Railway Privatization in Peru

Abstract

In July 1999, the government of Peru awarded a 30-year concession for privatization of the Peruvian Central Railway to a consortium led by U.S. based Railroad Development Corporation (RDC). The consortium includes both Peruvian and international shareholders. The concession is structured under the “open access model,” which allows other operators to run trains on a per-trip basis. RDC established an operating company, which maintains and operates the rolling stock, and an infrastructure company, which maintains the tracks and charges either the RDC or third-party operating companies for their use. This article illustrates the benefit of a partnership between an experienced railway operator and local partners, the lengthy and complicated negotiation process that often accompanies privatization, and, given the economic and business risk, lower financial leverage than found in many types of project finance.