Concessions and road and rail transport optimization

Abstract

The Latin American railways faced serious competition from another means of land transport for the first time in the 1930s, and one of the results of this was a significant loss of income from the transport of products of relatively high unit value. This income had covered their fixed costs in terms of management and infrastructure. The financial difficulties of the railway companies drove them to seek aid from the State sector, but in subsequent decades governments gradually lost interest in them because of their financial deficits and dwindling importance in the national economy. The services with the least volumes of freight and passengers were steadily eliminated, and rail services had already become quite sparse when governments decided to return the railways to the private sector as from the late 1970s. The growing tendency of railways to devote themselves to the transport of bulk cargo between a limited number of points means that in corridors without navigable waterways almost the only competition comes from heavy trucks. The subsidies for the transport of goods by such trucks have been reduced, but not impeded, by the granting of highway management concessions. Within a few years it will be technologically feasible to charge heavy trucks tolls that really reflect both the external costs of their operation and those deriving from the wear and tear on the infrastructure. In the meantime, rail and road transport could be placed on an equal footing in terms of competition by compensatory subsidies for the former. This would channel each type of traffic towards the means of transport that could move it at lowest cost. In order for the benefits to be received by the community in general rather than by the private-sector concessionaires of railways and highways, however, the policy on compensatory subsidies should be laid down before the award of the concessions.