China splashes billions on Argentine rail, subway

BEIJING, (Reuters) – China and Argentina have  agreed to invest about $10 billion over several years to  renovate the Latin American country’s dilapidated railway  system and build a subway for its second-largest city.

Argentine President Cristina Fernandez is in the Chinese  capital to boost ties, promoting her land-rich nation as a  natural partner for commodity-hungry China, and seeking to  resolve a Chinese freeze on imports of Argentina soyoil that  has threatened a key hard-currency earner for Argentina.

Ministers signed the railway deals after Fernandez met with  Chinese counterpart Hu Jintao — and apologised repeatedly for  postponing a visit originally planned for January.

The bulk of the railway cash will be dispensed in three  stages, with $2.5 billion over the first four years going to  repair two branch lines with over 1,500 km (930 miles) of  track, the Argentine government said on an official website.

Argentina’s once-extensive rail network was largely  dismantled during the privatisations of the 1990s. But as  agricultural output soars, farmers and grain elevators — who  send more than 80 percent of grains by costly road transport —  have been calling for investment to revive the railways.

China in recent years has been dipping into its deep  pockets to fund infrastructure projects in poor and emerging  economies that bolster relations and often further Beijing’s  own economic goals by helping bring goods and raw materials to  market faster.

The China Development Bank will provide 85 percent of the  financing and Argentina the remaining 15 percent of investment  for the two lines, which pass through central and northern  regions key for both agriculture and minerals.

The government gave no details of the second and third  stages of the three-part renovation programme, but another  $1.85 billion dollars will go towards modernising the  privatised Belgrano line.

It travels thousands of kilometres north from Buenos Aires  to the border with Bolivia and is a vital lifeline for  producers.

Another $1.8 billion deal covered four metro lines for the  city of Cordoba, Argentina’s second biggest and a major  agriculture centre, with a population of 1.5 million.

China’s Eximbank will fund the purchase of engines and  passenger coaches for suburban commuter rail lines, and CITIC  will provide cash for new subway trains for Buenos Aires.

Argentine travellers and businesses have mostly switched to  road and air transport because of the decay of the rail system.  But freight trains are still extremely important for the  country’s agricultural industry, and the government is pushing  for an upgrade of the system.

Road transport costs about 7 U.S. cents per tonne per  kilometre in South America’s No. 3 economy — about twice the  cost of rail cargo and four times what it costs to transport  grains by boat, according to the grains exchange in the  country’s biggest agricultural port, Rosario.

Fenandez, who will also travel to Shanghai later in the  week, said on Monday a deal on soyoil would come within days,  but Chinese officials showed no hint of striking an agreement.

China, the world’s largest soyoil buyer, halted cargo from  Argentina in late March after the South American country  imposed anti-dumping measures on some Chinese manufactured  goods.

Argentina’s trade deficit with China had already widened to  $1.2 billion last year from $700 million a year earlier.

Separately, China and Argentina signed memorandums of  cooperation between Chinese oil giant Sinopec and Argentina’s  state-owned utility Enarsa, and between Chinese hydropower  contractor Sinohydro and Enarsa. No details were given.

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