Railway privatisation in Argentina

Railway privatisation in Argentina was a process which began in 1993 under the presidency of Carlos Menem, following a series of neoliberal economic reforms. This primarily consisted of breaking-up the state-owned railway company Ferrocarriles Argentinos (FA) and allowing the former lines to be operated by private companies instead of the state. This policy was met with widespread criticism and proved catastrophic for the Argentine railways whose service worsened significantly in the years that followed, with entire lines closing and infrastructure deteriorating beyond repair.[1][2][3] Privatisation was ultimately reversed in 2015 with the creation of Nuevos Ferrocarriles Argentinos.[4][5]

Carlos Menem's administration carried out the privatisation process.

Background
Sarmiento Railway rolling stock during the FA era.

Since railway nationalisation in 1948, during the presidency of Juan Perón, the network had been operated by the state-owned company Ferrocarriles Argentinos (FA) which comprised the six relatively independent divisions, Sarmiento, Mitre, Urquiza, San Martín, Belgrano and Roca.

By the time that President Carlos Menem's administration took over the Government in 1989 FA had a serious economic deficit, with no investment projected and a high amount of social charges owed to the state. The amount of freight services had considerably decreased between 1970 and 1990, going from 13,500 million tons to 7,500 million twenty years after (almost a 55% decrease). The infrastructure and rolling stock were seriously deteriorated, with the exception of central network. Most part of locomotives and coaches had become obsolete therefore the costs of maintenance had also increased. The aim was to reduce FA's deficit previous to a major restructuring of the company.

With the railway network's chronic deficit having risen to US$355 million per year (about US$1 million per day), the National Congress adopted Law 23,696 (named "Ley de Reforma del Estado") that began the privatisation process in 1989.[6]

The Law allowed president Menem to declare a state of emergency over any state-owned company with the objective to proceed to a privatisation or closure of that company. In November 1989, Menem pronounced his famous threat to any railworkers contemplating strike action: "Ramal que para, ramal que cierra" ("A line that goes on strike is a line that will be shut").[7][8]

Freight Services
Ferrosur Roca was granted Roca Railway.
Nuevo Central Argentino took over Mitre Railway.
Ferroexpreso Pampeano operated Sarmiento Railway.
América Latina Logística worked on Urquiza and San Martín networks.

Although FA supported the idea of operating the freight line competing with private companies, the Ministry of Public Works (assisted by the World Bank) excluded FA from the activity, allowing only private concessionaires to operate the lines. In 1990 a program of restructuring was signed by FA, the Ministry and the World Bank. That agreement was the first official document to suggest the possibility to exclude FA from the operation of public transport.[9]

The government granted concessions for a term of 30 years, extensible to 10 years else. It was also established that investments made by private operators became property of the state when the contract of concession finished. The concessionaire only kept the rolling stock or other goods acquired during the term of concession.

For freight transport, the government established zones of interest according to traffic. The first section was Rosario–Bahía Blanca with a traffic estimated in 2,000,000 tones carried by year along its 5,300-km length. The second section was the Urquiza Railway with 1,200,000 ton per year along 2,700-km length. The third section was Mitre Railway with 2,500,000 tons (also considering the possibility of passenger services) in its 4,800-km length. The San Martín Railway was included as the fourth section, with 4,700-km length

Most part of Roca Railway was granted in concession to Ferrosur Roca, property of Loma Negra, the largest cement producer of Argentina. The San Martín was granted to Buenos Aires al Pacífico S.A. while Sarmiento was granted to Ferroexpreso Pampeano (owned by Techint), Urquiza to Ferrocarril Mesopotámico and Mitre to Nuevo Central Argentino.

Only the Belgrano Railway freight service remained under the control of the state due to lack of interest from private inversors. Nevertheless, the railway would be granted to Belgrano Cargas S.A., a consortium established by railway union "Unión Ferroviaria" in 1999. That same year, Brazilian company América Latina Logística (ALL) took over the Urquiza and San Martín lines replacing Ferrocarril Mesopotámico and BAP respectively.

Freight services were granted in concession as follows:[10]

Freight services privatisation
Concessionaire Railway/s Gauge (mm) Length (km) Period
Ferroexpreso PampeanoSarmiento, Roca[lower-alpha 1]1,6765,0941991–present
Nuevo Central ArgentinoMitre1,6764,9001992–present
Ferrosur RocaRoca1,6763,1451993–present
Buenos Aires al Pacifíco[lower-alpha 2]San Martín1,6765,6901993-1999
Mesopotámico General UrquizaUrquiza1,4352,7041993-1999
América Latina LogísticaUrquiza1,4352,7041999-2013
San Martín1,6765,6901999-2013
Belgrano Cargas[lower-alpha 3]Belgrano1,0009,8601999-2013
  1. Only the Rosario and Puerto Belgrano line.[11]
  2. Not to be confused with the British-owned company Buenos Aires and Pacific Railway, the original concessionary and builder of the line that had been awarded concession in 1872.[12]
  3. Taken over by state-owned Belgrano Cargas y Logística in 2013.

