Bolivia is one of two landlocked countries in South America (the other is Paraguay) and has an area of 1,098,581 sq km (424,162 sq mi), about the size of California and Texas combined. It had 8.9 million residents in 2004. Terrain is rugged: Bolivia straddles the Andes and claims the world's highest capital city, its highest navigable lake, its highest passenger railroad, etc. It was once much larger: in the 19th century Bolivian territory included parts of the Brazilian states of Acre, Amazonas and Mato Grosso, the Chaco region of Paraguay, two sections of Argentina and the Antofagasta Region of Chile, which has 500 km of coastline on the Pacific Ocean. Today it is only 46.5% of its original size.

Bolivia's first railroad was a short line that opened in 1873 in the Antofagasta area in what was then Bolivian territory, but since 1904 has been a province in Chile. The line reached modern Bolivia in 1889, but steam locomotives did not arrive in La Paz until 1917. Because of difficult geography and economic conditions, rail development in Bolivia was much slower than in other South American countries.

There seem to have been only four tramway operations, none before the 20th century. Horsecars began running in Cochabamba in 1902, in Oruro in 1907 and in Potosí about 1910. They never ran in the capital, La Paz. Bolivia's first electric rail operation was a 9 km line that the Guaqui-La Paz Railway opened between La Paz and El Alto in 1905. The La Paz urban trolley system began carrying passengers in 1909. Cochabamba inaugurated an electric line in 1910 and Potosí about 1913.