Chile Freight Transport Report Q1 2008

Chile's state-owned railway company Empresa de Los Ferrocarriles del Estado (EFE) posted a net loss of CLP38.325bn (US$71.3mn) in 2006, compared with a net loss of CLP25.4bn (US$47.3mn) in 2005, the company reported in March. The main reason for the increased loss was a lower level of sales, linked to infrastructure problems near Chillan. Cargo transported by EFE fell by 3.1% to 9.8mn tonnes. While the state company's problems are casting something of a shadow over the rail-freight sector, there are other reasons for optimism. Ferrocarriles Antofagasta Bolivia (FCAB), the privately-owned rail freight company which forms part of the Antofagasta mining group in northern Chile, reported increased volumes last year. Some of the world's leading infrastructure concession groups have acquired the tender rules and regulations for the bilateral rail project for Chile and Argentina known as the Ferrocarril Trasandino Central, designed to link Los Andes, Chile, and Mendoza, Argentina. Renewing this rail link is seen as vital, since much of the US$5bn in yearly trade between the two countries is transported by truck through a mountain pass that snowstorms shut down intermittently every winter. The pass was again closed briefly in June. The railway will run for 225km and will cost almost US$300mn. Companies showing interest thus far include OHL and Dragados of Spain, Japan's Marubeni, Germany's MAN Ferrostaal, and Chilean groups Iacafal and Besalco. The tender was opened earlier this year at a ceremony attended by Argentina's President Nestor Kirchner and his Chilean counterpart Michelle Bachelet to revive the rail link, which was closed in 1984 after being used for 74 years. Our latest Chile Freight Transport Report, BMI concludes that the country's rail-freight traffic will grow at an annual average of 4.1% in the 2007-2012 forecast period (the new trans-Andean rail link will not be operational until around 2010).

Various factors support this prediction. In the past, rail has been one of the slowest-growing freight transport modes in the country. Growth will nevertheless be underpinned by GDP expansion of 4.4% over the next five years, and by Chile's strong mining export performance. It will, however, lag a little behind the average annual growth in freight turnover across all modes, measured in mn tonnes-km (mntkm), which will reach 4.9% in 2007-2012. For the five-year forecast period and across the freight sector as a whole, BMI's view is that good export-oriented growth, coupled with a favourable business environment and 'catch-up' infrastructure investments, all point to a good performance. Airfreight will lead (growth of 6.3% per annum), followed by road (5.7%) and maritime freight (4.8%), reflecting the strength of Chile's international trade, particularly with Pacific Rim countries. Chile is at the top end of our Latin American freight transport business environment matrix. It scores particularly well on long-term political and economic risk and on the regulatory and competitive environment. Freight and transport infrastructure growth are comparable with those of counties in the peer group such as Brazil and Argentina. Chile is again out in front on the transport intensity index, a measure of the dynamism of its foreign trade.

According to our latest estimates, the total value of transport and communications GDP will rise to US$15.5bn in nominal terms by 2012, representing 7.9% of Chile's GDP. The transport and communications sector employed an estimated 506,800 people, or 8.6% of the labour force in 2006. We see this rising to 546,000, and 8.7% of the total by 2012.