Grupo Mexico drops out of Argentine rail privatisation in setback for Milei

Grupo Mexico decided not to bid because Argentina plans to run Belgrano Cargas under an open-access model. The company had spent more than a year lobbying officials to reconsider that structure. It viewed the model as incompatible with the investment needed to rebuild the railway.

Under open access, several freight companies could use the same tracks. Grupo Mexico preferred the vertically integrated system used in the United States, Mexico and Brazil. In that model, one company controls the infrastructure, trains and operations. Its transport chief, Fernando López Guerra, said the company would not bid without a radical change.

The withdrawal came despite US Commerce Department support and a partnership with Wabtec. Grupo Mexico had pledged an initial US$3 billion for repairs. Its exit leaves a consortium involving a local operator and grain exporters as the only other top contender, making the process more uncertain.

An open-access rail system separates track access from train operations. The infrastructure is available to multiple freight companies, which can run services over the same railway. This differs from a system where one operator owns or controls the tracks and also runs the trains.

For Belgrano Cargas, several cargo companies would be allowed to use Argentina’s freight tracks under the government’s proposed model. The railway currently operates as a state-run entity controlling the entire operation. If privatised, however, officials say a 2015 law requires open access. Alejandro Nuñez called it a competition-promoting law.

The model matters because it shaped the bidding contest. Grupo Mexico considered it unacceptable and withdrew unless Argentina made a radical change. The government has no interest in repealing the law, saying open access matches its free-market principles. That leaves other bidders assessing whether shared infrastructure can support investment.

Belgrano Cargas is a very large freight railway serving Argentina’s agricultural regions. It owns about 14,000 kilometres of track across the country’s farmlands. That network could connect producers with transport routes for moving crops and other goods.

Its usable scale is much smaller. Decades of disrepair mean only 7,600 kilometres are currently operational. More than 6,000 kilometres are therefore outside the operating network, based on the figures given in the article. The condition of the system is central to the proposed privatisation and its investment requirements.

President Javier Milei wants private investment to upgrade the railway, boost exports and reduce logistics costs. Nearly all Argentine freight currently travels by truck. The size of the network creates a major opportunity, but its poor condition also raises the cost and complexity of restoring service across the unused sections.

Grupo Mexico’s exit does not automatically end Argentina’s privatisation plan. Alejandro Nuñez said the process remains open and companies are free to decide whether to participate. The government still wants to transfer Belgrano Cargas to private operators as part of its wider economic overhaul.

The immediate alternative is a consortium that includes a local Argentine rail operator and grain exporters led by Cargill and Bunge. Investments could qualify for RIGI, Milei’s investor programme, which offers tax breaks, legal guarantees and other benefits. Those incentives may help keep the bidding process moving.

The setback is the loss of a bidder that promised an initial US$3 billion rail upgrade and had US backing. The government still refuses to change the open-access model, Grupo Mexico’s dealbreaker. The result could be a narrower contest and continuing uncertainty over how much private capital will reach the ageing network.

The government’s preference is rooted in competition. Under open access, several freight companies can use the same railway instead of one private operator controlling the entire system. Officials believe that structure matches President Javier Milei’s libertarian and free-market approach to economic reform.

Alejandro Nuñez said the open-access law was retained because it aligns with the government’s principles and promotes competition. The law, passed in 2015, states that cargo rail must operate under open access if it is privatised. Belgrano Cargas currently controls the whole operation because it remains state-run, but privatisation would activate that framework.

The government does not want to repeal the law, even while pursuing deregulation elsewhere. This position has a direct commercial consequence. Grupo Mexico argued that shared access would undermine its preferred operating model and withdrew. Argentina must now attract bidders willing to invest within the competitive structure already established.

The two models divide control differently. Argentina’s proposed open-access system would allow multiple freight companies to operate on the same tracks. The infrastructure would be shared, rather than reserved for one company that manages the whole railway.

In the vertically integrated model used in the United States, Mexico and Brazil, one company controls the infrastructure, trains and operations. That gives the operator responsibility for the track network and the freight services running on it. Grupo Mexico favoured this arrangement for Argentina and treated open access as a dealbreaker.

The distinction shaped the failed bid. Grupo Mexico lobbied Argentine officials for more than a year and said it would not participate without a radical change to the tender design. Argentina’s government kept the open-access law because it considers competition a core principle. The remaining bidder must therefore work within a model unlike the systems Grupo Mexico knows.

Rail freight can reduce logistics costs by moving large volumes over long distances with fewer separate vehicle journeys. That can lower the transport burden for producers and exporters, especially when goods travel from inland farming areas toward export routes. The article links rail investment directly to boosting exports and reducing logistics costs.

Argentina’s Belgrano Cargas crosses the country’s farmlands, where agricultural producers need dependable connections. A functioning rail network could provide another way to move grain and other freight. The article does not quantify the savings, but it states that almost all Argentina’s freight cargo is currently transported by truck.

That dependence makes rail rehabilitation strategically important. Only 7,600 of the network’s roughly 14,000 kilometres operate after decades of disrepair. Milei’s privatisation effort aims to attract investment, restore infrastructure and support exports. Whether those gains appear will depend on securing a workable operator under the disputed open-access model.