Economy

China, The Silent Conductor In Latin America's Big Rail Projects

China's global investment tentacles have reached South American railways, where Chinese firms are "silent" partners in expanding rail networks, through financing or sale of rolling stock.

Photo of a train car lifted by a crane

Workers in China load a metro train car that is to be shipped to Brazil

Gwendolyn Ledger

SANTIAGO — From public mistrust of its goals to suspicions of its ties to corruption rackets, Chinese investment in Latin America's railway sector has gotten off to a shaky start. Over the past decade, the Asian superpower may have suffered from its unfamiliarity with regional and domestic policies, but it's going full steam ahead on investment in an industry where there is much to gain, but also much to risk.

Francisco Urdinez, a politics professor at the Catholic University of Chile, cites the aborted Mexico City to Querétaro railway project as a cautionary tale: The deal was canceled for corruption, and public opinion singled out the Chinese firm in the scandal, even though it was part of a multi-company consortium.

"I think the reputational harm ends up being greater than the project's potential benefits," says Urdinez. "Chinese firms have more to lose than win out of uncertainties around the risks of domestic corruption here in Latin America."


Chinese businesses have learned from experience and are now focusing on smaller and less ambitious proposals than the megaprojects of the 2010s.


Partnership over monopoly 

Diego Leiva, a Ph.D. student at Australia's Griffith University, says, "I think they're starting to learn quite a bit and starting to have more success."

Leiva points out that Chinese investments abroad are changing as they have grown at a slower rate, lost money and experienced problems in their own economy. He says that authorities are asking firms to be more considerate of risks before investing. For example, they "won't do the entire project anymore, but come in, let's say, through procurement — selling train cars, assorted inputs — but without necessarily participating in construction from the start."

Leiva says this has proved to be the right recipe, even in problematic markets.

China could also supply electric coaches for city railways

In May 2021, the Chinese were successful bidders to build the first leg of the Mayan Train project from Palenque to Escárcega, in the eastern state of Campeche. Their proposal amounted to $781 million and was put together as part of a consortium. This consisted of the China Communications Construction Company (CCCC), Mota-Engil in Mexico and three Mexican firms: Eyasa, Grupo COSH and Gavil Ingeniería.

In Brazil, they are processing the Ferrogrão project (also known as the EF-170 railway), designed to link the Mato Grosso state with the northern state of Pará. Another Brazilian project is the Pará railway, a joint enterprise between CCCC and Vale mining. In its first phase, the railway is set to link the city of Marabá with the port of Barcarena over 500 kilometers.

Construction is planned to start in 2021 with a budget of $1.3 billion. Once complete, the railway will be used to carry iron ore from the Carajás complex, the world's biggest iron ore mine. In a second phase, the railway will extend southward toward Santana de Araguaia, to incorporate meat and grain transportation.

photo of a boy asleep inside a train

A passenger naps on a train in Aguascalientes, Peru

Tim Johnson/TNS/ZUMA

Chile on rails 

In Argentina, one of the most recent agreements was in April 2019, when CRRC Qingdao Sifang, a rail construction firm, signed a $287 million deal (financed by the China Development Bank) with the Argentine transport ministry to supply 200 train cars for the General Roca metro line in Buenos Aires. In Colombia, a consortium led by China Harbour will build the first line of the Bogotá metro, covering over 20 kilometers. The consortium will also build the Regiotram de Occidente, a suburban line designed to transport 130,000 commuters daily between Bogotá and the Cundinamarca department.

In Chile, EFE Trenes de Chile, the former state railway, has bought 21 Chinese motor-coach trains for various services in central and south-central Chile. CRRC Sifang has also successfully bid to supply rolling stock for new long-distance trains set to link Santiago and Chillán (400 km) in just three hours and 40 minutes.

These are part of the Chile on Rails (Chile Sobre Rieles) plan that would increase train use from 50 million to 150 million passengers a year by 2027 and envisions big investments in a range of new services and infrastructure. Chile wants to grow its trains from 58 working units in 2019 to 156 in 2027.

Cutting competition, curbing pollution

There is "an important space for Chinese firms to participate in future tenders for rolling stock," says Franco Basso, an expert in transport systems at the Pontifical Catholic University of Valparaíso. This, he says, could increase competition and lower prices, adding the Chinese could also supply electric coaches for city railways, contributing to moves to decrease pollution levels in cities.

Urdinez of the Catholic University of Chile, largely concurs: "It is a very cheap and non-polluting way of transporting goods and people, but its disadvantage is its very costly maintenance and installation."

He also highlights that the problem in Latin America is low population density, which makes railways less profitable than in densely populated zones like Europe. Although, he's also looking to the future: "As oil becomes scarce and costly and we have to cut carbon emissions, then moving toward an infrastructure system with a bigger share of railways will be crucial."

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Green

In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.


It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park

Xinhua/ZUMA

Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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