The Economics of Transmilenio, a Mass Transit System for Bogotá

Urban public transport in Latin America has experienced public and private provision, as well as different types of market regulation, moving from almost total liberalization to intervention in fares, route allocation, bus size and service quality, exclusive road lanes, among others. This paper analyzes the experience of Bogotá, Colombia, where a new, hybrid system of urban public transport called TransMilenio (TM), was implemented at the beginning of this century. The new transit system combines public planning of the network structure, route tendering conditions, regulation and supervision, as well as private operation, in a separate manner, of revenue collection and transport service. This model emerged from long and failure ridden experiences with fully public provision, as well as private ownership, liberalization and competition in the market. Its adoption seeks to resolve market and policy failures that characterize mass transport systems in many developing countries. We conduct a cost-benefit analysis (CBA) of the first phase of the system. The new organization has had a sizeable impact on TM users by improving traveling conditions significantly. In addition, congestion, pollution and traffic accidents have plummeted in TM corridors. However, the type of transition adopted for the transport corridors not yet covered by TM has caused unforeseen negative spillovers, as a result of slow scrapping rates and bus and routes relocation. Political economy considerations partly explain the particular transition implemented. Consequently, although the CBA for the first phase of the corridors covered by TM is positive, once these additional measures are taken into consideration, the net effect is found to be negative due primarily to increases in travel time for passengers using the traditional transport system. In order to minimize the negative spillovers during the full implementation of TM, which is expected to last until 2015, the traditional and the new system should be integrated, and strict regulation of the traditional public transport system should be crafted. These recommendations apply for other Latin American and Asian cities that might attempt reforms of their urban public transport systems