President Javier Milei is seeking billions in private capital to turn Argentina\u2019s decaying freight railways into a key route for hauling grain and minerals to export ports.<\/p>\n
But privatising the state-owned network is a daunting task \u2013\u00a0and one Argentina has failed at before. In the 1990s, the government\u2019s first attempt to hand the railways to private operators unravelled as companies underinvested in infrastructure and abandoned unprofitable routes. Entire communities were left isolated, some turning into ghost towns, and the system was ultimately renationalised.<\/p>\n
This time, Milei may be making the challenge even greater. The model his administration has chosen for the auction has drawn criticism from industry experts and risks sidelining one of the most prominent bidders: railroad giant Grupo Mexico, which has backing from the Trump administration. Other contenders could include a local Argentine operator and a consortium of grain exporters that includes Cargill Inc and Bunge Global SA.<\/p>\n
The stakes are high. Without robust participation from major players, the auction could struggle to attract the level of investment needed to modernise the network, and turn it into a driver of growth at a time when Argentina\u2019s economic recovery is losing momentum.<\/p>\n
\u201cIf they don\u2019t make a radical change in how they plan to tender, we\u2019re not going to bid,\u201d Grupo Mexico’s Chief Executive Officer Fernando L\u00f3pez Guerra said in an interview, describing the railway as the future backbone of the Argentine economy. \u201cIt\u2019s not just another tender.\u201d<\/p>\n
The process also highlights the limits of US influence over one of its closest regional allies, even after the Treasury helped Argentina secure a US$20-billion bailout during a critical election year.<\/p>\n
Today, Argentina’s state-run operator has roughly 14,000 kilometres of freight rail, but so much of it is in disrepair that only about 7,600 kilometres are operational. Reviving the system could be transformative, lowering logistics costs, boosting exports and supporting economic growth.<\/p>\n
How to unlock that potential is where the real dispute begins.<\/p>\n
At the heart of Milei\u2019s plan is a shift away from the current vertically integrated system, under which state-owned Belgrano Cargas controls infrastructure, trains and operations. The model is widely used across the Americas, including by private railroads in the United States, Mexico and Brazil.<\/p>\n
Instead, the government plans to break Belgrano Cargas into nine separate auctions covering tracks, warehouses and operations across three corridors. Winners would be required to allow Open Access, a system in which multiple operators can run trains on the same infrastructure.<\/p>\n
Officials, including Deregulation & State Transformation Minister Federico Sturzenegger, argue the approach is not only pro-competition but also legally grounded in a 2015 law passed under former president Cristina Fernandez de Kirchner. \u00abIt’s key that Open Access exists so that there’s competition in rail operations,\u00bb Sturzenegger, who voted in favour of the law when he was a congressman, said in a written response.<\/p>\n
Although Milei has dismantled many regulations passed by his predecessors, this one has remained.<\/p>\n
\u201cThe Open Access law was kept because it\u2019s totally aligned with the principles and values of this government. It\u2019s a law that promotes competition,\u201d said Alejandro Nu\u00f1ez, head of Belgrano Cargas, who is leading the privatisation.<\/p>\n
In a statement, the consortium of grain exporters voiced support for an Open Access model but said it cannot confirm whether it will bid until the government publishes the final tender documents. The group accounts for about 85 percent of Belgrano Cargas\u2019 current freight.<\/p>\n
\u201cA more efficient Open Access operation can accelerate the modernisation the system has needed for decades, creating a railway for all Argentines,\u201d the consortium said in a written response.<\/p>\n
Grupo Mexico strongly disagrees \u2014 and its stance is emerging as one of the biggest risks to the auction\u2019s success.<\/p>\n
The conglomerate, controlled by billionaire Germ\u00e1n Larrea, has pledged an initial US$3-billion investment to rebuild Argentina\u2019s rail system. But it wants to bid on the network as a whole, or at least secure an entire corridor, rather than compete for piecemeal assets under an Open Access regime. CEO L\u00f3pez has travelled to Argentina five times since Milei took office to meet officials and inspect the network. So far, the sides have failed to reach common ground.<\/p>\n
