico port of Veracruz, making it a strategic rail center for cargo
traveling east-to-west or west-to-east. Monterrey, a city of 4.5 million people, is the industrial
capital of Mexico, operational home to TFM and serves as a main distribution hub for
manufactured goods throughout Mexico.

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Expanding U.S.-Mexican Trade

The Lazaro Cardenas-Kansas City Corridor
will also spur greater trade between Mexico
and the United States. Since 1997, American
exports to Mexico have increased by 55.2
percent to $110.8 billion, while imports have
grown 44.8 percent to $155.8 billion.
This trading partnership will only benefit
and grow as a result of the new trade route,
benefiting the economies of cities and
towns along the way.

Kansas City SmartPort, Inc., is a non-profit organization dedicated to transforming tlie Kansas City region from an
liistoric trade liub to a cutting-edge, liigli-tecli inland port. Its goals are to grow the transportation and logistics
industry; to make it cheaper, faster and safer for importers and exporters to move their goods; and to improve
access to international markets for all businesses. Kansas City SmartPort, which promotes the bi- state area's
transportation assets under the banner of "America's Inland Port Solution," is supported by dozens of area
companies, communities and trade- related organizations in the Kansas City region. For more information about
The Lazaro Cardenas- Kansas City Corridor or Kansas City SmartPort, visit their Web site at www.kcsmartport.com

Captions for photos:

1. The Port of Lazaro Cardenas on Mexico's Pacific Coast is in the midst of a $290 milUon
expansion that will expand its capacity to more than 2 million TEUs per year.

2. The world's three largest shipping companies already offer regularly scheduled service at Lazaro Cardenas.

3. In 1997, Kansas City Southern and TMM joined forces to create Transportacion Ferroviaria Mexicana (TFM),
paving the way for what is now known as "The Nafta Railway."

4. A single 1,300-mile railroad, under common management, seamlessly connects Mexican seaports to the
central United States.

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5. This is the sole railroad bridge connecting the United States with Mexico at Laredo, Texas.