Sal Castelar

Transport Challenges in Central America The following document highlights some views on the main transportation challenges in Central America, discussing the roles of the private sector and the role of institutions like the Interamerican Development Bank with regards to this situation. It uses some examples from El Salvador to stress some of the points. General Challenges The Central American countries share many common challenges with regards to their transportation systems; these challenges are well known and will be only mentioned next: Increased population growth Accelerated private vehicle growth Inefficient public transportation systems Increasing fuel costs High levels of congestion Insufficient road space Increasing maintenance need on the road network Limited financial resources Worrying traffic accident levels Increasing pollution levels Increased transportation costs

At the heart of these problems are common causes that are also well known to most stakeholders: Weak legal and institutional frameworks Lack of integral policies between land use and transportation planning Lack of intermodal approaches to transportation within each country Few regional efforts to face the transportation challenges Inefficient private sector participation in the provision of transportation services.

An additional problem affecting transportation in the region in a negative way is the increased negative impact of climate change. This has increased natural disasters like heavy rains and floods all over the region and every year the road network in the region suffers an incredible amount of damage from these phenomena. Events like Ida and the Storm E-12 caused serious damage to the road network in El Salvador (6), preventing road authorities from culminating different road projects due to the need to make critical repairs on the main road network of the country. Governments alone will not be able to face these challenges successfully.

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Challenges and roles of the private sector It is clear that private sector stakeholders like constructors, freight carriers and public transport operators will be critical to improve the current state of transportation systems in the region. Transportation costs represent an important element of the general cost structure for companies in the region (3). This situation reflects the urgent need for improvement that the current transportation sector faces. With the majority of transportation services in the hands of private companies, it is clear that close collaboration and work is needed between them and the government. The private sector also plays a vital role in the construction and maintenance of road infrastructure in the region. With financial resources becoming more and more limited, it is also important to promote public private partnerships to help overcome this situation and take advantage of the efficiencies the private sector can provide (4). The need for adequate public private partnerships is particularly evident in the case of port infrastructure, which is having an important growth in the region. The case of Puerto Cutuco in El Salvador reflects clearly a case where even though an enormous investment was made by the government, the lack of an adequate strategy to involve the private sector has resulted in infrastructure that has been underutilized and is not living up to its potential, unable to bring the economic benefits that originally justified its reconstruction/improvement. With regards to transportation service providers, both public transportation and freight movement activities are characterized by atomized operators with low levels of organization. Individual operators prevail resulting in older transport fleets and increased costs. It is imperative to promote increased levels of organization among these players as well as to invest in their professionalization. The promotion of green ecological transport practices among these players is also critical to achieve sustainability of current transportation systems in Central America. One major challenge that affects the private sector involved in the provision of transportation services in the region, in particular those in the northern triangle is the issue of crime and violence. The example of El Salvador can be used to illustrate this situation. Most public transport operators need to pay regular fees to the gangs in their areas to be able to run their services. This is a common practice that is in effect all over the country. The authorities have not been able to act effectively against this situation and transport operations have incorporated the cost of this extortion as a regular part of their cost structure. According to the bus operators from El Salvador, over 20 transportation workers have lost their lives at the hands of gangs in 2012 (5). There are similar situations in effect with freight operators, who invest large amounts of money to hire private security services to protect their operations. It is important for the private sector to take a leading role in the solution of these situations. The private sector involved with transportation in the region needs to be proactive in demanding from authorities more actions and strategies to solve the security problem, for example. It is also clear that joint measures are needed to elevate the standards in the provision of current services. The

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regional governments seem to be investing in improving public transportation services, they seem interested in promoting BRTs as well as considering automated fare collection systems, however these efforts may prove unsuccessful if the private operators involved in these projects do not go through changes in their operating schemes. In the case of SITRAMMS, in El Salvador, it seems the construction of the required infrastructure is a far less complicated issue in comparison to integrating the different bus operators so that the system can function properly. Another element that needs attention, both from authorities as well as from the private sector, is the way public transportation is being subsidized. It is clear that the subsidy model in effect right now in El Salvador is not effective and does not contribute to improve the quality of transit service in the country. With regards to freight movement, it is important to continue improving border controls and facilitating transit across the region. A freight strategy to better integrate the different transportation modes is required by the private sector to become more competitive. The regional initiatives being promoted with this aim will be a useful instrument in improving current transit times and will contribute to make the private sector more competitive. The role of institutions like IADB These challenges call for integrated initiatives to be resolved. It has been shown long enough that isolated initiatives do not provide the results required to solve these problems. Integrated initiatives require many different stakeholders to work together; they require a level of leadership that is not being shown by current authorities in the region. However, the leadership role that is required could be played by organizations like IADB. An institution like IADB is not only in the position to provide funding for critical initiatives, it is also in a position to do so by setting conditions that can enable improved management of traditional transportation problems. If elements like coordinated planning, private sector participation and a multimodal approach are put behind the different transport related loans the IADB and similar institutions provide in the region, countries will be forced to look for improved ways to face the issues mentioned before. The role the IADB can play is of enormous value, considering the weak institutional capacity that most countries in the region suffer from. If the effective strengthening of the staff in critical positions is demanded, then the IADB would be contributing to filling a critical void that is currently preventing authorities in the region from acting effectively to solve the transportation problems. They also possess a strong capacity to play an advisory role and provide technical knowledge to regional decision makers that can enable them to carry out their work more effectively. The fact that the involvement of organizations like IADB (1) extends beyond the realm of transportation and into different critical sectors for our countries, such as education and health, allows them to create linkages among these different sectors that can force authorities to act in a more proactive and integrated fashion

