Improving Brazil's Infrastructure

by Teresa Acklin
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Market liberalizations, economic stability foster port, trans-portation projects to facilitate soybean movement, exports.

   The Brazilian private sector, in conjunction with Brazilian federal and state governments, is pushing ahead to develop and complete a number of infrastructure projects that will generate major transportation cost efficiencies and make Brazilian soybeans and products more competitive in international markets.

   The success of the Brazilian gov-ernment's economic stabilization and liberalization plan, in place since 1994, has been a major factor behind the projects. In the past two years, sharply lower inflation, increases in gross domestic product and privatization have encouraged large investments. If economic growth and stability continue, further investments, both national and foreign, are expected to result in additional improvements to railways, waterways and port facilities.

   In the past year, World Grain has published several articles related to infrastructure developments in Brazil (see March 1996, page 26; October 1996, page 46; and March 1997, pages 45 and 56). Recently, the U.S. agricultural attache's office in Sao Paulo released a report providing additional details on existing and planned infrastructure projects.

Northwestern Corridor

   The Northwestern Corridor project is spearheaded by Maggi Seeds and Hermasa Amazonia Navigation, S.A. This development enables soybeans grown principally in northern Mato Grosso, especially in the Sapezal and Campos de Julho municipalities, to be exported via the Madeira and Amazon Rivers instead of through the Center-South ports of Paranagua and Santos.

   The attache report described the Northwest Corridor project, also known as Projeto Hermasa, as “extremely impressive in many different respects.” Maggi Seeds estimates that savings on freight should be about U.S.$30 per tonne of soybeans via this new route (see adjacent article).

   The project involves investment in a road in northern Mato Grosso and in soybean silos and loading platforms in Porto Velho. Porto Velho, the capital of the state of Rondonia, is located on the Madeira River, one of Brazil's principal rivers. Soybeans grown in northern Mato Grosso will be trucked and loaded onto barges at the port.

   From there, soybeans will be shipped down the Madeira River to the port of Itacoatiara on the Amazon River. At Itacoatiara, a floating port has been installed to receive both barge traffic and ocean-going vessels of 35,000 to 60,000 dwt capacity.

   Soybeans that are unloaded from barges will be stored in 90,000-tonne silos until they are ready to be discharged for export. All equipment used in this project is top quality, according to the attache report.

   The building of barges and pushers that will be used along this waterway is almost completed. The barges and pushers have been adapted to the difficult navigational conditions of the Amazon and Madeira rivers.

   The Northwestern Corridor project was scheduled to become operational in March, and 300,000 tonnes of soybeans are expected to be shipped out through this waterway in the 1997 marketing year. As the barge and pusher fleet is expanded, Hermasa Navigation predicts that the volume of soybean exports will increase rapidly, hitting 1 million tonnes by 1999.

   Outside of northern Mato Grosso, the project also will have an impact on soybean production in the states of Rondonia and Amazonas. The government of Amazonas recently announced that it will invest more than U.S.$15 million to bolster agricultural development in the municipality of Humaita in the southern part of Amazonas state.

   Agricultural officials already are carrying out field trials with soybean varieties that can adapt to tropical climates. According to press reports, the municipality of Humaita has 100,000 hectares of arable land, although some sources place the potential at higher levels.

   The Northwestern Corridor project also could enable viable soybean production in outlying Roraima, which borders Venezuela and Guyana to the north of Amazonas. Some successful soybean growers from northern Mato Grosso have visited Roraima and assert that the area contains plentiful savannah-type land.

   This land is within a reasonable distance from the port of Caracarai on Rio Branco, which feeds into the Amazon River. Soybeans then would be shipped to Itacoatiara for export. For production in Roraima to become viable, infrastructure investments at Caracarai will be required, the Rio Branco will need to be mapped, and the soils would need to be limed to enable soybean plantings. (According to news reports in late March, the Ministry of Agriculture received approval for a program that would encourage commercial banks to finance the liming of agricultural land in exchange for certain concessions from the Central Bank.)

   Other future developments linked to the Northwestern Corridor project include the possible construction of soybean crushing facilities in Itacoatiara and a fertilizer mixing plant in Porto Velho, whose inputs would be transported to Porto Velho as part of return barge traffic.

   Given the efforts made by Maggi Seeds and Hermasa Navigation, coupled with the apparent support from the state governments of Amazonas and Rondonia, the Northwestern Corridor project should be successful and will have a significant impact on the agricultural economy of northern Brazil, the attache report said.

Center Corridors

   The Center-North transport corridor begins in western Mato Grosso and uses river, road, and railway systems to ship soybeans to Sao Luis, Maranhao, in the Brazilian Northeast. Soybeans first go up the Manso (Rio das Mortes) and Araguaia rivers to Xambioa in the state of Tocantins.

   From there, soybeans are transported by truck and rail to the ports of Ponta da Madeira and Itaqui in Sao Luis. Some soybeans have already been exported out of Mato Grosso via this transportation route, and this route should stimulate further soybean production in western Mato Grosso, Tocantins and Maranhao.

   The Center-East corridor links the savannah areas of the Center-West with the ports of Vitoria and Tubarao. Investment needs to be made in the railway system to make this corridor viable, although a functioning railway already exists in part of this corridor between Tubarao and Belo Horizonte.

   According to some accounts, this corridor serves an area with a potential of 13 million hectares of arable land. Currently, only 1.5 million hectares of this area are in production.

   Another project involves the Parana River. This waterway project would begin in Caceres, in southwestern Mato Grosso, and would go along the Parana River to the port of Nueva Palmira in Uruguay. The project reportedly has been on paper for ten years, but recently, its first phase — the dredging of the river bottom in Santa Fe, Argentina — was initiated.

   The Parana River waterway, when it is completed, will benefit agricultural interests, especially soybean growers, in countries of the Mercosul trade pact. Some analysts believe that soybeans from the Center-West that are shipped via this waterway will benefit from transportation costs up to 30% less than those associated with trucking product to Paranagua.

   Improvements in railway systems also need to be realized to make Brazilian soybeans more competitive in the international market. The privatization of the railways will lead to major cost efficiencies, some of which will be reaped this year.

   Investment in port infrastructure, especially that of Paranagua, is also critical in order to reduce the shipping delays that were so common during the 1996 season; reportedly, 30-day delays for Panamax vessels were not uncommon during May-July 1996. As more “outpost” ports become operational, however, Paranagua and other major soybean exporting ports of the Center-South will feel less pressure.

New Brazil waterway reduces soybean export costs by 30%, operator says

   ITACOATIARA, BRAZIL — The flow of soybean production from northwestern Mato Grosso state is 30% cheaper since the Madeira Amazonas waterway began operating in March, according to a report in the Brazilian newspaper Gazeta Mercantil. As a result, freight, which cost $105 per ton to Paranagua and Santos, now has fallen to $70 per ton.

   “This is the reduction in the Brazil cost,” said Blairo Maggi, president of Hermasa Navegacao da Amazonia S.A., which operates the line. The company invested U.S.$59.65 million to build two terminals and a fleet of tugboats and flatboats to transport the cargo.

   With the new route, the distance to many markets is shorter. For example, the distance to the port of Rotterdam, the Netherlands, has been slashed by 569 kilometers. The new route also results in savings in time and loading charges.

   Ships spend an average of three days to load in Itacoatiara, while in Paranagua at the height of the season, it may take a vessel 10 days to wait in line to dock. Loading costs are also lower, half the price charged in Santos, which charges U.S.$13 an hour, Maggi said.

   Hermasa is a joint venture between the Andre Maggi group (57%) and the state of Amazonas (43%), to help develop the southern part of the state.