Henry Posner III, the company's owner, said the trains would operate until Sept. 30 so the company can fulfill its obligations to cargo companies.

Ferrovias, the name of the U.S.-owned Railroad Development Corporation's operations in Guatemala, operates one line between Puerto Barrios and Guatemala City that moves 15 percent of the port's cargo for the capital and 90 percent of the country's imported iron. The company also operates short lines in several other countries, including Malawi and Estonia.

Engineer Jorge Victor Diaz Marroquin drives through the train yard outside Guatemala City, where another cargo car will be added before the train begins the 24-hour journey from the capital to the Atlantic Coast. (Sarah Meghan Lee / For The Times)

The Guatemalan government gave the firm a 50-year contract in 1998 after the country's train service was privatized.

However, the company sued Guatemala in 2005, alleging it had failed to follow through on promises to remove squatters and come up with $3 million to help maintain the line. The Guatemalan government responded with a public declaration stating that the 1998 concession was no longer in Guatemala's best interests.

A worker puts out a fire on the tracks en route to the coast. Bandits set fire to the railroad ties to loosen the metal of the tracks, which they sell for scrap. (Sarah Meghan Lee / For The Times)

After that, Ferrovias manager Jorge Send said, the company lost clients, access to credit and the support of local law enforcement, effectively sealing the company's fate.

The company's lawyer, Juan Pablo Carrasco, told The Associated Press the firm will now focus on winning a $65 million lawsuit against the Guatemalan government in U.S. courts. The company is seeking to recover $15 million it says it invested in restoring 200 kilometers (125 miles) of railway and the estimated $50 million it says it will lose in revenues and fines for canceling its contracts under its 50-year concession.

Government spokesman Julio Corado said the company's decision to abandon its Guatemalan operations is "an internal decision that the Guatemalan government respects."

The company will lay off most of its 75 workers.

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Rail buff's dream rolling to a halt in Guatemala

Los Angeles Times: July 10, 2007
By Marla Dickerson, Times Staff Writer

Guatemala's rough road - A Ferrovias Guatemala train enters the yard on the outskirts of Guatemala City. The country once had one of the finest rail systems in the world. (Sarah Meghan Lee / For The Times)

MEXICO CITY — It's the end of the line for Henry Posner III.

The Pittsburgh millionaire who spent $15 million to revive Guatemala's once-defunct railroad said Monday that the freight trains would stop rolling Oct. 1.

His company, Railroad Development Corp., is locked in a legal battle with the Central American nation's government, which Posner said has made it impossible to keep operating the money-losing service.

"Enough is enough," Posner said. "It's clear that at every level of Guatemalan society there is, at best, a lack of respect and, at worst, an outright hostility to everything that we have been trying to accomplish."

Posner said the company would continue running trains to the end of September to meet previous commitments to freight customers.

The company will also press ahead, he said, with a legal action seeking $65 million in compensation from the government for allegedly damaging its business. Guatemalan officials did not respond to a request for comment.

Posner, 51, was the subject of a Times profile last month that chronicled his efforts to restore rail service to Guatemala, whose national railroad ceased functioning in 1996.

Posner's railroad firm in 1998 won a 50-year concession to get the freight trains rolling again. It reopened a 200-mile stretch of track running from the capital of Guatemala City to the Atlantic port of Puerto Barrios, a feat hailed by train buffs but which never turned a profit.

Posner has made a career out of salvaging troubled railways in far-flung parts of the globe, including Malawi, Mozambique and Estonia.

But Guatemala has proved a tougher haul than any of them. Scrap metal thieves routinely plunder the tracks. Thousands of squatters have taken up residence in the right of way. Washouts ravage the rails during the rainy season.

Vendors set up shop on the tracks, where they don’t have to pay rent, and move out of harm's way at the last moment. They know just how high they can stack their merchandise so the locomotive doesn’t flatten it. (Sarah Meghan Lee / For The Times)

But Posner said his biggest stumbling block in Guatemala had been the government. He claims that it failed to honor its agreement to contribute $3 million for track improvement and to evict squatters from the most potentially profitable lines.

A market on the tracks outside Guatemala City. The railroad's operations manager says municipal officials have ignored his pleas to honor the 50-foot right of way on both sides of the tracks. (Sarah Meghan Lee / For The Times)

When the company pressured the government to live up to its end of the bargain, Posner said, it retaliated with a rare and powerful legal maneuver to repossess its locomotives and rail cars.

That 2006 action is still tied up in court. But Posner said the threat alone scared off customers, sending his firm into a downward spiral.

In its suit against Guatemala, the company is invoking an investor protection clause in the Central American Free Trade Agreement, which includes the U.S. and Guatemala.

That pact forbids governments from expropriating assets of foreign investors. The railroad firm filed a claim in Washington last month before a special international dispute panel. A decision could take two years.

A couple kiss next to the tracks in Puerto San Jose, on the now unusable line to the Pacific. The man who wants to salvage the railroad says the key to profitability is reviving trains to the Pacific, where the nation’s sugar growers export their cargo. (Sarah Meghan Lee / For The Times)

Posner said he finally concluded that nine years of spinning his wheels in Guatemala was enough.

"We can't succeed in a country that doesn't want us there," Posner said.

Some say Guatemala might end up the real loser.

"The implications for foreign investors are not good," said Carlisle Johnson, a political analyst and host of a popular radio program called "Good Morning Guatemala." "Who is going to come in after this fiasco?"

People in Puerto San Jose often use the old tracks as a fishing spot. (Sarah Meghan Lee / For The Times)