A THOUGHT OF TRAIN

It has been an uphill struggle for Ecuador’s railway system, but pardon the pun, there is now a glimmer of light at the end of the tunnel.

THE ECONOMIC STATUS OF AN ENTERPRISE doesn’t get more definitive than liquidation, which is precisely what happened to Ecuador’s national railway. In a buildup to effective derailment, the expedient decision had been made in 2008 to declare the national railway network a national monument protected under law, with infrastructure and rolling stock to be safeguarded against wholesale sell-off in the event of liquidation.

Having ceased operations in March 2020, the very month the World Health Organization declared COVID-19 a “pandemic,” liquidation of the public railway company was a done deal shortly thereafter, amid losses that would amount to USD144 million between 2012 and September 2020. Inherent issues of unpaid wages and lack of maintenance were compounded by the dearth of tourists, not to mention deflated oil revenue, as the world sank into lockdown.

Having existed for just a decade, liquidated Ecuador Railways Public Company (FEEP) had been set up in 2010 to assume control of the assets and operation of the previous state-owned railway incarnation EFE. That entity had been all but dormant in the wake of the battering delivered by El Niño weather damage in 1996-97. FEEP had ostensibly operated the short-distance and longer multiday tourist trains, a mandate that featured the 447km flagship Tren Crucero Quito-Duran (Guayaquil) service crossing the Andes to the Pacific.

GETTING BACK ON TRACK

Ecuador’s 966-km 1,067mm-gauge rail network had actually seen notable modernization between 2010 and 2015, as 507km were wholly renewed with an investment of around USD385 million. Yet, by 2019 just 380km remained operational. In short, investment was simply not generating returns.

The government wants the rail rehabilitation to feature a shift in energy matrix to electric traction trains, thereby decarbonizing a notable part of the transport matrix. The envisaged network is intended to be a Swiss Army knife with a blade, or track, for diverse user profiles.

One key objective is to reprieve the tourist train market as the pandemic wanes; the rehabilitation of the tourism-rich areas of La Moya and Jatari Campesino where hundreds of artisans lost their income is targeted accordingly. The overarching vision in which the Technical Secretariat of Public-Private Associations (APP) plays a notable role is for both passenger and freight traffic to take advantage of tomorrow’s rail system; it even anticipates the transport of mining material and solid waste. The intention is to change the rail width, which is anticipated requiring a minimum of five years. Ultimately, the rail program is but a key part of President Lasso’s overarching commitment to infrastructure development to optimize national connectivity and create employment. All are conceived using the PPP model with a minimum investment of USD5 billion envisaged.

THE TENDER ARRIVING AT PLATFORM…

Predictably the favored model is a PPP earmarked by the Ministry of Transport and Public Works (MTOP) at USD2.5 billion in value to ensure full rehabilitation of the nation’s 966km railway system. The ministry intends to hold the tender in 2H2022 having by then formulated definitive plans and tender structuring. The proposed line would pass through the four ports of San Lorenzo, Posorja, Guayaquil, and Puerto Bolívar, as well as nine dry ports that are notable commercial stops. The government considers it expedient to build on existing infrastructure, while adding supplementary segments spanning east and west.

The rail system is essentially a single line running from north and south between Ecuador’s borders with Colombia and Peru. If successful as a catalyst for GDP growth, the rail network could provoke investor interest in the auxiliary road system that also requires modernization. Official numbers suggest that 5,200km of roads require improvement to maximize the impact of the rail project.

MTOP announced diverse preliminary foreign interest in 2021, including Ameireh Consulting International (Jordan), Esteban Coello (Spain) and Jaime Nogales (Ecuador), Peruvian Trains & Railways (Peru), and Reliance (US), which submitted proposals, as well as Servicios de Consultoría y Gestión (Ecuador), Shining Consultants (Hong Kong), and Sinara (Russia). To expedite the tender process and removing ambiguity, MTOP has assumed control of the incumbent, yet liquidated, rail operator. Meanwhile, red tape in terms of requited reporting has also been reduced to facilitate the process.

It seems then that Ecuador will soon have the opportunity to rebuild its failed rail system to modern specifications, a system that must then prove sustainably profitable as a viable contributor to the nation’s transportation matrix.