Summary

Legal framework
Bus system facilities and equipment
Ownership structure of the bus fleet
Public transport regulation

This case study is based on recent studies and data on public transport reform in Santiago and on the direct experience of the author in the reform of public transport in Santiago, in 1990-1992 and 2000-2003.

Metropolitan Santiago has a population of nearly six million and comprises 37 districts (comunas) or municipalities. In the last 20 years metropolitan Santiago has seen significant changes in terms of demographic growth and of the territorial distribution of activities. The classical Spanish pattern, where most commercial and leisure activities were concentrated in a small downtown area, has given place to a pattern of increasing dispersion of activities throughout the whole metropolitan area and beyond. People have changed their pattern of movements around the city accordingly.

The Chilean economy is highly liberalized with strong private sector presence in all kinds of productive and service activities. The process of privatizing state companies started in the 1980s; electricity, telecommunications, gas, pension funds, health services, water, sewage, shipping, railways, ports and other companies have now been privatized.

Bus services in metropolitan Santiago are provided entirely by the private sector under concession contracts granted by the Ministry of Transport through periodical tender processes. The services are totally self-financing and there are no longer any direct or indirect subsisides, except for infrastructure provision. Not all routes are equally profitable, and there is an unequal distribution of routes among the different operators, the bigger ones serving the more profitable routes.

There are 132 companies (in reality groups of individual operators organized into trade unions) with over 7,000 buses, serving the 318 services tendered. The total fleet of buses in metropolitan Santiago in 2005, including all types of buses and services was 12,437.

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Legal framework
There are two levels of government, the national government and the regional governments, and one level of local administration, the municipalities. The national government has the overall constitutional mandate over transport matters. The Ministry of Transport is the only ministry involved in planning, regulating and monitoring public transport.

The metropolitan public transport management system consists basically of one body, which carries out the daily tasks of monitoring and regulating all aspects of public transport. There is no regulatory body dedicated to transport matters, as there is in relation to electricity, telecommunications, banks and financial institutions.

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Bus system facilities and equipment
Garage and maintenance facilities are provided mostly by bus owners themselves. The bigger operators usually have their own garages and maintenance workshops but most keep their vehicles at night in their homes or at their drivers’ homes.

Each bus line has its own terminal, usually owned by the company or, in a few cases, rented. Most of these terminals, however, do not have municipal permits, because of the environmental problems they pose and the negative impact on the value of real estate near them. It is an historical contradiction between the desire to have a bus service as close as possible and the desire not to be inconvenienced by the presence of the bus terminals.

In the original version of the Urban Transport Plan for Santiago, now in the process of implementation, it was intended to build a network of bus terminals through the private concession mechanism. However, this part of the original plan will not be implemented.

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Ownership structure of the bus fleet
The Santiago tendered bus fleet has around 7,279 buses, owned by 3,868 operators. Around 50% of the operators own between one and two buses, while another 20% own between three to five buses. No more than three individual operators, not companies, own over 50 buses each.

Lines are not organized as companies but as trade unions, each with a president and an executive body. The president is usually the biggest bus-owner in the line and the rest of the members of the executive body are generally appointed by agreement by all bus owners working on the line. The president of the line plays the role of general manager. The executive body is equivalent to a board of directors, while also acting as the leadership of the trade union. Each bus owner pays for the right to work with his bus on the line.

Owning a bus is symobolic of social status and a special bond is created between the machine and the family of the owner, who takes care of the vehicle as if it were a member of the family. When the first tender process carried out in 1992 required bus owners to transfer ownership of their buses to formal companies, and to become shareholders in those companies, operators angrily claimed that they were being deprived of their buses, and strongly resisted the change.

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Public transport regulation
Public transport in Chile has always been considered a state responsibility, although the role of the state has been that of regulator rather than provider. The operation of public transport services has always been a predominatly private activity under different governments, with radically different ideological leanings, from the extreme right to the left.

Between the 1930s and 1960s the state was also a provider of public transport, first with tramways and later with buses and trolleybuses, and in the 1970s with the metro network. But even in the 1970s, when the state-owned public transport company was most active, no more than 20% of demand was met by its bus and trolleybus services. The company was eliminated in 1975 and the only public transport service still provided by the state is the metro network.

Until the 1980s, regulation was comprehensive and included determining routes and fares as well as assisting private operators in buying their buses through soft credits. Political influence on public transport was strong.

From 1982, public transport was deregulated, so that anyone who wished to start a public transport business had the freedom to do so, with no previous permission from the state, and with no entrance barriers other than the need to comply with vehicle inspection regulations. Each operator established his own route and fares and could change them whenever he wished, without informing the authority about those changes. Such freedom was limited, however, by the agreements on tariffs usually taken by the trade unions that historically have controlled the operators in Santiago.

In this deregulated environment, all out competition was the name of the game. But it was not a competition in terms of who provided the best service, but competition in terms of who was first to grab the passengers waiting on the street.

The result was that by the end of the 1980s there was an oversized and overaged bus fleet (14,000 buses of an average age of over 12 years), excessive fares in relation to costs, badly maintained buses, high levels of emission of pollutants, and a high degree of user dissatisfaction. All agreed that something drastic had to be done.

Further changes in public transport were made at the beginning of the 1990s. The maximum age for public transport buses operating in Santiago was set by decree at 10 years. This eliminated 2,600 old buses. A new law allowing government to franchise public transport services through a tender process was implemented in 1991, despite attempts by bus operators to prevent it. Initially no changes in the route network were introduced, but these and other changes were introduced later.

The consequences of subsequent tender processes were dramatic. The bus fleet, which was around 11,400 after the forced withdrawal of buses, decreased further to 8,500, and further reductions followed. The number of buses operating in the main avenue of the city decreased from 750 to 550 per hour at the peak but the average number of passengers per bus went up from around 300 to 500 or 600 per day, substantially improving profitability.

By 2000, public transport had deteriorated further and many of the advances made at the beginning of the 1990s were lost or seriously undermined. The government initiated the Urban Transport Plan for Santiago 2000-2010. This plan proposes, inter alia, the creation of an integrated public transport system, embracing buses, metro, shared taxis and suburban trains. This will require modification of the bus route network, which has evolved on an ad-hoc basis as operators have reacted to changes in demand, introduction of an automatic integrated ticketing system, co-ordination of all bus and metro services, and investment in public transport infrastructure.

By January 2005 the service network had already been redesigned and the new bus services had been tendered. The infrastructure program has been advancing also, although at a slower pace and in a much limited form than originally planned.