Rail buff’s dream rolling to a halt in Guatemala

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.

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.

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.

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?”

marla.dickerson@latimes.com

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To read the recent Column One article on Posner, go to latimes.com/railroad.