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How Latin America’s Transportation Mega-Projects Could Revolutionize Trade

As Latin America continues its recovery from the Covid-19 pandemic, several countries are undertaking large-scale transport infrastructure projects to improve regional and international connectivity and trade.

One of the region’s most ambitious projects, the Bioceani­c Corridor, aims to connect the Brazilian port of Santos on the Atlantic Ocean with the Chilean ports of Iquique and Antofagasta on the Pacific Ocean through a series of roads. Alongside this transnational motorway, space is also being left for the eventual construction of a parallel freight railway.

In recent months the corridor has progressed significantly. In February the Paraguayan government inaugurated the first stage of its part of the project, a 276-km dual carriageway from Carmelo Peralta, on the border with Brazil, with Loma Plata in the centre of the country.

The Paraguayan section – which, once completed, will total 544 km and bisect the country from east to west, linking Brazil with Argentina – is seen as key to the broader Bioceanic Corridor.

It passes through the Gran Chaco, a vast stretch of scrub, swamp and forest that has traditionally been so isolated that a large part of the Paraguayan section of the Chaco did not have paved roads until 2019. The Paraguayan part of the corridor, which will also feature a bridge linking Carmelo Peralta to Brazil, is expected to be completed by early 2024.

In a similar vein, Mexico is also pursuing multiple large-scale transport infrastructure projects, one of which is the Trans-Isthmus railway project.

As OBG has previously detailed, this project aims to link ports along the two coasts of Mexico’s narrowest section of land, known as the Isthmus of Tehuantepec.

Connecting the deepwater ports of Coatzacoalcos in the Gulf of Mexico and Salina Cruz on the Pacific, the railway will be accompanied by a raft of infrastructure projects aimed at creating a trade corridor, including a natural gas pipeline, and road and port upgrades.

Construction on the project began in 2019, with Mexican government officials confident that the railway will be operational before the end of the year.

Trade and transport benefits

These projects will help to close Latin America’s infrastructure gap and unlock economic development in the region.

According to the Inter-American Development Bank, Latin America and the Caribbean would need to invest $976.1bn in transport infrastructure annually by 2030, equivalent to 1.4% of regional GDP, in order to meet the UN’s Sustainable Development Goals.

To this end, the Bioceanic Corridor – although still some years away from being realised – will bring significant benefits to transport and trade.

Arnoldo Wiens, Paraguay’s minister of public works, has said that the corridor will look to rival the Panama Canal once completed, arguing that it will save agricultural producers from the Southern Cone around 14 days and $1000 per container – equivalent to roughly one-third of their current logistics costs.

Indeed, in a sign of the potential efficiency gains, the recently completed 276-km first stage of the Paraguayan section has slashed travel time along the stretch from 12 hours to four.

This improved connectivity is not only expected to drive an increase in internal Latin American trade, but also bolster linkages with the rest of the world.

For instance, the corridor would provide the cattle ranchers and soya bean farmers of Argentina, Brazil and Paraguay with a more direct link to lucrative Asian markets, which are presently reached via lengthy seaborne journeys through either the Panama Canal or the Strait of Magellan, at the tip of South America.

Similarly, Mexican officials hope that the dry canal created by the Trans-Isthmus railway will compete with the Panama Canal and draw more trade from Europe, North America and Asia.

The trade corridor would provide an alternate route for those looking to ship goods between the Atlantic and Pacific oceans at a more northerly latitude, thereby improving the competitiveness of logistics.

Economic integration

On a more local level, improved transport infrastructure can also accelerate the economic development of regional and rural communities that currently have poor connections to larger domestic and international markets.

This is particularly relevant for regions like the Norte Grande in northern Argentina, through which the Bioceanic Corridor will pass.

“Regions like the Norte Grande have to deal with historical asymmetries in many areas, such as transport infrastructure, the availability of public and basic services, as well as the macroeconomic problems that Argentina as a country has experienced,” Pablo Dragun, studies coordinator at the Industrial Organisation of Argentina, told OBG.

These landlocked communities within the Chaco, which encompasses parts of Argentina, Bolivia and Paraguay, have long been among the most underdeveloped in Latin America, and have some of the highest levels of poverty.

Having long contended with poor access to roads, sanitation and other infrastructure, it is hoped that new projects will improve overall standards of living.

“To reverse infrastructure deficits and attain economic autonomy, the Norte Grande needs to develop its Bioceanic Corridor, which would integrate the region through land, rail, fibre and energy connectivity,” Jorge Capitanich, the governor of Argentina’s Chaco Province, told OBG. “This would not only help create more resilient and competitive provincial economies, but also boost international commerce opportunities.”

Indeed, many political and business leaders believe that the construction of the project will help attract investment in the region and subsequently stimulate an economic boom.

“For companies in the north, access to finance is a key area to address in order to be able to access international markets,” Abel Fernández, the executive director of the Salta Industrial Union, told OBG. “In addition, transport connectivity is also a priority moving forwards, as the Bioceanic Corridor opens up opportunities for increased international trade for the Norte Grande via Pacific ports. These two areas, coupled with the development of industrial parks, can greatly bolster the region’s export potential.”

By Oxford Business Group

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Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia… More