SAN ANTONIO, TX: Strong growth in several countries in Latin America (LATAM) is leading to increased investments in rail equipment and infrastructure according to consultants Frost & Sullivan (F&S).
In a new study, F&S says it expects South America's long-neglected rail networks to get US$47 billion in new funding by 2020.
"With the average age of LATAM's locomotive fleet at more than 40 years old and a few models in active service for over 50 years, rail companies have little option but to purchase new locomotives or refurbish old models to improve fleet availability and assurance of motive power," said F&S Automotive & Transportation research analyst Shyam Raman.
As the collective gross domestic product of Argentina, Brazil, Colombia, Chile averaged 5.2 percent growth over the last five years, he said the rail freight market, currently dominated by General Electric and EMD, is "ripe for investments" as regulatory changes promote foreign money through public-private partnerships where the state is the owner of infrastructure and rolling stock; and private companies are responsible for the operation, maintenance and investments.
"Foreign participants have begun entering joint ventures to minimize the risk of investment and penetrate the previously-stagnant rail freight transport market. In fact, by 2020, China is expected to account for a significant portion of the foreign presence in the LATAM rail freight market," added Raman.
The F&S analysis suggests the value of LATAM investment opportunities to 2020 could be as high as $280.00 billion with up to 70.0 percent directed toward the construction of new lines, extensions, and the upgrading of existing infrastructure that is currently causing traffic bottlenecks in Chile, Colombia and Peru.
With current mining-related investments of more than $500.00 billion, Raman said the subsequent increase in demand for capacity would lead to more income for operators including Peru Rail, MGE Brazil and the Colombian National Infrastructure Agency.