On track

Chile’s new government wants to revitalise the rail network. 

Chile’s longitudinal geography lends itself well to rail transport, but years of chronic underinvestment have left the country’s railway infrastructure woefully inadequate. Given fiscal pressures and the stark socio-economic disparities that paved the way for the populist administration of president Gabriel Boric (“Boric”) to take the reigns of power, it is little surprise that the government has identified its revitalisation as key to the country’s future prosperity.  

Boric’s administration this month announced that the government will build the first segment of the Santiago-Valparaiso rail, linking the country’s capital and leading commercial centre, with an investment of more than USD 3.5 billion. The idea is that by 2027, the total number of journeys made per year on the national railway network will have grown threefold to 150 million per year whilst the volume of cargo will increase to 20 million tons.   

The executive of a national transportation company in Chile explained, “The railway routes have been greatly reduced and limited, being currently surpassed by the highway system, especially the concession highways that have been a success and that were strongly promoted by the government of president Lagos.”

“The railway routes have been greatly reduced and limited, being currently surpassed by the highway system, especially the concession highways that have been a success and that were strongly promoted by the government of  president Lagos.”

Executive of a national transportation company, Chile

There is enormous scepticism about the true possibilities of carrying out projects of this magnitude and, above all, about the participation of private parties in general, with certain exceptions, who distrust the capacity or willingness of the state to undertake important initiatives and maintain a stable investment environment over time. 

The few passenger trains currently in operation in Chile are mainly short lines and local transport, with much less coverage than in the past when it was possible to travel by train from Santiago to Puerto Montt, a distance of more than 1,000 kilometres. Efforts to restore long-distance rail services have been unsuccessful to date. 

According to the director of a Chilean investment bank, “Although there has been interest from at least two groups in the development of a train service from Santiago to Valparaiso, a private-public partnership (PPP) is considered uninteresting and unattractive for private actors for various reasons.”

“Although there has been interest from at least two groups in the development of a train service from Santiago to Valparaiso, a private-public partnership (PPP) is considered uninteresting and unattractive for private actors for various reasons.”

Director of an investment bank, Chile 

Although the idea of increasing rail transport enjoys support and popularity across broad swathes of the population, the high cost also opens the risk that allocating resources of this magnitude instead of prioritising other urgent needs of the country could ultimately mean a loss in popularity. 

The consensus among our sources points to the reality that the deep devaluation of the peso during 2022, the increase in public debt and the consequent increase in the cost of financing, in addition to the low growth of the economy, the final cost for the administration could be substantially higher than originally predicted.  

Not all in Chile are happy about the proposal – the president of Chile’s National Confederation of Freight Transport was highly critical, remarking that the investment was an attempt to replace Chile’s truckers with railroads.  

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