Trans-oceanic railway should remain on track

By Chris Dalby Source:Global Times Published: 2016/11/14 21:38:39

Illustration: Peter C. Espina/GT

Illustration: Peter C. Espina/GT


During a visit to Latin America in May 2015, Premier Li Keqiang pledged Chinese financing and engineering to build a trans-oceanic railway between Brazil and Peru, the first such line to link the two oceans. This would be an ambitious project in a problematic continent.

Despite increasing regional integration efforts, such as the Pacific Alliance, commerce remains heavily impaired by geographic barriers. The waterways of the Amazon and the mountain passes of the Andes are not currently suited for the volume of trade passing between South American countries, let alone equipped to handle the colossal amounts of raw material and food exports sent to China.

While the port of Callao in Peru makes for the best option for starting a naval trade route to East Asia, it is currently not well linked to Brazil. Goods can be transported by truck or railway but often in a piecemeal fashion, making ports from the Atlantic Coast still the preferred way of ferrying them to China, despite the extra distance.

This sees the port of Paranagua, Brazil's second-largest, in the southern state of Parana handle much of the soybean trade to China. The port of Rio de Janeiro takes care of minerals, such as iron ore, while the crammed Santos, long the country's main trade window to the ocean, handles everything from sugar to cars.

The need for a rapid railway link between the Atlantic and Pacific coasts would benefit China, almost as much as it would Brazil and Peru. Transport times would be greatly reduced, logistics made easier, supply chains shortened, and money saved every step of the way.

Hence Li's offer of Chinese expertise to build the trans-oceanic railway as fast as possible. The idea first arose in 2014 when Li signed a memorandum of understanding with Brazil and Peru. The initial plan was for the railway to run between Porto do Acu in Brazil and Peru's Puerto Ilo, measuring around 5,300km, at a price tag of $10 billion and taking six years to build.

Yet more than a year on from Li's visit, not much has happened. For starters, both partner countries have changed governments. Brazil's Dilma Rousseff was unceremoniously ousted by Congress in August on charges of cooking the books. Peru's Ollanta Humala ended his term as constitutionally mandated. Both their successors, Michel Temer in Brazil and Pedro Pablo Kuczynski in Peru, have enthusiastically stated support for the project. However, conflicts have arisen as to whether Chinese companies or local firms should shoulder the bulk of the construction.

Another issue is also that of the route. Bolivia, neighbor to Brazil and Peru and receiver of its own fair share of Chinese investment, is proposing a diversion. Its president, Evo Morales, has approached all parties independently to try and make the Trans-Oceanic Railway cross three countries instead of two.

According to Xinhua, Bolivia's plans for the trans-oceanic railway would see it begin at the port of Santos, in southern Brazil, enter Bolivia at the town of Puerto Suarez, cross the cities of Santa Cruz, Montero and Bulo Bulo, before entering Peru and finishing at the town of Puerto de Ilo, on the Pacific Ocean.

Morales has also asked the Union of South American Nations (Unasur) to approach China for financing this alternate vision for the route. To the south, Paraguay is also looking to get in on the action. While it is too far out of the way to directly access the railway, Paraguay is claiming that its waterways could form part of a broader transportation network across South America. 

China has been keen to develop ties to Bolivia and Paraguay as much as any other regional trading partner but Bolivia's counter-proposal has prohibitive aspects. Bolivia's altitude would make the cost of building the railway skyrocket. None of the countries involved have decent rail infrastructure, meaning that focusing on two partners makes more economic sense. Landlocked Bolivia also offers no advantage, vis-à-vis access to the ocean or for getting goods to China. With bilateral trade of $2.25 billion with China in 2014, Bolivia is also not in the same category as Peru or Brazil.

While China may be keen to at least entertain all proposals, this Trans-Oceanic Railway cannot be all things to all countries. A railway across the continent would revolutionize the movement of goods in Brazil and Peru, benefit China economically and likely have a knock-on effect on neighbors. Any deviation from this already agreed-on plan risks seeing the whole railway derailed. 

The author is a Mexico-based analyst of Chinese politics and economics.


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