Pricing Urban Transport in Latin America

Abstract

This chapter reviews several themes related to the pricing of urban transport services in Latin America, a region characterized by high-income inequality, weak institutions, and rising motorization rates. These features generate important pricing challenges. We first analyze the allocative efficiency of transit fares and fuel taxes and conclude that the first are probably not too far off from optimal levels while the latter are below their optimal level. We then analyze non-pricing regulations that generate shadow pricing effects. The region has been a pioneer in BRT-type reforms and research suggests that this policy may be a good substitute for congestion road pricing. License plate driving restrictions are ubiquitous and may be counterproductive. Finally, we review the social and distributive issues related to transport pricing and discuss several novel experiences with mean-tested transport subsidies.