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The Slow Return of Trains
Business News Americas, Feb 2010, Pages: 12
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 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.
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This title is also available in the following language
El Lento regreso del Tren (Spanish Version)
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