EXECUTIVE SUMMARY
February 2010
this month ’ s series :
The Brazilian locomotive
Brazil is by far the region’s railway leader. The
entrance of private capital between 1996 and
1999 gave the sector a major boost and since
2000 the investments have increased yearly.
Currently, trains transport only slightly more than
a quarter of Brazilian cargo. The majority of
national production continues to be moved by
trucks. The main bottleneck facing the Brazilian
railway system is the construction, expansion
and repair of the rail network. And since the
regulations that control concessions mean
private companies can only operate in the area
they have a concession for, there is no private
investment available to expand the network.
Integration
Speeding up integration plans is also key if
Brazil wants to get its minerals and grains to
pacific ports and export them to Asia. “Railway
integration has been slow; we expect that the
region of the Plata Basin will be better integrated
within a few years thanks to the investments that
are happening mostly in Brazil and Argentina”
- Rigoberto García González, the coordinator
of the South American infrastructure integration
initiative (IIRSA) in Chile. Mexico is the only
country in the region with a strong background
in railroad integration.
Passenger trains
This part of the railroad business is oriented
towards people of modest means, who have
trouble paying high prices for transportation,
and as a result profits are low or even
nonexistent. However, because it is the most
relevant rail segment from a social perspective,
states have ended up subsidizing these losses.
In Latin America there are very few suburban
passenger train services: in Buenos Aires, in
Santiago, a small service in Montevideo, and
five cities in Brazil. However, in the past few
years four new services were started, proof
that countries are increasingly interested in
passenger trains as solutions to enormous traffic
problems and environmental hazards.
Conclusion
Railroads are once again an important part
of government and company plans in Latin
America. The advantages are obvious. The
train is compatible with the need to protect
the environment and other sustainable
development requirements.
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The slow return of trains
Railroads are back on Latin America’s agenda.
After economic reforms in the late 1990s
opened the railway system up to private
capital, a number of regional governments
made plans for revitalizing trains for
passenger and cargo transportation. The
advantages of rail transport - including less
environmental impact in comparison to other
modes of transport and lower transportation
costs - have made governments reconsider
the role of trains in the region.
Having said that, so far most of these
plans haven’t made it off paper but the fact
that railroads have been reincorporated
into public debate is a sign of change of
direction. The decline of the passenger
train began in the 50s with the mass arrival
of the automobile and the rise of the jet
aircraft. Highway construction and the ever-
increasing cargo capacity of trucks conspired
against the economic feasibility of railway
systems.
As demand fell over the decades, state
budgets began financing more and more of
the maintenance and investments needed
for trains in the region but the periodic
fiscal crises and spending adjustments
ended up working against the quality of
train service. The poor state of railways and
Cargo transportation matrix
Brazil India
13%
25%
1%
4%
58%
United States
24% 46%
Trains
Road
Water
Other
30%
Source: Brazil’s national railway transportation association (ANTF)
or +56-2 941 0300.
or +56-2 941 0404.
rail equipment, plus the hefty losses at the
region’s most emblematic companies like
Ferrocarriles Argentinos (FA), the Brazilian
Rede Ferroviária Federal and Ferrocarriles
Nacionales de México (FNM), among others,
encouraged governments to open the system
up to private investment in the 90s. Many
governments retained asset ownership and
transferred management to private entities
by concession. There were some isolated
cases, like Ferronor in Chile, where ownership
of the entire infrastructure was sold to an
outside company.
However, the opening to private investment
has not solved all the sector’s problems.
In most of the countries in the region rail
networks have fewer kilometers today than
they did half a century ago. Furthermore, a
large portion of this network is made up of
old railways, making trains less competitive
compared to other transportation systems.
The biggest barrier to the sector’s
development has been that railway projects
require a considerably larger capital
investment than highways. However, the
advantages of rail transport are gaining
ground and have stimulated plans for
expansion in the sector in several countries
in the region.
Canada
49%
11%
46%
50% 43%
Russia
81%
8%
11%
 Infrastructure Daily Written and researched by
Gustavo Stok

Content Development & Analysis

At the beginning of 2008, Mexico’s government created a Editor

Raúl Ferro
US$3.9 billion National Infrastructure Fund to finance projects
Executive editor
worth a total of US$25 billion in this sector over the next 5 Henriette Iraçabal
years. In Brazil, a federal plan to accelerate economic growth
Financial services analyst
includes investments in the order of US$30 billion in roads María Alejandra Moreno

and highways between 2007 and 2010, and in Peru, the road Telecom analyst
Phil Anderson
infrastructure deficit is some US$7 billion.
Energy analyst
Michael LaGiglia
From whichever angle, infrastructure investment requirements
Financial data analyst
(and plans) come to billions of dollars. While this is nothing María José Arredondo
new, this time round the possibilities of these investments
Researchers
being made are higher than they’ve ever been before. Gonzalo Vergara
Carlos Montoya

T his means that in the next few among the projects and regulations BNamericas Infrastructure Group
years, business opportunities upon which this growing and
Editor
are as numerous as they are attractive sector of Latin American Greta Bourke
lucrative. business is based.
This is the context in which The Infrastructure Intelligence Santiago, Chile
BNamericas is launching a new Series will focus on topics such as: Eva Medalla
· Concessions Catherine Setterfield
product, the Infrastructure
Indiana Corrales
Intelligence Series, which every · Privatizations
month will focus on the biggest · Port development Sao Paulo, Brasil
trends and topics within the region · Logistical integration projects Daniel Bland
in order for you and your company · Airports
· Railways Translated into English by
to have all the information and
Evie Willis
analysis necessary to find your way · Urban transport
· Water and waste treatment Designed by
Tamara Lorca

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