End of the line: Railroads in Chile

Between 1860 and 1950, railroads in Chile were synonym of modernization, integration, and economic development. By the 1970s railroads were bankrupt and socially discredited, surviving out of government subsidies. By 2000, passenger services had disappeared but private sector freight operations were revitalized after swift reforms. We review the Chilean reforms and experience, focusing on regulation, public sector involvement and political interference, market entry, vertical integration, and externalities. Perhaps uniquely, two different forms of private sector participation in freight operations emerge after reforms: a vertically integrated, privatized railroad and a state-owned, open-access, concession system.