China and Argentina have reached agreements valued at more than 4 billion U.S. dollars to help the South American country strengthen its rail infrastructure.
With the new investments bringing in green solutions and jobs to boost its railway network, Argentina stands to gain from lower logistical costs and increasing competitiveness of its agricultural exports.
Argentine scholars hail the new deal as an “auspicious start” for Argentina’s railway development as well as a bet “on the future” for the country to achieve long-term economic growth.
China and Argentina have decided to take a further step in bilateral cooperation after agreeing on new investment in rail infrastructure, which is key to Argentina’s goal of achieving long-term economic growth and development.
The two countries signed on Friday four new agreements on the rehabilitation and reactivation of the main freight railways that connect the northwest, west, and south of Argentina, where agricultural products are plentiful, with the eastern port region, as well as on the incorporation of new electric units to replace the older diesel machines.
The agreements, with a total value of 4.695 billion U.S. dollars, were signed by the Argentine government and Chinese companies, including China Railway Construction Corporation (CRCC), China Machinery Engineering Corporation (CMEC), CRRC Corporation Limited and Yutong.
Many of them have projects already underway in Argentina since the two countries agreed to upgrade their relationship to a comprehensive strategic partnership in 2014.
One of the agreements, valued at 490 million dollars, includes the incorporation of electric power rolling stock, which are more environment-friendly, to replace the old diesel trains on the Belgrano (south) and Sarmiento lines, as well as the Coastal Train passenger trains on the Miter line, which connect the capital with the southern, western and northern areas of the country.
In total, there will be 211 electric vehicles on these lines several of which will also be incorporated into the commuter trains of 13 Argentine provinces.
The two other agreements consist of the reactivation of the Belgrano Cargo and San Martin Cargo railways, two of the most important rail lines in the country, as they connect provinces with high agricultural productivity in the northwest and west of Argentina with the ports of Buenos Aires and Rosario in the east.
The renovation of the Belgrano Cargo railway will be accomplished with an investment of 816.7 million dollars and will focus on rehabilitating 911 kilometers of tracks that will directly benefit the provinces of Jujuy, Salta, Tucuman, Cordoba, San Luis, Santa Fe, Buenos Aires, and Catamarca. The program will also create 6,202 jobs.
The San Martin line will be the largest binational project with an investment of over 2.603 billion dollars, which will focus on 1,813 kilometers of rail in the districts of Buenos Aires, Santa Fe, San Luis, Cordoba, and Mendoza.
This railway will have its cargo capacity and speed increased to minimize travel time and logistics costs and will generate 16,830 direct jobs.
Argentine authorities and Chinese companies also agreed to upgrade the Norpatagonico (south) Train, with a required investment of 784 million dollars for the construction of new tracks and the placement of signs, rail yards and detours.
Argentine Minister of Transport Mario Meoni said after the signing of the agreements that these new investments represent an “extremely important and auspicious start for the country in the terms of railway development.
He hailed cooperation with China as an opportunity for Argentina to lower its logistical costs and increase the competitiveness of its agricultural exports.
Bet on Future
The investments announced by the two countries are of “crucial importance” and abet “on the future of the country,” according to Juliana Gonzalez Jauregui, director of the China Studies of the Latin American Faculty of Social Sciences at University of San Andres in Argentina.
The railway network is “a very important source of local work” and the investment is “an opportunity for true development of regional economies, as well as better and wider access to new markets for some of the goods produced in various areas of Argentina,” said the expert in an interview with.
Employment, regional connectivity, faster transfer of goods and lower logistical costs were some of the points mentioned by the expert, who also highlighted these investments as a starting point for Argentina to better stand in the global market with products with higher added value.
“The integration of Argentina into the Belt & Road Initiative will be the next step forward for the strengthening of the comprehensive strategic partnership, opening space for new investments and financial support, which are so necessary for Argentina and its long-term development objectives,” she said.
“The key point in this context of mutual understanding is to trace the path, to continue advancing towards a connection where our country gradually achieves, through bilateral agreement and offering higher added-value products for the Chinese market,” she added.
Improving Int’l Competitiveness
Jauregui said the fact that trains will be reactivated through this series of investments implies speeding up the transportation of goods obtained from regional economies as well as reduction of their transportation costs.
“In terms of exports, the objective pursued by the Argentine government is to increase the competitiveness of transported products, including agro-industrial products. Through the renewal of these railways, both the national and local governments intend to strengthen the development and access of goods produced in these provinces to new markets in the international arena,” she noted.
“A window of opportunity is also opening to add value to the products that are exported from the country, taking advantage of the fact that the cost of transportation will be lower and the transportation will be much more agile and efficient,” she added.
Patricio Giusto, director of the Sino-Argentine Observatory and a visiting professor at the University of Zhejiang, said: “This investment is very important for boosting the agro-export sector, which has the most growth potential at this time, as a rise in the price of commodities is expected.”
It also benefits “the great economic recovery that China is exhibiting, which is accompanied by an increase in demand for agricultural products,” Giusto told.
“It is key that this is accompanied by the development of this type of infrastructure, and China has that strategic and comprehensive view that these investments will constitute a fundamental step,” he said.
Emblem Of Connectivity
Jauregui said that the new investments have “crucial” importance as
“railroads have a historical relevance for the country”
and they are “the emblem of connectivity that characterized the vast national territory during much of the 20th century.”
In this sense, the new agreements with Chinese companies will allow the country to “regain part of that emblem,” Jauregui added.
Beyond the broad impact of the new rail projects on the domestic economy, the investments will make it possible to improve the quality of life of thousands of passengers commuting from different regions to the capital, she said.
“These differences are already noticeable, for example, in the improvement of previously Chinese-funded urban railway lines in other areas less passenger wait time, greater comfort, better service, and greater security by having new rolling stock,” she added.
Jauregui and Giusto both pointed out that these agreements were signed in a year full of complexities due to COVID-19, which is why they are seen as a reflection of growing confidence between China and Argentina, and a commitment to investment to pursue long-term development.
“Even in a situation complicated by the pandemic, with investors fleeing countries like Argentina, China continues to confirm the continuity of all its projects and is even expanding them, as we are seeing in this case with the railways (…) It is a very good moment in the bilateral relationship,” Giusto added.