The Southern Railway, Transportation Costs and the Economy of Southern Peru

This article analyzes the effects of the Ferrocarril del Sur (Southern Railway) on the economy of southern Peru. The construction of the Southern Railway, one of the two largest railway systems of Peru, generated great optimism about the economic future of the region. The study shows (as promised by its promoters) that the railroad reduced transportation costs. Compared to muleteers and llama owners, the railroad charged low freight rates and passenger fares. The social savings of this railroad ranged between 2.3% and 6.2% of the stock of capital in 1890 and between 10% and 20% in 1904. The railroad did not have an immediate impact on the economy of the South of Peru. From the late 19th century, however, the volume of freight increased at high rates. Over time, the railroad fostered the integration of the South with the world economy and with the rest of the Peruvian economy.