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If education and health loans begin to include as conditions a more active involvement from authorities in dealing with the road safety situation for example, then governments will have no choice but to take measures to meet these requirements. The fact that loans seem tied to concrete goals and specific indicators like improvements in travel times, mobilized TEUs, etc., are most certainly steps in the right direction. The next step should be demanding for the improvement of indicators that might seem outside the scope of work of a particular Project or sector, but that are in reality needed to have integral improvements carried out, for example linking security indicators in transportation to the provision of financing of transportation projects; or in a more direct fashion, demanding a certain level or road network accessibility to approve operations supporting the Port of La Union. Such an approach could be defined within the country strategy prepared by the IADB for each of the countries. The support the IADB provides to Proyecto Mesoamrica (3) is in my opinion a valuable instrument to promote regional strategies to improve transportation systems in the region. Concrete projects like improvement of the Pacific corridor and the border crossing initiative to facilitate intraregional transit and improving freight travel time across the region from 190 to 54 hours will be critical to contribute to making the region more competitive. The initiative to establish a regional road safety program will also be beneficial for the region and similar programs should be part of the regional strategy promoted by institutions like IADB. Private participation could be more easily demanded/promoted if it were made a requirement of certain loan operations and in a more direct way, of the general strategy the IADB has for the region (with private participation as an indicator). About the IADB transportation strategy for El Salvador The IADB El Salvador 2010-2014 transportation strategy (1) aims to contribute to improve the transportation planning capacity in the country, contribute to establish a more efficient public transportation service, contribute to improve rural roads and also contribute to improving competitiveness by focusing on port infrastructure. These are all critical aspects required to improve the transportation system of the country as a whole. The indicative targets to measure progress on these objectives are a travel time reduction from 50 to 35 minutes from Santa Tecla to San Martn, the movement of at least 148,000 TEUs through La Union port and a 7% increase in the number of rural roads with an IRI of 3m/km; all of these goals by 2014. Based on the progress so far, it seems difficult that the foreseen travel time reduction will be achieved, considering the current government plans to work only on the first section of the Santa Tecla-San Martin corridor. Although the infrastructure for the first section of the corridor seems secured thanks to the IADB loan given earlier this year, the government does not seem to have made any progress with regards to improving the service provision. A considerable portion of the bus operators in the metropolitan area of San Salvador do not feel represented by the operators

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sitting on a permanent basis with the Viceministry of Transport (VMT). This lack of representation can result in additional threats to the advancement, not only of the SITRAMMS project, but also of the automated fare collection project the VMT is promoting in San Salvadors metropolitan region. With the continuous damage the road network in the country has experimented from natural disasters since 2010, the goal of improving the IRI of a percentage of the rural network might also require some reconsideration. If measures are not taken towards a more resilient transportation network, many of the investments in the road network run the risk of evaporating sooner than expected, as floods continue to gain strength year after year in the country. It is important to consider these structural issues affecting the IADBs transportations goals so that the resources the institution is making available result in the greatest possible benefit for the country. Sources: (1) Interamerican Development Bank, IDB:Country strategy with El Salvador 2010-2014, June 2010. (2) Interamerican Development Bank, Perfil de Proyecto(PP) Programa de Transporte del rea Metropolitana de San Salvador (ES-L1050), 2010 (3) Proyecto Mesoamrica, Declaracin de Mrida, XIII Cumbre de Jefes de Estado y de Gobierno del MEcanismo de Dilogo y Concertacin de Tuxtla, December 2011. (4) Proyecto Mesoamrica, Pases en el Proyecto Mesoamrica:Tendencias econmicas y sociales, XIII Cumbre de Jefes de Estado y de Gobierno del Mecanismo de Dilogo y Concertacin de Tuxtla, December 2011. (5) http://www.laprensagrafica.com/el-salvador/judicial/255077-extorsiones-no-se-han-reducidotransportistas.html (6) http://www.elsalvador.com/mwedh/nota/nota_completa.asp?idCat=47862&idArt=6585980