Railway Privatisation in Argentina
Economic history of Argentina
Rail transport in Argentina
Economic history of Argentina Forum
Following a prolonged period of hyperinflation in the 1980s, accompanied by a steep increase in fiscal deficit and a sharp fall in reserves, the Argentine government, under the presidency of Carlos Menem from 1989, initiated a series of neoliberal reforms which included the privatisation of public utility companies together with the entire railway network. Since railway nationalisation in 1948, during the presidency of Peron, the network had been operated by the state-owned company Ferrocarriles Argentinos (FA) which comprised the six relatively independent divisions, Sarmiento, Mitre, Urquiza, San Martin, Belgrano and Roca. Before privatisation began in 1990 FA ran a national network of about 35,000 km, employed 92,000 people and was losing more than US$1.0 billion a year with much of the track and many of the locomotives and rolling stock in poor condition.
The plan was to break up the network into segments and to grant concessions to private companies for their operation through competitive bidding. Freight and passenger services were separated and, since most of the intercity passenger services were not commercially attractive to the private sector, the government offered these to the provinces. The remaining passenger services in the city of Buenos Aires, including the five lines of the Metro, were potentially more viable and were treated separately.
Privatisation began with the granting of long-term concessions (30 years with an optional 10 year extension) to six companies for the operation of freight services (see Table 1). These companies were responsible for all operations and maintenance and for the implementation of the investment programme detailed in their bid. The fixed assets remained the property of the state and the operators had to pay for their use and to rent rolling stock. Freight tariffs were deregulated but were subject to state approval. The concessionaires were expected to hire as many FA employees as were required and redundancies were financed by the government with the help of the World Bank.
Initially no bids were received for the Belgrano line, and in October 1993 the government created a new state-owned corporation to continue its operation and to undertake improvements likely to make it a more attractive commercial proposition for a private buyer. Privatisation followed six years later.
Passenger Services in Buenos Aires
In March 1991 the government separated the urban passenger rail services and metro operating within the city of Buenos Aires from the rest of the rail network, and to this end created the holding company Ferrocarriles Metropolitanos S.A. Whilst the freight concessionaires were expected to make a profit, it was recognized that the operation of these services would require public subsidy. Concessions were granted to the bidder who would require the lowest subsidy. Four companies bid successfully for the seven lines originally operated by the six divisions of FA, together with the Metro, as shown in Table 2.
In spite of these companies receiving large government subsidies, the services operated by Metropolitano deteriorated to a point where the concession for the operation of Linea San Martin was revoked in 2004 and concessions for the operation of the other two lines by the company were revoked in 2007. All three lines are currently operated by the consortium UGOFE which Ferrovias joined in 2004.
The concessions were mainly for 10 years, with an optional 10 year extension, except for the Metro and the Linea Urquiza which were for an initial term of 20 years. As in the case of the freight concessions, the government maintained ownership of the assets, whilst the concessionaires undertook to operate their services as described in their original bid. Maximum fares were set by the government but were subject to automatic increases according to service quality and the prevailing rate of inflation. Financial penalties would be levied if agreed levels of service were not achieved.
Other Passenger Services
On 20 May 1992 the government announced that all inter-city passenger services, other than Buenos Aires to Mar del Plata, would be discontinued on 1 January 1993, unless provincial authorities either agreed to assume responsibility for them or selected a private concessionaire to operate them on their behalf. The services that survived in this way, together with several that were discontinued and later resuscitated, are listed in Table 3.
Reshaping Argentinas Railways, Jorge H. Kogan & Louis S. Thompson, Japan Railway Review, June 1994.
Railway Nationalisation in Argentina
Rail transport in Argentina
Argentine Government website
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