Argentina’s Ruined Railways Will Force Milei to Confront Poverty

[MilHojas]

Argentina’s Ruined Railways Will Force Milei to Confront Poverty

Those living off state subsidies in ghost towns abandoned by the once-robust train service fear the pain of the new president’s spending cuts will be acute

www.bloomberg.com

Archived version

 

[sergio]

Argentina’s Ruined Railways Will Force Milei to Confront Poverty

Those living off state subsidies in ghost towns abandoned by the once-robust train service fear the pain of the new president’s spending cuts will be acute

www.bloomberg.com

Archived version

My fear is that rather than cutting costs by eliminating non productive employees (many almost certainly ñoquis) Milei may simply terminate intercity passenger trains, as Menem did. No private company will take over passenger service without large subsidies - and when they do that it's almost certain that they will not provcide an accurate, if any, itemisation of operating costs.

 

[Quilombo]

My fear is that rather than cutting costs by eliminating non productive employees (many almost certainly ñoquis) Milei may simply terminate intercity passenger trains, as Menem did. No private company will take over passenger service without large subsidies - and when they do that it's almost certain that they will not provcide an accurate, if any, itemisation of operating costs.

This is exactly what I expect him to do. He literally said anything that can be privatized/in the hands of the free market should, so there will no doubt be a fire sale in which people connected to him get a deal on taking over things previously run/provided by the government.

 

[sergio]

This is exactly what I expect him to do. He literally said anything that can be privatized/in the hands of the free market should, so there will no doubt be a fire sale in which people connected to him get a deal on taking over things previously run/provided by the government.

Yes, but it's not possible for intercity passenger trains to turn a profit without some subsidy. Even projects like the new Brightline trains in Florida have received federal grants and some tax breaks. There is no way that a private company in Argentina will be able to run long distance trains and make a profit. Reducing a bloated staff is a good idea but I doubt it will be enough to turn a profit.

 

[mikic007]

Yes, but it's not possible for intercity passenger trains to turn a profit without some subsidy. Even projects like the new Brightline trains in Florida have received federal grants and some tax breaks. There is no way that a private company in Argentina will be able to run long distance trains and make a profit. Reducing a bloated staff is a good idea but I doubt it will be enough to turn a profit.

Passenger transportation almost nowhere works without subsidies, or is connected to freight network, that covers the losses of passenger part. There is no way private company can do anything with trains, except sell what there is and close down.

 

[aloevera]

What works for the IMF and the international financial markets does not work for the people.

 

[sergio]

What works for the IMF and the international financial markets does not work for the people.

That is probably true but how can Argentina ever get out of its massive indebtedness?

 

[sergio]

Passenger transportation almost nowhere works without subsidies, or is connected to freight network, that covers the losses of passenger part. There is no way private company can do anything with trains, except sell what there is and close down.

This is generally true. The question is whether cutting out all the ñoquis and increasing fares to a more realistic level will be enough. I am certain some subsidy will be needed but that subsidy needs to be accounted for. Dealing with corruption is going to be a real challenge.

 

[TonyTigre]

Privatization doesn't have to mean no subsidies, and subsidies doesn't have to mean actual tax revenue being sent to the private company. It can be in the form of tax incentives and exceptions on certain regulations. Politicians who didn't understand that forced Amazon to drop its plan to build one of its headquarters in Long Island City, Queens. One of the politicians even suggested using some of the "subsidies" (tax incentives) to pay teachers more. These people failed to understand that the tax revenue related to the new headquarters would not actually exist if they don't build the headquarters and tax incentives are not tax revenues that can be used to pay government employees.

If a government owned company is losing $1 billion a year to provide a certain service for the people and struggles to improve that service due to funding constraints, what is wrong with handing it to private sector owners and giving them some tax incentives, and maybe even some financing that is much less than the amount that the government is losing each year for a period of time? Yes, you have to give people an opportunity to make large profits before they are willing to risk their capital. And when they actually succeed and make large profits, you can fight with them about how much of that profit should be shared with the people later, in the form of new taxes. Don't be like the financial illiterate politicians and activists who forced Amazon to drop its plan to build the Long Island City headquarter.

 

[sergio]

Privatization doesn't have to mean no subsidies, and subsidies doesn't have to mean actual tax revenue being sent to the private company. It can be in the form of tax incentives and exceptions on certain regulations. Politicians who didn't understand that forced Amazon to drop its plan to build one of its headquarters in Long Island City, Queens. One of the politicians even suggested using some of the "subsidies" (tax incentives) to pay teachers more. These people failed to understand that the tax revenue related to the new headquarters would not actually exist if they don't build the headquarters and tax incentives are not tax revenues that can be used to pay government employees.

If a government owned company is losing $1 billion a year to provide a certain service for the people and struggles to improve that service due to funding constraints, what is wrong with handing it to private sector owners and giving them some tax incentives, and maybe even some financing that is much less than the amount that the government is losing each year for a period of time? Yes, you have to give people an opportunity to make large profits before they are willing to risk their capital. And when they actually succeed and make large profits, you can fight with them about how much of that profit should be shared with the people later, in the form of new taxes. Don't be like the financial illiterate politicians and activists who forced Amazon to drop its plan to build the Long Island City headquarter.

Some background: Under Menem, Ferrocarriles Argentinos was privatised. Intercity trains were discontinued. Local trains were taken over by private companies. The government subsidised these companies. There was, however, no accountability. This was a failing of the Menem government. Privatising companies was often a good idea but it had to be done with some oversight. Under the Kiurchners intercity trains were gradually revived with eventually the state taking over again. What you say is correct however to make your ideas work corruption needs to be brought under reasonable control. The culture of doing business in Argentina needs to change. Change must come from government but it must filter down to the people who need to change their way of thinking.