President Javier Milei is pursuing substantial private investment to revitalize Argentina’s deteriorating freight railways, aiming to establish them as a vital corridor for transporting grain and minerals to export ports. However, the privatization of the state-owned network presents a formidable challenge, one that Argentina has previously struggled to overcome. During the 1990s, the government’s initial endeavor to privatize the railways faltered as firms failed to adequately invest in infrastructure and withdrew from unprofitable routes. Entire communities found themselves isolated, with some evolving into ghost towns, leading to the eventual renationalisation of the system. This time, Milei appears to be intensifying the challenge. The auction model selected by his administration has faced scrutiny from industry experts and poses the risk of marginalizing one of the leading bidders: railroad behemoth Grupo Mexico, which enjoys support from the Trump administration. Potential competitors may consist of a domestic Argentine operator alongside a coalition of grain exporters featuring Cargill Inc and Bunge Global SA. The stakes are considerable. In the absence of substantial involvement from key stakeholders, the auction may face challenges in garnering the necessary investment to upgrade the network, thereby hindering its potential as a catalyst for growth amid a period of waning momentum in Argentina’s economic recovery. “If they don’t make a radical change in how they plan to tender, we’re not going to bid,” stated Fernando López Guerra in an interview, characterizing the railway as the future backbone of the Argentine economy. “This is not merely another tender.” The process underscores the constraints of US influence over a key regional ally, despite the Treasury’s assistance in facilitating a US$20-billion bailout during a pivotal election year.
Currently, Argentina’s state-run operator manages approximately 14,000 kilometres of freight rail; however, a significant portion is in disrepair, resulting in only around 7,600 kilometres being operational. Reviving the system has the potential to be transformative, as it could lower logistics costs, enhance exports, and bolster economic growth. The crux of the debate lies in how to effectively unlock that potential. Milei’s plan fundamentally seeks to dismantle the existing vertically integrated system, wherein the state-owned Belgrano Cargas maintains control over infrastructure, trains, and operations. The model enjoys extensive application throughout the Americas, notably among private railroads in the United States, Mexico, and Brazil. The government intends to disaggregate Belgrano Cargas into nine distinct auctions, which will encompass tracks, warehouses, and operations distributed across three corridors. Winners would be mandated to permit Open Access, a framework that enables various operators to operate trains on the identical infrastructure. Officials, including Deregulation & State Transformation Minister Federico Sturzenegger, contend that the approach is not only pro-competition but also firmly rooted in a 2015 law enacted during the administration of former president Cristina Fernandez de Kirchner. “It’s essential that Open Access exists to foster competition in rail operations,” Sturzenegger stated in a written response. Despite Milei’s efforts to dismantle numerous regulations established by his predecessors, this particular regulation has persisted. “The Open Access law was retained as it is entirely consistent with the principles and values upheld by this government. “It’s a law that promotes competition,” stated Alejandro Nuñez.
The consortium of grain exporters expressed its endorsement for an Open Access model; however, it stated that it cannot ascertain its bidding intentions until the government releases the final tender documents. The group constitutes approximately 85 percent of Belgrano Cargas’ existing freight operations. “A more efficient Open Access operation can accelerate the modernization the system has needed for decades, creating a railway for all Argentines,” the consortium stated in a written response. Grupo Mexico expresses significant dissent — and its position is becoming one of the most substantial threats to the auction’s success. The conglomerate, under the stewardship of billionaire Germán Larrea, has committed to an initial investment of US$3 billion aimed at revitalizing Argentina’s rail infrastructure. However, it seeks to make a bid for the entire network, or at the very least, secure a complete corridor, rather than engage in competition for fragmented assets within an Open Access framework. CEO López has made five trips to Argentina since Milei assumed office to engage with officials and assess the network. The parties involved have yet to establish a consensus. Nuñez, representing Belgrano, contends that any company has the capacity to adopt its integrated model, provided it engages in every auction for a corridor and permits others to utilize the tracks. López argues that Open Access compromises profitability, cautioning that “everyone loses money” in such a framework. Grupo Mexico highlights its historical performance. In the aftermath of Mexico’s 1997 rail privatisation, the company played a pivotal role in revitalising a declining network, establishing it as a crucial conduit for North American trade. It now recognizes comparable opportunities in Argentina, especially for enhancing exports of grain, minerals, and resources for oil production. In an effort to bolster its standing, Grupo Mexico has pursued assistance from Washington, amid a deterioration in relations between officials from Mexico and Argentina.
The company has gained entry into the US Commerce Department’s Advocacy Center, an entity that assists US-supported firms in vying for international government contracts, as reported by sources. In the course of its operations, Grupo Mexico has pledged to procure locomotives and services from manufacturers based in the United States. A representative from the Commerce Department did not provide a response to inquiries for comment. The Trump administration has yet to adopt an official position regarding privatization. Nuñez indicated that he has engaged with US policymakers to deliberate on the auction framework. Beyond the political maneuvering, the debate reflects a deeper question: how should competition function in Argentina’s rail sector, given that trucks currently transport 95 percent of the nation’s freight? Government officials frequently cite Australia as a prime illustration of an effective Open Access system, emphasizing its comprehensive freight network. However, experts in that field caution that the model entails considerable trade-offs. Australia’s railways function within a complex framework of federal and state regulations, characterized by the presence of various infrastructure managers. Operators often find themselves in the position of negotiating access on a corridor-by-corridor basis, occasionally with direct competitors. “The situation is quite complex,” remarked Rico Merkert. In contrast to more integrated models, “the Australian multi-regime system is much more fragmented, decentralized, negotiated and historically path‑dependent.”
These concerns echo among numerous Argentine scholars and industry experts, who contend that the nation’s unsuccessful privatization efforts in the 1990s cannot be attributed solely to vertical integration. Rather, they highlight insufficient investment and impractical expectations in an industry characterized by inherently challenging profitability. There is widespread consensus on a singular aspect: the necessity of attaining scale through heightened volumes, as the transportation of low-value commodities across extensive distances permits minimal margin for error – or for supplementary layers of competition utilizing the same routes. “It’s inviable in Argentina to think that somebody would buy locomotives and rail cars to operate on a line where there’s another competitor,” stated Jorge Waddel. “A vertically integrated concession with closed access is the only viable option.” Henry Posner III reflects on a system that had been significantly weakened by years of state ownership and encumbered by excessively optimistic forecasts. He cautions that Open Access may exacerbate the situation. “It’s a race to the bottom,” Posner remarked. Successful railways in Latin America exhibit a model of vertical integration. This situation presents Milei’s administration with a critical inquiry, accompanied by increasing doubt from specialists.
On a global scale, Open Access systems are often characterized by higher costs, increased bureaucracy, and a greater likelihood of disputes. Research conducted by MIT-trained engineer Francisco Furtado indicates that Europe necessitates approximately seven times the number of trains compared to the United States to transport an equivalent volume of freight, owing to its more fragmented operational model. Furtado highlights deficiencies in Argentina’s strategy, notably the lack of a definitive regulatory framework to address disputes between infrastructure proprietors and train operators. Government officials refute this assertion, contending that the undersecretary of transport is fully equipped to manage any disputes that may arise. Critics argue that ideology could be influencing policy decisions to a greater extent than practical considerations. “You can live in the real world or you can live in ideology,” Furtado stated. “Open Access will not serve as a panacea for the challenges facing Argentina’s rail system.”