The Government of Argentina has signed a $1bn contract with Chinese state-owned railway builder China Railway Construction to improve a key railway line that transports cargo and other raw materials.

The railway modernisation contract was announced at the sidelines of the G20 summit held at the Argentine capital of Buenos Aires.

Under the contract, China Railway Construction will renovate 1,020km of San Martin railroad connecting the shipping hub of Rosario in the east and Mendoza province in the west.

Reuters reported that the railway system is in a dilapidated condition, forcing farmers to transport their soy, wheat, corn and other materials on trucks.

The project will enable them to transport the cargo via rail, generating significant logistical cost savings.

“The expectation is to go from 1.5 million tonnes of shipments this year to three million tonnes in 2025, and eventually to eight million tonnes in 2030.”

Argentina Transport Ministry was quoted by the news agency as saying: “When the works are finished, the expectation is to go from 1.5 million tonnes of shipments this year to three million tonnes in 2025, and eventually to eight million tonnes in 2030.”

The ministry further added that the renovation project will create around 3,800 jobs. Additionally, it will help to run longer trains on the line and reduce transportation costs by 55%.

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However, the statement did not elaborate on the contract’s financing structure.

China has been associated with the refurbishment and modernisation of multiple railway lines in Argentina including Belgrano Cargas cargo line and General Urquiza Cargas rail line.

Argentina is also acquiring Chinese-made locomotives to support its operations, reported Xinhua. To date, 97 locomotives have been delivered to the South American nation.