When Government Wastes Benefits from a Project : The Case of Line 3 of Light Rail in Guadalajara, Mexico

This paper shows and analyzes the deterioration of net social benefits from Line 3 of the Light Rail in Guadalajara, Mexico, which took place even before Line 3 began its operational life. According to this ex-post evaluation, this light rail project has performed worse than the average international figures reported by several authors concerning the two most critical issues related to this kind of project: cost overruns and overestimated demand. Scenarios analyzed in this work show that failures in managing and executing Line 3 resulted in, at least, a loss of 500 million dollars in net social benefits (in present value), but if we compare the ex-post results to ex-ante studies, this loss can escalate to more than 1 billion dollars. These figures expose wasteful use of scarce social resources. In essence, there is a shortage of ex-post evaluations on major transportation projects in countries like Mexico. The analysis produced here represents a step towards improving the execution of this type of project in developing countries, particularly in Latin America