Chilean President Gabriel Boric revives the bet on railways

RIO DE JANEIRO, BRAZIL – One of the promises of Chilean President Gabriel Boric that drew the most applause in his first speech to the Nation earlier this month in Congress was the National Railway Development Plan.

Like the project announced in 2019 by the previous president, Sebastián Piñera, the goal for 2027 is to triple the number of passengers carried to 150 million and double the cargo to 20 million tons.

At the center of the plan is the long-standing promise to recover the Santiago-Valparaíso train, 130 kilometers north of the capital.

Boric pledged last week that the first rail would be built during his four-year term. However, the millions of dollars for subsidies and permits needed to implement the proposal cast doubt on the feasibility of the schedule.

Train use in Chile has been uneven throughout its history, reaching its peak in 1972, when it carried 27.5 million passengers. During the Pinochet dictatorship, more than a third of the railways disappeared.

Since the 2000s, suburban sections have been strengthened, postponing the longing for a train to connect Chile, the longest country in the world, with 4,300 kilometers of coastline and a rail coverage of about 800 kilometers.

“Starting with the suburban trains, which strengthen demand and justify the operation and investment, we will begin to rebuild the backbone of the new railroad from Valparaíso to Los Lagos [950 kilometers south of the capital],” explains the Minister of Transport and Telecommunications, Juan Carlos Muñoz. The project starts in Valparaíso because the rail network to the north is privatized.

When Boric’s rail plan was just a campaign promise, the president of Chile’s National Confederation of Freight Transport (CNTC), Sergio Pérez, criticized the proposal as wanting to “replace Chile’s truckers with railroads.”

“We do not want the State of Chile, with money from all Chileans, to go to the aid of a transportation system in unfair competition with truckers,” Pérez said.

The Minister of Public Works (MOP), Juan Carlos García, dismisses the criticism.

“They have enough direct and indirect subsidies such as diesel or what they pay in tolls, for example, that they do not account for the damage done by the truck compared to the car. The conversation will come once the layout is done,” García says over the phone.

Muñoz understands that “there are fears” on the part of the truckers’ union, but he considers that it is “a short-sighted view to see them as antagonistic” to the train.

“The railroad cannot reach the destination of the cargoes, but it can be a good way to respond quickly and with a great capacity to the longest stretches, and the truck service allows that cargo to reach its destination.”

Pedro Pablo Errázuriz, president of Empresa de Ferrocarriles del Estado (EFE) until last May, affirms that he never received “any complaint about the freight plan” from the truckers and that when he consulted them about the rejection of the plan, they told him that it was “part of the political discussion”, but that they are “aware that they are very complementary”.

In Chile, little more than 4% of the national cargo is transported by train, while in OECD countries, the figure ranges between 15% and 30%. Rail has a 75% lower fuel consumption per ton/kilometer than a truck.

Muñoz points out that most of the cargo that can be moved by rail does not have a north-south logic but rather a mountain range-sea logic; they will put their efforts there.

“The cargo arriving from abroad is increasing, and we foresee that the port system will have a bottleneck between now and 2030. One bet is the project of an outer port in San Antonio, which should be able to move six million containers a year and which will be connected to a cargo corridor of the railroad route,” he assures.

THE PENDING DEBT: THE SANTIAGO-VALPARAÍSO TRAIN

Boric’s government has set itself the goal of defining the route that will link Santiago with Valparaíso by the end of this year and to carry out an international public-private bidding process in 2025 in the hope of starting it up in 2030.

They already have two private proposals, one from the TVS consortium and the other from Talgo. García, from the MOP, explains that they are looking at other proposals because the current ones “do not necessarily have a complementary look”.

“EFE proposed us the route that they already have up to Tiltil, and that enters the greater Valparaíso,” he says, adding that the project will be administered through the MOP so that the state-owned railroad “can turn with everything to the train plan that it has promoted”.

The Minister of Transportation clarifies that the value of the investment will depend on the proposal they choose, but it will be around US$3.5 billion. “It seems little to me,” says Errázuirz, former president of EFE (2018-2022).

“It’s closer to US$5 billion. For the service to make sense, it has to enter Santiago. One of the two private proposals went as far as Maipú. Still, one needs an hour more to get to the center of the capital from there,” he says.

Regarding deadlines, he estimates that “it is impossible” to start anything in the four years of Boric’s government because the environmental impact studies and bids take time, “unless the option of the old route is implemented,” he points out.

Errázuriz, who was Piñera’s Minister of Transportation (2011-2014), estimates that the subsidy required by the project is US$250 million per year.

“When the details are analyzed, and the amount of subsidy is looked at, we will think about hospitals, environmental challenges, pensions, which are much more of a priority and which will make it very difficult to justify this project,” he predicts.

Minister García affirms that since it is a public-private plan, risks can be distributed, and investment can be accelerated. He clarifies that the evaluation of the proposals will consider, among other factors, distance, travel time, and environmental impact.

“One does not build trains because they are a good business,” Muñoz points out, concerning the US$22 billion annual loss recorded by EFE, half that in 2017.

One builds them “because they are good for the country; they help with congestion issues and generate fewer emissions. When evaluating the convenience, we have to understand that these externalities generate a value that has to be in the equation,” Muñoz stresses.

Errázuriz states that rail operation always requires subsidies, “but for investment, not operation”. By 2027, he projects that EFE will achieve a positive operating margin – that revenues are more than direct operating costs – from US$20 million to US$25 million when the Biobío, Araucanía, and Metropolitan Region services, among others, are incorporated.

With information from El País