Railway privatisation in Argentina

Carlos Menem's administration carried out the privatisation process.

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]

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 of tons to 7,500 millions twenty years after (almost a 55%). 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 mainteanance 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 USD 355 million per year (about USD 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 opearation 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]

Notes:

• 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]
• ² Took 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:

Notes:

• ¹ Took 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 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).

When UGOFE and UGOMS were dissolved, Corredores Ferroviarios (a company part of Grupo Roggio, which also owns Metrovías, a company that operates the Buenos Aires Subte and Urquiza line since 1994) and Argentren took over the Mitre / San Martín and Belgrano Sur / Roca lines, respectively.^{[21][22][23][24][25][26][27]} The company operated both lines until the government rescinded the agreement with the company in March 2015.^{[28][29][30][31]}

Apart from Corredores Ferroviarios, other private company, Argentren S.A., was granted concession to operate the Roca and Belgrano Sur lines.^[29][30][31] The contract was also revoked by the government in March 2015.^[28]

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:

• Buenos Aires, establishing state-owned company Ferrobaires (1993 to present days)
• Chaco Province operated trains through state-owned Servicios Ferroviarios del Chaco (1999-2010)
• Tucumán also operated a railway service to Buenos Aires to keep the line active. Services started in 1992 but ceased in 1997.
• Río Negro created its own company, named "Tren Patagónico" to operate trains from Viedma to Bariloche^[32] that had been under concession since 1993.

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:

Notes:

• 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.^[33]

See also

• Railway nationalisation in Argentina
• Rail transport in Argentina
• Ferrocarriles Argentinos
• Nuevos Ferrocarriles Argentinos

Bibliography

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

References