Interview: Ezequiel Lemos
How would increased railroad use and a revamped freight train affect growth in the country’s interior?
EZEQUIEL LEMOS: The main cost for the agricultural industry in the inland regions of Argentina is freight, with high logistics costs limiting the possibility of reaching many markets with competitive prices intact. In consumer goods, which are almost entirely moved overland by road, the cost of freight is 21%. Argentina is a country with enormous distances to travel, yet the railroad transports only 5% of total freight. In Brazil this figure reaches 21%. In the US it exceeds 20% and in Canada close to 50% of freight is moved by train.
Argentina needs a strong freight train network to gain competitiveness, especially in the interior, so that production can be increased, employment and wealth can be generated and exports from a range of sectors can be boosted. A train can transport up to 6500 tonnes of cargo – equivalent to 230 trucks – with one set of documentation. This would mean, for example, that the construction or the metal-mechanic industry would see lower production costs since the raw material would reach processing plants at a lower cost and in less time.
What opportunities currently exist for new private investors in the cargo rail sector?
LEMOS: We need to begin by developing the infrastructure and then we can increase the amount of cargo. In three years of work, we have managed to double the freight transported by train in the country, with demand for transport projected to reach up to 100m tonnes in 2031, including mass-consumption products.
In the coming months the government is finalising the Open Access Law, a new regulation that will change the existing concession regime in place since the 1990s. Previously private companies were responsible for all risk and investments in regards to developing railway lines. This ended up being counterproductive and led to disinvestments in the sector. To amend the situation, the incoming law will have separate tenders for engineering, construction and maintenance of routes, operators, workshops and traffic control. The railway system will soon be open to new private investments.
To what extent is technology being applied to increase efficiencies in the sector?
LEMOS: In recent years the lack of technology in the sector has been one of our biggest challenges. Most rail lines were one-way, causing traffic congestion in many situations. In addition, 45% of tracks were in poor condition, so the speed of transportation had to be reduced. At the same time, most locomotives lacked a speedometer, further increasing the precariousness of the situation. Today we have satellite-tracked traffic control systems, digital systems to authorise rail use and software to inform maintenance of missing parts. All of this results in the improved management of a company with a total of 4500 employees who have a presence in 17 provinces, all of which is funded by public funds, thereby requiring maximum transparency.
What are the authorities doing to improve connections between ports and rail infrastructure?
LEMOS: This requires a concerted effort between rail clients and the ports to increase efficiency in the interconnections with the railway system. We must focus on specific areas to achieve a greater impact at the national level. For example, at the Port of Rosario – from where companies such as Bunge, Cargill, Dreyfus and COFCO export their own products through their own private terminals – the process is not as efficient as it could be due to ineffective connectivity with the rail network, meaning these firms depend on trucks.
It is for this reason that we are now building the Port of Timbúes, a new port terminal north of Rosario. We are working with five of the largest global private agricultural firms to design and implement the best entry and exit schemes for freight trains, allowing for greater efficiencies and reducing overall operational costs.