Transandean railroads: the interruption of service and prospects for resumption

Building the infrastructure and then operating a railroad which starts on the Pacific coast of South America and which, a few score kilometres inland, must climb close to 4,000 metres above sea level in the Andes mountains has always presented challenges both for the civil engineers responsible for its construction and for the managers in charge of its operation.As at mid-2001, two of the four transandean railroads that ran 20 years ago are out of service, owing to adverse weather conditions, and a third is not operating as a result of institutional problems.Nevertheless, two of the three railroads that are now shut down could resume service soon. Furthermore, there is a possibility that a new transandean railroad could be built that would cross the Andes mountains further south, at an altitude of less than 1,750 meters.

The opportunities and risks associated with privatizing railways in Latin America

Most railways in Latin America were built by private firms, often foreign owned. Over time, owing to a combination of nationalizations and competition from road transport, virtually all railways passed into government hands; the railroad industry became more and more of a white elephant for the Government because of the ever-increasing subsidies it swallowed up, its dwindling role in national economies, and a conviction that Governments should not be involved in productive activities. Consequently, the late 1980s saw the start of a trend towards denationalization of railways, with the latter being turned over to private, often foreign, interests. In this way, the railway industry in Latin America has come full circle in the space of 150 years. So far, there has not been any assessment of the recent privatization of railways in Latin America. However, the conclusion would probably be that: (i) privatization has on the whole been successful, and (ii) the results achieved would have been more positive still, had some things been done slightly differently. One problem is that the bidding process has failed to take into account the positive externalities associated with railways, such as the contribution they make to reducing road maintenance costs and environmental damage caused by road transport. Another unresolved issue is whether to put the entire railway system up for tender, or to invite separate bids for infrastructure and services. Economies of scale operate in the railway industry, favouring the existence of a number of rail companies. In the past, the railway companies of neighbouring countries such as Argentina and Paraguay, and Bolivia and Chile, enjoyed ties at director level, but these came to an end with the nationalization of railways. Now that the era of State involvement is itself drawing to a close, we can expect to see the formation of integrated railway systems, one of which might extend from Quijarro, on the border between Bolivia and Brazil, to Puerto Montt in the south of Chile.