Article

Details of a similar aspiration: Privatized railroad in Argentina, deregulated railroad in the USA

Authors:
  • George Mason University, Schar School of Policy and Government
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Abstract

This paper provides a comparative analysis of the introduction and outcomes of more “market friendly” reforms in Argentina and the United States. Finding several similarities in the early development of the railroad industry in Argentina and in the United States, it continues to provide a detailed review of railroad performance in each country and explains the underlying differences supporting this divergence. Deregulation in the U.S. allowed railroads to recover from near bankruptcy. Nearly every economic variable in the industry indicates that railroads have improved their operations, are more competitive, and are attaining higher levels of financial strength. Privatization of the industry in Argentina yields mixed results. Argentine railroads have been able to improve their operations, increase productivity but are still far from reaching long-term sustainability. Evidence uncovered by this paper suggests that privatization is not a silver bullet for railroad revitalization without a clear transportation policy and the willingness of the government to infuse financial support for infrastructure rehabilitation. The paper concludes by providing several policy alternatives for railroads in the United States and Argentina.

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... The U.S. has the world's largest railway system, with a network of more than 200,000 km (Laurino et al., 2015). There, the development of railways started in the late 1800s and early 1900s, mostly with private finance, although local, state and federal governments provided strong support by providing investors with rights-of-way 18 and large portions of properties adjacent to the tracks (Müller & Aragonés, 2013). ...
... Although the private sector provided the necessary capital for the construction and operation of American railroads, the industry was heavily regulated, for instance with little flexibility for private entities to set access and service rates, in order to prevent monopolistic behaviour in the sector, and the obligation of provision of passenger services (Müller & Aragonés, 2013). ...
... With the increasing competition from highways and road transport in the 1960s and 1970s, the financial situation of the railroads deteriorated, including cases of bankruptcy. As a result, the U.S. Congress adopted a series of measures to increase flexibility in the sector 19 , adopting several market-oriented procedures, for example allowing companies to abandon and sell unprofitable lines and, thus, increase efficiency (Müller & Aragonés, 2013). ...
Technical Report
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This report seeks to identify the barriers that must be overcome in order to unlock private investments for the railway sector in Brazil. The two main challenges examined in this study are barriers that hamper the attraction of domestic and foreign private companies to build and maintain railway infrastructure and/ or operate freight transport services as well as barriers that hinder the attraction of domestic and foreign investors to invest in railway projects and companies through the bond market in Brazil.
... 7 2 REVISÃO DA LITERATURA 2.1 ESTUDOS ANTERIORES O estudo da indústria de transporte ferroviário teve notável importância na pesquisa acadêmica, notadamente, econômica (Waters II, 2007). Todavia, com a desregulamentação do mercado ferroviário nas Américas, inicialmente 5 no Canadá a partirde 1967(Waters II, 2007, seguido dos Estados Unidos, em 1980 (Waters II, 2007;Wilson & Wilson, 2001), e de diversos outros países da América Latina(Müller & Aragonés, 2013), a exemplo do Brasil, em 1995, a pesquisa acadêmica foi levada a um intenso confronto comparativo sobre os prós e os contras de cada modelo de exploração à medida que as reformas foram amadurecendo.Com a decisão da União Europeia de unificar o mercado ferroviário e aumentar sua competitividade, notadamente, a partir de 1991, por meio de uma estratégia de desverticalização da malha (unbundling), a literatura internacional passou a estudar um leque mais amplo de abordagens em termos de exploração da modalidade ferroviária de transporte, tanto de carga quanto de passageiros.Segundo Peixoto et al. (2017) verificaram em estudo bibliométrico sobre o financiamento ferroviário, o aumento do interesse acadêmico modelou-se segundo uma tendência crescente, entre 1991 e 2016. Nesse período, a produção científica internacional cresceu segundo uma regressão linear com inclinação de 1,54 e R 2 de 0,79. ...
Thesis
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Extension, density, and quality of the rail transportation mode in Brazil are incompatible with the size of its economy on the world stage. Government initiatives to expand Brazilian rail infrastructure in the last decade have not achieved the expected results. This research tries to evaluate the Brazilian rail sector in the light of an international comparison with global benchmarks, such as England, the United States and China, in order to identify and propose the incorporation of the best strategies adopted among the analyzed countries. In addition, it assesses the perception of Brazilian stakeholders to new ways of exploring the rail market. The paper tries to prove the hypothesis that railways should be explored and regulated, differently, depending on the degree of competitiveness they have. The application of this principle would even allow the existence of an entirely private market of exploitation, currently lacking in Brazil. The research has found international evidence that various forms of exploration of railway infrastructure are effective in terms of quality, length and density. However, in terms of efficiency - execution of public spending, private operation with vertical integration and competition for routes is the most recommended for Brazil, due to its railway infrastructure and fiscal deficit. The study recommends the deregulation and reprivatization of the Brazilian rail network. Keywords: Rail transport; Models of Railway Exploration; Regulation of the Railway Sector; Railroad Benchmarking.
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Se presenta una reseña y evaluación preliminar de los efectos de las reformas regulatorias en el sector transporte de la Argentina. La conclusión principal es que las reformas regulatorias operadas en el sector transporte han mejorado la eficiencia productiva (debido en parte a las inversiones realizadas y a la renegociación de las condiciones de trabajo), pero presentan deficiencias asignativas, reflejadas en sobreinversión y déficit financieros. Se requiere en consecuencia fortalecer la función reguladora del sector público. /// This paper develops a survey and preliminar assessment of the effects of regulatory reforms of Argentina's transport sector. Regulatory reforms in the transport sector appear to have improved productive efficiency (due partly to investment and to the renegotiation of labor conditions), but allocation inefficiencies took place, as shown by over investment and financial deficits. Strengthening of the regulatory function of the public sector is therefore required.
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Two reform acts, the Staggers Railroad Act of 1980 and the Railroad Revitalization and Regulatory Reform Act of 1976, represented big changes in U.S. policy toward railroads. An important welfare gain from these changes predicted by researchers was the efficiency gain from increased densities in rail freight traffic. However, few retrospective studies have analyzed the accuracy of these predictions. The present paper fills this gap by analyzing the effects of regulatory changes on freight traffic density, through simulation of the cost savings from gains in density, using a newly estimated rail cost function, and by comparison of these results with earlier predictions. Our results indicate net benefits of $7-$10 billion per year (as of 2001), stemming from cost savings from increased traffic densities relative to what would have occurred under regulation. These benefits are substantially higher than those predicted by researchers in the 1970s and early 1980s, for reasons explained in the paper.
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