Nu\u00f1ez, from Belgrano, argues that any company could implement its integrated model as long as it participates in each auction for a corridor, and allows others on the tracks. L\u00f3pez says that Open Access undermines profitability, warning that \u201ceveryone loses money\u201d under such a system.<\/p>\n
Grupo Mexico points to its own track record. Following Mexico\u2019s 1997 rail privatisation, the company helped transform a deteriorating network into a key artery for North American trade. It now sees similar potential in Argentina, particularly for boosting shipments of grain, minerals and supplies for oil production.<\/p>\n
To strengthen its position, Grupo Mexico has sought support from Washington, as relations between Mexican and Argentine officials have cooled.<\/p>\n
The company was accepted into the US Commerce Department\u2019s Advocacy Center, which helps US-backed firms compete for overseas government contracts, according to people familiar with the matter. As part of the process, Grupo Mexico committed to sourcing locomotives and services from US manufacturers.\u00a0<\/p>\n
A Commerce Department spokesman didn’t respond to requests for comment. The Trump administration has not taken an official stance on the privatization. Still, Nu\u00f1ez said he has met with US policymakers to discuss the auction framework.\u00a0<\/p>\n
Beyond the political maneuvering, the debate reflects a deeper question: how should competition work in Argentina\u2019s rail sector, when trucks already carry 95 percent of the country\u2019s freight?<\/p>\n
Government officials often point to Australia as an example of a successful Open Access system, highlighting its extensive freight network. But experts there caution that the model comes with significant trade-offs.<\/p>\n
Australia\u2019s railways operate under a patchwork of federal and state regulations, with multiple infrastructure managers. Operators frequently must negotiate access on a corridor-by-corridor basis, sometimes with direct competitors.<\/p>\n
\u201cThe situation is quite complex,\u201d said Rico Merkert of the University of Sydney. Compared to more integrated models, \u00abthe Australian multi-regime system is much more fragmented, decentralized, negotiated and historically path\u2011dependent.\u00bb<\/p>\n
Those concerns resonate with many Argentine academics and industry veterans, who argue the country\u2019s failed privatisation in the 1990s was not the result of vertical integration itself.<\/p>\n
Instead, they point to a lack of investment and unrealistic expectations in a sector where profitability is inherently difficult. There is broad agreement on one point: the need to achieve scale by increasing volumes, as transporting low-value commodities over long distances leaves little margin for error \u2013\u00a0or for additional layers of competition on the same tracks.<\/p>\n
\u201cIt\u2019s inviable in Argentina to think that somebody would buy locomotives and rail cars to operate on a line where there\u2019s another competitor,\u201d said Jorge Waddel, an engineering professor at the University of Buenos Aires. \u201cA vertically integrated concession with closed access is the only viable option.\u201d<\/p>\n
Henry Posner III, whose Railroad Development Corp participated in the 1990s privatisations, recalls a system already weakened by decades of state ownership and burdened by overly optimistic projections. He warns that Open Access could make matters worse.<\/p>\n
\u201cIt\u2019s a race to the bottom,\u201d Posner said. \u201cSuccessful railways in Latin America have been vertically integrated.\u201d<\/p>\n
That leaves Milei\u2019s government facing a fundamental question \u2013\u00a0and growing scepticism from experts.<\/p>\n
Globally, Open Access systems tend to be more costly, bureaucratic and prone to disputes. According to research by MIT-trained engineer Francisco Furtado, Europe requires roughly seven times more trains than the United States to move the same volume of freight under its more fragmented model.<\/p>\n
Furtado also points to gaps in Argentina\u2019s plan, including the absence of a clear regulatory framework to resolve conflicts between infrastructure owners and train operators. Government officials dismiss this argument, saying the undersecretary of transport can handle any conflicts.<\/p>\n
For critics, the concern is that ideology may be shaping policy more than practical considerations.<\/p>\n
\u201cYou can live in the real world or you can live in ideology,\u201d Furtado said. \u201cOpen Access is not going to magically fix Argentina\u2019s rail system.\u201d<\/p>\n
by Patrick Gillespie & Michael O’Boyle, Bloomberg<\/p>\n
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