Grupo Mexico, major crop traders eye Milei rail privatisation in Argentina

Investors seeking to capitalise on Javier Milei’s next round of market reforms are gearing up to bid in a tender to privatise Argentina’s beleaguered freight railways, part of the president’s effort to unleash vast agriculture and mining exports.

The transport unit of billionaire German Larrea’s mining and logistics conglomerate Grupo Mexico SAB is planning to bid for the Belgrano Cargas network after meeting with Milei officials, according to a person with direct knowledge of the matter. It envisions an investment of at least US$3 billion, according to the person, who couldn’t be named discussing behind-the-scenes plans.

GMexico Transportes could see competition from major crop trading houses, who are working to form a consortium to make an offer in the tender, according to the Ciara-Cec exports and soy-crushing association. The group could include Bunge Global SA, Louis Dreyfus Co and Cargill Inc, as well as local powerhouse Aceitera General Deheza SA.

Neither Grupo Mexico, Bunge, Cargill nor AGD immediately replied to requests for comment. Louis Dreyfus declined to comment. 

Most freight transport in Argentina — like taking crop harvests to ports and sending fracking sand to a Patagonia shale oil patch — is done by truck, as thousands of miles of train lines first built by British entrepreneurs more than a century ago fell into disrepair amid decades of economic malaise.

But Milei, whose libertarian experiment just got fresh voter endorsement in midterm elections, is now expected to press ahead with privatising freight rail as well as energy assets and utilities. He’s also likely to rekindle a tender to deepen the Paraná River, a key outlet for Argentine exports into the Atlantic Ocean.

Upgrading the sprawling Belgrano Cargas network — which connects northern Argentina to Paraná ports — would help unlock extra soy and corn production, and catalyze a slew of lithium and copper projects in the Andes.

To be sure, previous governments invested in Belgrano Cargas, luring money from China, which has had a long-term focus on South American infrastructure. But the line remains slow and fragile. Some lithium producers have even tested exporting through Chile, rather than trucking all the way to Paraná ports. The San Martín network, which connects central Argentina from east to west, and the Urquiza line bordering Brazil, may also be a part of the privatisation tender.

Rio Tinto Group, which is developing huge lithium operations in Argentina, is also reported to be interested. A spokeswoman declined to comment.

Larrea, who controls Latin America’s second-biggest fortune, is looking for investment opportunities after a failed bid to buy Citigroup Inc’s Mexican banking business. Grupo Mexico has been eyeing expanding its US smelting capacity and in June delisted its transport unit to provide more control over decision-making.

Potential bidders are awaiting the terms and fine print of the tender. Milei took the first steps to privatise through his marquee reforms law passed last year, and signed an executive decree in February to kick-start the process. Many business leaders were waiting to see how Milei fared in the October midterms before committing to investments.

Investors will want assurances that a freight rail investment would be included in Milei’s RIGI incentives programme, which provides tax, customs and currency exchange benefits for 30 years. A key issue will also be how to reorganise the freight rail workforce because there are thousands of state workers on the payroll and Argentina’s labour laws make lay-offs extremely costly.