Evaluation of the Benefits of Transnational Transportation Projects

In this paper, we examine the impact of transnational transportation projects on cargo traffic and the distribution of the benefits of the project amongst those affected. The paper has found that the allocation of the economic benefits depends upon whether the goods are traded internationally or regionally. When the goods are internationally traded, producers of the exporting country benefit from the reduction of transportation cost. In the case of regionally traded goods, the gains from the reduction of transportation cost will be shared by producers in the exporting country and consumers in the importing country where the shares are determined by the import demand and export supply elasticities of the commodity. This analytical framework is applied to the evaluation of a proposed Buenos Aires-Colonia binational bridge project. In the base case we find that for internationally traded goods, the present value of the benefits of freight cost reductions that accrue to Argentina are estimated to be US$47.0 million and those accrue to Uruguay are about US$41.8 million. Brazilian producers would even benefit more in the amount of US$73.8 million. These cost reductions are over and above the reduction in freight costs that are captured by the tolls on the bridge. These net benefits are equal to approximately 18 percent of the investment cost of the bridge. For regionally traded goods, consumers in Argentina and producers in Brazil would share equally the small amount of benefits generated.