Freight Problem? Uruguay's Solution!
by David P. Michaels & Edmond
Indispensable to Mercosur's continued success
is a fast, reliable and affordable freight transportation network.
It will permit industrial integration and specialization? and
globally competitive costs? as well as the "just-in-time"
delivery to final assembly plants of components and modular
sub-assemblies manufactured throughout the region. Moreover,
it will facilitate a massive increase in exports of perishable
agricultural and livestock products through Atlantic and Pacific
International and regional economic development
experts also have concluded that evolutionary improvement in
Mercosur's existing rail and road connections is not a satisfactory
answer, and that a revolutionary change in freight transport
technology is required.
Pipeline Freight Transportation ("PFT")
appears to be the only technology that meets the experts' criteria.
A PFT system consists of twin two meter internal diameter reinforced
concrete pipes lowered into a trench on land and across river
and lake bottoms through which capsules move(see footnote 1)
on rails propelled by Linear Induction Magnetic ("LIM")
propulsion (see footnote 2).
If Uruguay is to consolidate its status as
Mercosur's logical gateway ? and if the Port of Montevideo is
to enhance its position as Mercosur's preferred port of entry
and exports ? and if Uruguay is to become the preferred site
for parts manufacturing plants that ship components and sub-assemblies
to the revolutionary modular final assembly plants now being
built (e.g. Ford - Curitiba; GM - Rio Grande do Sul) in Brazil
and Argentina it is critical that the central hub of
a hub-and-spoke PFT network throughout Mercosur and associated
member countries be in its logical site: Montevideo. The network
could also include secondary hubs within each Mercosur member.
In order to assure the placement in Montevideo
of its central hub, it is highly desirable that Uruguay captures
the leadership in the development and design of such a PFT network
by sponsoring as a demonstration project the construction of
its initial segment within Uruguay, for example, between the
Montevideo and Colonia free zones.
International agencies and other funding sources
are likely to support such a demonstration project not only
as a template for subsequent extension throughout the Mercosur
countries, but also as a freight transportation system that
with Uruguayan developed know-how could then be
1- Each capsule: 4' x 4' x 25' = 400 cubic
feet/8 tons capacity. Speed: 90 Km/hour. Buenos Aires - Sao
Paolo (via Montevideo): ±18 hours. Montevideo - Valparaiso
(via B.A.): ±16 hours.
2- The maximum acceptable up/down grade
for a PFT system is 20%, compared with 6% for Trucks and 2%
for rail. The resulting capital cost and distance savings
in crossing the Andes and the Rio de la Plata are obvious.
Other merits of PFT systems include:
Reductions in truck fuel consumption
and their exhaust pollution. PFT systems are powered by electricity.
Reductions in the damage to roadbeds,
overpasses and bridges; 97% of which is attributable to trucks
Reduction in fatalities, injuries
and property damage caused by trucks.
Reduction in traffic congestion,
thereby increasing traffic capacity for automobiles.
PFT's enclosed nature protects its
sealed capsules from diversion and theft during transit.
Pipeline transportation systems of varying diameters have been
in commercial use for decades, notably in Japan, Russia and
the UK. However, their compressed air propulsion systems limit
their operational length to a few kilometers.
LIM propulsion, the key to long distance PFT
systems, is also in commercial use in a number of countries.
Application of LIM propulsion includes:
The baggage transportation and sorting
system at the new Denver International Airport.
New roller-coasters at several Six
Flags amusement parks.
The principal challenge of the demonstration
project in Uruguay would therefore be the combination of these
two proven technologies.
A Final Thought!
It has been stated that LIM-propelled PFT systems will be the
21st century's technology-of-choice for the intercity and transcontinental
transportation of freight, as railroads were in the 19th century,
and trucks in the 20th. Should not Uruguay be Mercosur's
and the World's innovator in applying this 21st century
Julio Mara Sanguinetti, President of Uruguay, and
his tourism minister, Benito Stern, enthusiastically
support the Colonia - Buenos Aires "puente" (i.e.
bridge), a project to award to the private sector a 35 year
concession to finance, build and operate a 41.4 Km (26 mile)
combination of bridges and causeways across the Rio de la Plata
estuary (South America Report June 1998 issue, and Journal of
Commerce June 16, 1998 issue).
Informed observers have expressed doubt that
the project is economically viable without substantial subsidies:
- Ariel Davrieux, director
of Uruguay's Office of Planning and Budget has stated that:
"It is very difficult for the "puente" to be
commercially viable given its high cost" (same two press
- David Michaels,
president of the Uruguayan American Chamber of Commerce (USA)
has stated that: "There is a belief that there is no
way this bridge can be constructed for the money they are
talking about" (same two press sources).
- Luis Alberto Lacalle,
former President of Uruguay and presidential candidate, has
stated that: "the economic basis (of the bridge) upon
which we are calling for offers does not add up. It is too
expensive to be self-financed by its own traffic" (Journal
of Commerce August 7, 1998 issue).
Moreover, informed observers agree with David
Michaels' contention that transportation of freight, not passengers,
is the only macro-economic justification for the bridge as follows:
"Forget the tourism argument. Tourists who want to go (from
Argentina) to Uruguay already have a way of getting there. The
bridge is only important from the aspect of transporting freight.
There are other ways to resolve this transport problem"
(same two press sources).
views expressed herein are those of the authors and do not necessarily
reflect the views of Tondu Associates, or the Uruguayan-American
Chamber of Commerce in the USA.
About the authors:
David Michaels is an advisor to corporations
and government al entities on matters associated with economic
restructuring and the related financial and economic negotiations.
He is the creator of a number of financial
programs for economic restructuring and expansion utilizing
sovereign debt instruments, blocked currencies, trade and investment
incentives, and has authored papers on international debt, trade,
investment and economic restructuring. Notably, he was
the principal proposer of the "International Central Clearing
House" for the registration of public and private sector
debt instruments and is credited with anticipating the concepts
behind the Brady Plan and the Enterprise for the Americas program
launched by the Bush Administration.
Mr. Michaels' activities of the MERCOSUR region
of South America, the South American Common Market, includes
representing and advising U.S. and European companies, including
Government entities, on their negotiations with the Public and
Private Sectors in the Southern Cone of South America, and he
acts as a conduit for multinational corporations requiring access
to "Southern Cone" markets.
He is President of the "Uruguayan-American
Chamber of Commerce in the USA", which he co-founded in
1985 with His Excellency, President Dr. Julio Sanguinetti, during
his earlier term as President of the Republic of Uruguay.
For more information
on David P. Michaels >>
Edmond A. Tondu
Edmond Tondu managed the project finance departments
of two major US engineering/ construction firms.
More recently, as an independent consultant
he was the financing advisor to the Department of Public Works
of Canada on a project to award to the private sector a 35 year
franchise to finance, build and operate a Canadian $ 900 million,
13 Km toll bridge across the Northumberland Strait between Prince
Edward Island and New Brunswick. He assisted Public Works Canada
with designing its innovative capped annual subsidy financing
structure, with drafting its Request for Proposals, with evaluating
the bids, with negotiations with the bidders, and with drafting
the franchise and subsidy agreements.
Subsequently, Mr. Tondu was the advisor to
the Dept. of Public Works of Turkey on the financing proposals
of three competing consortia for the US$ one billion Izmit Bay
Bridge private sector concession project.