South American railroads and intermodal: Business models in battle

10/9/2023

Shown: Domestic containers in Argentina during the late 1970s. “This intermodalism ended soon due to the railway failure,” write AIMAS’ Jorge de Mendonca and Federico Ignacio Weinhold. Photo courtesy of the Jorge de Mendonca collection

By Jorge de Mendonca, president, and Federico Ignacio Weinhold, treasurer, of the Asociacion Intermodal de America del Sur

All the intermodal opportunities are there for the taking in South America, with the four transport modes serving as potential protagonists. The continent needs intermodal for its development. Will the respective railway administrations and cultures be up to the task of making it happen?

Except for Brazil's constant effort to extend and integrate its rail network, the other South American countries have lost a significant amount of track over the years. Argentina is the worst case: From almost 47,000 kilometers, the country’s rail network now is 17,000 kilometers. It went from being one of the world’s largest and most integrated networks to one that barely concentrates on a few weak trunk lines almost exclusively dedicated to export grains and minerals.

Argentina’s 1991-1994 rail concession model is very similar to Mexico’s 1998 iteration. But railways in Argentina only cared about carrying their own load — their owning companies’ goods (grains, stones, cement) — and abandoned 70% of the contracted routes. Left unmaintained, the lines over time no longer could support traffic. In Mexico, meanwhile, the objective of the private companies was to earn money from the business of moving cargo, and that is why they do well to this day.

Since 1932, neither the governments of Argentina nor the railway professionals have ever cited the existence of a 2,804-kilometer rail line (the line is marked in red) running through the entire network that unites the network. AIMAS began promoting the line as a potential intermodal corridor in 2017. Map courtesy of AIMAS

Intermodalism, especially between truck and rail, offers the biggest potential in South America in terms of economic development and sustainability (i.e., the reduction of the carbon footprint). For intermodal to grow among the continent’s countries, stakeholders must break the inertia of disbelief, eliminate current practices that hinder progress and understand that rail, in particular, will win if — and only if — it manages to understand that truck is its main ally. For both, domestic and regional moves will drive growth.

The logistics capitalism of South America is broad, flexible, creative and ready to shippers’ needs: It will constitute the flow of cargo. But the railways must take care of business. That would pave the way for other infrastructure investments to be made.

History: Rail, politics and economics in Argentina

A historical analysis of the Argentine railway network would reflect the successes and failures of more than 17 decades of transportation by steel rails in South America.

Given that the objective of this report is to express the needs of the regional economy that rail service should satisfy, We'll limit ourselves to the outstanding details of these evolutions and setbacks.

The Argentine railway network originally exceeded 46,000 kilometers, and almost all of it extended north of the parallel of 40 degrees south, from the north of Patagonia. It connected almost all river and seaports in the region and came close to or even reached border exchange points with Chile, Bolivia, Paraguay, Brazil and Uruguay.

Since 1932, neither the governments of Argentina nor the railway professionals have ever cited the existence of a 2,804-kilometer rail line running through the entire network (from the North Center up to Northern Patagonia) that unites the network. Until 2017, when members of AIMAS began to promote this corridor that connects two overseas ports and that crosses all bi-oceanic corridors, it had never been cited in any book, study or even political proclamation.

When the final nail was hammered at the Argentine Central Railway Sumampa Station in 1932, “no one realized that they had connected Argentina from north to south,” write AIMAS’ Mendonca and Weinhold. Photo courtesy of the Jorge de Mendonca collection

Popular myths have been undermining that same network and many on the subcontinent for a century:

• "That the differences in gauge (width between rails) were international geopolitical intentions so that we could not unite." (see the investigations of Sylvester Damus, M.A. Ph. D. — an Argentine, a Canadian; and the Argentinian historian Carlos Fernandez Priotti) The truth was recorded in papers on the government decisions in which the railway gauge of each permit became an arbitrary decision made by an official. A perfect but grotesque example occurred in this millennium with a two-kilometer-long tram from nowhere to nowhere in Puerto Madero, city of Buenos Aires, built with standard gauge on a railway line featuring metric and Irish gauge. "We will put the gauge that they offer us," expressed in 2005 the brilliant, brilliant functionary who decided:

• "… that the railways of French and English capital were means of imperial occupation for the sole extraction of raw materials." With stations every 15 to 50 kilometers along all the railway lines, towns were located, cities expanded, new ones were built (industries, too) and were populated with a lot of integration with the pre-existing socioeconomic life (when there was one), constituting an economic territory that almost covered the entire country. It is no coincidence that in the 1930s, more than half of the tons mobilized by rail in Argentina were for domestic trade. Although there are cases in the world in which a rail line goes from a single point of production to the port in hundreds of kilometers without providing any local service, in Argentina there is only one case in the extreme south, in which the state itself built a line mining that only connects the mining site with the port.