Passenger services

Commuter rail (Buenos Aires)
A Metropolitano train in La Plata.
TBA operated Mitre and Sarmiento lines.
Ferrovías train at Grand Bourg.
Buenos Aires Underground unit.
Ferrocentral ran trains to Tucumán.
Tren de las Sierras served by Ferrocentral.
Ferrobaires was created by the government of Buenos Aires.
The Southern Fuegian Railway was revived in 1994.

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. (FEMESA) 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 Ferrocarriles Argentinos, together with the Subte, as shown below:

Passenger services privatisation
Concessionaire Line/s Gauge (mm) Length (km) Period
MetrovíasUrquiza1,435261994–present
Subte1,435441994–present
MetropolitanoSan Martín1,676551994-2007
Roca1,6762521995-2007
Belgrano Sur1,000581994-2007
FerrovíasBelgrano Norte1,000521994–present
Trenes de Buenos AiresMitre1,6761821995-2012
Sarmiento1,6761671995-2012
Tren de la Costa [lower-alpha 1]Mitre1,43515,51995-2013
Corredores FerroviariosMitre1,6761822014-15
San Martín1,676552014-15
ArgentrenRoca1,6762522014-15
Belgrano Sur1,000582014-15
  1. Taken over by Trenes Argentinos Operadora Ferroviaria when contracts of concession were revoked or expired.

The concessions were mainly for 10 years, with an optional 10-year extension, except for the Metro and the Línea 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.

In spite of these companies receiving large government subsidies,[13] the services operated by Metropolitano deteriorated to a point where the concession for the operation of Línea San Martín was revoked in 2004 and concessions for the operation of the other two lines by the company were revoked in 2007.[14][15][16][17] All three lines were subsecquently operated by transitional private consortium UGOFE.[18]

Trenes de Buenos Aires operated the Mitre and Sarmiento lines until the concession was revoked after the Once rail disaster on February 22, 2012, at Once Station, Buenos Aires, in which 51 people died and at least 703 people were injured,[19] TBA was placed under federal intervention on February 28; its concessions to operate the Mitre and Sarmiento lines were ultimately revoked on May 24.[20] After the cancellation of the contact, both lines were taken over by transitional consortium Unidad de Gestión Operativa Mitre Sarmiento (UGOMS). Metrovías took over the operation of the Buenos Aires Subte, the Buenos Aires Premetro, and the Urquiza Line in 1994, and established an earlier closing time of 23:00 on all three systems in order to conduct extensive maintenance and reconstruction works, which was retained even after the reconstruction works were completed.[21] Numerous proposals to extend the operating hours of all three Metrovías-operated services have failed.[22]

When UGOFE and UGOMS were dissolved, Corredores Ferroviarios (a company part of Grupo Roggio, which also owns Metrovías) and Argentren took over the Mitre / San Martín and Belgrano Sur / Roca lines, respectively.[23][24][25][26][27][28][29] The company operated both lines until the government rescinded the agreement with the company in March 2015.[30][31][32][33]

Apart from Corredores Ferroviarios, other private company, Argentren S.A., was granted concession to operate the Roca and Belgrano Sur lines.[31][32][33] The contract was also revoked by the government in March 2015.[30]

Other rail 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 January 1, 1993, unless provincial authorities either agreed to assume responsibility for them or selected a private concessionaire to operate them on their behalf.

Provincial governments that took over the services to avoid closures were:

On the other hand, La Trochita was never privatised and closed in 1992 due to the lack of interest of private investors. Nevertheless, the line would be later reopened, being currently operated by Governments of Río Negro and Chubut provinces together.

