SAINT JACQUES – From public mistrust of its goals to suspicion of its links to corruption rackets, Chinese investments in Latin America’s rail sector have got off to a rocky start. Over the past decade, the Asian superpower may have suffered from its ignorance of regional and national policies, but it is investing heavily in an industry where there is a lot to gain, but also a lot to risk.
Francisco Urdinez, professor of politics at the Catholic University of Chile, cites the aborted railroad project from Mexico City to Querétaro as a warning: the deal was canceled for corruption and public opinion chose Chinese society in the scandal, even though it was part of a multi-company consortium.
“I think the reputational damage ends up outweighing the potential benefits of the project,” Urdinez said. “Chinese companies have more to lose than to gain from uncertainties about the risks of domestic corruption here in Latin America.”
Chinese companies have learned from the experience and are now focusing on smaller and less ambitious proposals than the megaprojects of the 2010s.
Partnership versus monopoly
Diego Leiva, a PhD student at Griffith University in Australia, says: “I think they’re starting to learn a lot of things and they’re starting to be more successful.
Leiva points out that Chinese overseas investment is changing as it has grown at a slower pace, lost money, and experienced problems in its own economy. He says the authorities are asking companies to be more aware of risks before investing. For example, they “won’t do the whole project anymore, but will enter, say, through procurement – sale of railcars, miscellaneous inputs – but not necessarily participate in construction from the start.”
Leiva says this turned out to be the right recipe, even in problematic markets.
China could also supply electric coaches for urban railways
In May 2021, the Chinese were selected to build the first stage of the Mayan train project from Palenque to Escárcega, in the eastern state of Campeche. Their proposal was worth $ 781 million and was set up as part of a consortium. These were the China Communications Construction Company (CCCC), Mota-Engil in Mexico and three Mexican companies: Eyasa, Grupo COSH and Gavil Ingeniería.
In Brazil, they are dealing with the Ferrogrão project (also known as the EF-170 railway), designed to link the state of Mato Grosso to the state of Pará in the north of the country. Another Brazilian project is the Pará Railway, a joint venture between CCCC and Vale mining. In its first phase, the railway is to connect the city of Marabá to the port of Barcarena for 500 kilometers.
Construction is expected to start in 2021 with a budget of $ 1.3 billion. When completed, the railway will be used to transport iron ore from the Carajás complex, the largest iron ore mine in the world. In a second phase, the railway will extend south towards Santana de Araguaia, to integrate the transport of meat and cereals.
Chile on rails
In Argentina, one of the most recent deals came in April 2019, when CRRC Qingdao Sifang, a railway construction company, signed a $ 287 million deal (funded by the Development Bank of China) with the Argentine Ministry of Transport for the supply of 200 train cars for the General Roca Metro Line in Buenos Aires. In Colombia, a consortium led by China Harbor will build the first line of the Bogotá metro, covering more than 20 kilometers. The consortium will also build the Regiotram de Occidente, a commuter line designed to transport 130,000 commuters daily between Bogotá and Cundinamarca Department.
In Chile, EFE Trenes de Chile, the former public railway, purchased 21 Chinese coach trains for various services in central and south-central Chile. CRRC Sifang has also succeeded in providing rolling stock for the new long-distance trains that will connect Santiago and Chillán (400 km) in just three hours and 40 minutes.
These are part of Chile on Rails (Chili Sobre Rieles) which would increase train use from 50 million to 150 million passengers per year by 2027 and envision major investments in a range of new services and infrastructure. Chile wants to increase its trains from 58 work units in 2019 to 156 in 2027.
Cut competition, curb pollution
There is “an important space for Chinese companies to participate in future tenders for rolling stock”, explains Franco Basso, expert in transport systems at the Pontifical Catholic University of Valparaíso. This, he said, could increase competition and lower prices, adding that the Chinese could also provide electric coaches for urban railways, helping to reduce pollution levels in cities.
Urdinez of the Catholic University of Chile, broadly agrees: “It is a very cheap and non-polluting way to transport goods and people, but its downside is its very expensive maintenance and installation.
He also points out that the problem in Latin America is low population density, which makes railways less profitable than in densely populated areas like Europe. However, he also looks to the future: “As oil becomes scarce and expensive and we need to reduce carbon emissions, it will be crucial to move to an infrastructure system with a larger share of railways. “
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