Railway Concessions-Heading Down the Right Track in Argentina
Author: Jose Carbajo and Antonio Estache Date: 9/1/1996 (PDF, 200KB)
The Argentine government has privatized its railway industry by breaking up the network into exclusive concessions. The freight businesses were considered generally profitable, but the commuter services were expected to need subsidies and were sold to the bidder seeking the lowest subsidy. Both sets of concessions require the concessionaires to make specified investments over the life of the contracts. So far, the results in terms of traffic levels and industry costs have been positive, but the freight concessionaires are falling significantly below target revenues and are not investing. José Carbajo and Antonio Estache look at the implications for the design of the concessions.