• "The lines competed with each other and overlapped." Perhaps less than 2,000 kilometers (4.3%) could be considered overlapping, but this was not the case in fact. The companies mobilized the wagons or the loads produced in the networks of the other companies and, in addition to building economic territory with each kilometer built, 99% were traveled with a single track, so that the nearby branches (misunderstood as parallel) were the escape route for empty or less important trains, giving maximum capacity to the network, with less investment, greater productivity and greater territorial coverage.

• "Trucks and buses pushed for the railway to disappear." Without paved roads, since the 1910s the railway stopped increasing the supply of traffic even though the economy and population continued to increase in each place. Then, in 1961, with only 3% of the roads paved, the government canceled thousands of kilometers of railroad and closed hundreds of stations. The economy ran out of logistics in a single day.

• "The railway must be dedicated to large volumes with block and direct trains." The slogan was issued by Argentine engineer Dante Ardigo in 1956 and was published in the bulletin of the Association of the Pan-American Railway Congress. Like (almost) the rest of the world, Argentina also adopted the concept, only the metric gauge subnetwork reduced its annual load from 6 million to 500,000 between 1961 and 2001. (It mobilized mostly single-load wagons from each station of the entire network — most of the goods for final consumption.)

Intermodal Argentina: a short sigh

At the 1968 International Railway Exhibition, the Argentine railway showed trucks in piggyback wagons (TOFC), domestic containers in "thorn" wagons (COFC) after having offered intermodal service in 1964. By 1972 or so, the railway had lost intermodalism due to the railway's lack of compliance with its clients, the trucking companies, according to a 1982 World Bank report.

From concessions to liberal trains

Between the 1950s and the 1970s, and with the assistance of Argentine railway professionals (Ferrocarriles Argentinos), the Latin American Railway Association (ALAF) accompanied the development of railway companies and their lines in several neighboring countries. But by the late 1960s, it was Argentina that began receiving advice from railway models in Europe.

In 1981, Argentina began to reduce the height of the constructions for the railway — to 7.52 meters, which would have been suitable for doublestack container well cars; and only 5.40 meters between the rail and potential obstacles above.

Ferrocarriles Argentinos piggyback service for trucking company Expreso Malargue circa 1964 — intermodal in Argentina is born. But the service would be short lived. Photo courtesy of Grupo CODILSA

At the same time, the railway began to abandon unit loads, reduce the number of enabled stations and migrate to only bulk block trains, and very, very few foreign trade-only container trains. The latter has not been different in most countries in the region. The concessions added the elimination of traffic between companies, leading to even less cargo to be hauled by rail.

In the 1990s, railway concessions in South America were migrating toward the strange idea of free trains (open access) circulating on monopolistic tracks, which created a much higher business barrier: very few companies carrying freight for very few (albeit large) clients.

Rail complains about what it doesn’t load — loads it doesn’t want to move, anyway

How does the railway intend to help us reduce the carbon footprint, if since 1956 it has decided not to carry most of the load due to the issue of the volume "of scale"?

Faced with such a doctrinal dilemma (wanting to carry everything but not wanting to carry "the small"), the first step should be intermodalism. Railway companies must understand that their largest, most intense and most loyal leisure activity/customer may be the automotive freight transport (the truck), which in turn is the largest logistics provider in the entire region.

That potential partners — the truck and its logistics companies — are used to investing and serve customers on a day-to-day basis. They’re also the ones that, more than any other link in the transport chain, need to lower operating costs and reduce their carbon footprint. In other words, they are the ones that will be able to give volume to the railway with long-term contracts, develop transfer centers and acquire wagons (freight cars).

North America knows

U.S. freight railroads went through decades of decline until the Staggers Act of 1980 was enacted to pave a way back. Staggers helped established the railway with intermodal integration as a backbone of the U.S. economy — a backbone that extended to Canada and Mexico. It’s the example countries in South America should follow.

In North America, a well car with 53-foot containers is 4.25 times more productive than a 40-foot COFC. A 100 kilometer-per-hour train with those same well cars requires one-third of infrastructure than nearly 10 European trains to mobilize the same load in the same time.

Between a model that is a success and one that does not finish taking off; one that does not require public subsidies and another that only lives on them; and one that reduces the carbon footprint per pallet by up to eight times due to its simple productivity, there is no doubt that, from Honduras to Tierra del Fuego, we must begin to understand North American intermodalism and put our railways and trucks in a north-south alliance — first to learn, and then (immediately!) begin to connect our companies, universities and governments in knowledge, practices and business goals. The collective aim: for the competitive modes to collaborate and cooperate.

If we truly intend to apply efficiency, excellence and innovation, there is no doubt the railway and even the ocean carriers will have to rethink the doctrine written by Engineer Dante Ardigo in 1956. If they want to carry more cargo and significantly reduce their carbon footprint, they must understand that all cargo is crucial — in every place and of every size.