Long-distance and tourist services granted to private companies are listed below:

Other passenger services privatisation
Concessionaire Division Gauge (mm) Length (km) Period
Tucumán FerrocarrilesRetiro–Tucumán1,6761,2601997-2000
Ferrocentral [lower-alpha 1]2004-2014
Ferrocarriles MediterráneosCórdoba–Villa María1,6761501992-2004
FerrocentralTren de las Sierras1,0001502007-13
Servicios Ferroviarios PatagónicoViedma–Bariloche1,6768261993-?
Trenes Especiales ArgentinosF. Lacroze–Posadas1,6761,0602003-2011
(unknown)Southern Fueguian [lower-alpha 2]0,50071994–present
(unknown)Tren a las Nubes [lower-alpha 3]1,0002171991-2005
EcoTren2005-2014
  1. Taken over by Trenes Argentinos Operadora Ferroviaria when contracts of concession were revoked or expired.
  2. The Southern Fueguian was not included into any railway division after 1948 nationalisation. It remained closed from 1952 until 1994 when the SF was granted in concession to a private company that completely rebuilt the line.
  3. Taken over by the Government of Salta after the last concession was revoked.[35]

See also

Bibliography
  • Reshaping Argentina's Railways by Jorge H. Kogan & Louis S. Thompson - Japan Railway Review

References
  1. El servicio ferroviario argentino de las últimas dos décadas, el antes y después de las privatizaciones - Monografias.com
  2. Privatización de los ferrocarriles: “Ramal que para, ramal que cierra” - Contra Molinos de Sortilegios, 24 July 2013
  3. COMO PERDIMOS EL FERROCARRIL ARGENTINO - Ancaloo, 29 September 2008
  4. "Senado convirtió en ley estatización de trenes", Ambito Financiero, 16 Apr 2015
  5. "Con sólo dos votos en contra, el Senado sancionó la ley de estatización de los trenes", Cronista.com, 16 Apr 2015
  6. Ley 23.696 - Emergencia Administrativa. Privatizaciones y Participación del Capital Privado on Infoleg, promulgated 18 Ago 1989
  7. "Ramal que cierra, pueblo que muere", Clarín, 25 May 1997
  8. "De la resistencia a la recuperación", Página/12, 31 Mar 2014
  9. "Best Methods of Railway Restructuring and Privatization" by Ron Kopicki & Louis S. Thompson, CFS Discussion Paper Series n° 111 - World Bank website
  10. "La concesión del sistema ferroviario de Cargas" - Historia de los Ferrocarriles Argentinos, CNRT website (Archive), 23 Dec 2011
  11. "Mapa de la red - FEPSA", CNRT website (Archive)
  12. British Railways in Argentina 1857-1914: A Case Study of Foreign Investment by Colin M. Lewis - Athlone Press (for the Institute of Latin American Studies, University of London, 1983)
  13. "Los que viven del subsidio", Página/12, 16/05/2007
  14. "Hubo numerosos alertas que no se atendieron", La Nación, 17 May 2007
  15. "Metropolitano, una compañía con reiteradas sanciones", Terra, 16 May 2007
  16. "Protestaron contra el ex Roca en Constitución", Clarín, 16 Jan 2007
  17. "Lo que pasó se veía venir", Página/12, 17 May 2007
  18. "La UGOFE se hará cargo de los servicios de las dos líneas ferroviarias", La Prensa
  19. "Argentina train crash in Buenos Aires kills dozens". BBC News. Retrieved 2012-02-22.
  20. "Finalmente, el Gobierno le sacó las concesiones del Sarmiento y del Mitre a TBA". Clarín.
  21. Presentan proyecto para que el Subte funcione durante la noche – EnElSubte, 16 November 2010.
  22. "Reúnen firmas para apoyar el proyecto de ampliación del horario del Subte". enelSubte.com (in Spanish). 25 August 2015. Retrieved 10 January 2016.
  23. Roggio y EMEPA se repartirán el manejo de cuatro ferrocarriles clarin.com
  24. Trenes cero kilómetro después de cincuenta años/ Cambios Recientes pagina12.com.ar
  25. "Trenes: le dan a Roggio el Mitre y el San Martín y a Emepa, el Roca y el Belgrano Sur", La Nación, 12 Feb 2014
  26. "Las privadas volverán a operar la mayoría de las líneas ferroviarias", Clarín, 12 Feb 2014
  27. "El Gobierno estableció un nuevo régimen de operaciones de las líneas ferroviarias", Telam, 12 Feb 2014
  28. "De a uno por línea, para mejor control", Página 12, 12 Feb 2014
  29. "Metrovías operará las líneas Mitre y San Martín", En el Subte, 12 Feb 2014
  30. "Ya está lista la ley que prevé más control estatal sobre los trenes", Clarín, 5 Mar 2015
  31. "Estado rescindió contrato de trenes a privados y avisó que no pagará indemnizaciones", Ambito Financiero, 2 Mar 2015
  32. "Buenos Aires commuter routes renationalised", Railway Gazette, 3 Mar 2015
  33. Resolution N° 171/2015 - Official Bulletin of Argentina
  34. "Avanza la reactivación del Tren Patagónico", Minuto Uno, 16 Apr 2014
  35. "Tras las fallas de seguridad, Salta estatizó el Tren a las Nubes", Infobae 23 Jul 2014
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