The future of the Trasandino Central rail tunnel through the Andes mountains is uncertain, according to an official at Chile's public works ministry (MOP).
Although the project's preliminary design reduces the risk of the rail concession being nationalized by the Argentine government on its side of the border, Argentina's high country risk rating and the global financial scenario - including Brazil's economic situation - could affect the initiative's development schedule, the official told BNamericas.
The US$3bn project involves building a 23km freight rail tunnel at an altitude of 2,500m connecting multimodal stations on both sides of the Chile-Argentina border below the Los Libertadores international pass. Trucks crossing the border, or the containers they carry, would be loaded onto the train and then unloaded at the other end of the tunnel to continue their journey by road.
At present Los Libertadores, which is at an altitude of over 3,000m, is closed by snowfall for several days every winter, cutting off trade between the two countries and between several South American nations and Asia.
The project replaces a previous initiative to build a rail line connecting Chilean town Los Andes to Argentine city Mendoza, which would have included a higher altitude tunnel.
The previous initiative was launched for tender by both governments, but was declared void after it failed to attract private investment, mainly due to insecurity caused by former Argentine President Néstor Kirchner's intention to nationalize all railways.
The Trasandino Central project was submitted as a private initiative to the governments of both countries by Argentine firm CASA and Brazilian company Camargo Corrêa.
Chilean President Michelle Bachelet and her Argentine counterpart Cristina Fernández declared the initiative of public interest, meaning the companies can carry out technical, financial and environmental feasibility studies to draw up a preliminary design.
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Fernández, who is Kirchner's wife, announced last week the nationalization of the country's private pension firms, arguing the government would protect contributors' savings.
Analysts, however, have said Fernández's real motive is to use the pension funds to finance government spending, including indirect subsidies provided to citizens through low basic service rates, introduced to maintain what critics say is an artificially low inflation rate.
In April 2007, Argentines affiliated to the private pension system were given the option to change to the public system, but the vast majority decided not to. The government, however, decided to nationalize the system anyway.
Decisions such as these contribute to higher country risk and reduce private investments in transport infrastructure initiatives, the MOP official said.
Aside from political risk, infrastructure initiatives are also finding it increasingly difficult to obtain financing.
"There is a new factor in the current scenario that might put the brakes on this desired increase [for infrastructure development]: the scarcity of credit," Brazilian construction company Odebrecht's vice-president for Latin America and Angola, Luiz Antonio Mameri, told BNamericas in a recent interview.
This could affect Camargo Corrêa's chances of obtaining funding from entities such as Brazilian national development bank BNDES which, according to plans, was likely to support the Trasandino Central initiative, the official said.
While the two firms carry out the feasibility studies, MOP officials are holding talks with Chilean investors to explore their participation in the project.
According to the MOP official, the initiative is still very attractive as demand projections show the relatively low altitude tunnel would attract a large amount of cargo.
Chilean highway concessionaires have also expressed interest in the project, which could also include a highway tunnel.
Governments such as Uruguay, Paraguay, Brazil and Argentina have also expressed interest in the initiative, as it would benefit trade between their countries and Asia.
In the meantime, however, authorities will wait for the study results before moving forward.
According to initial plans, if the feasibility studies meet expectations, the initiative could be launched for tender in early 2009, the MOP official said.
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