SAO PAULO (Reuters) - Brazil’s Mato Grosso state has all the conditions to be a soy farmers’ paradise: plentiful rains, fertile and affordable land and a potentially navigable river, the Teles-Pires, that winds its way north to the Amazon and out to sea.
Yet farmers cannot use the Teles-Pires and instead have to load their crops onto trucks for a two-day, 1,300-mile (2,100-km) journey by road to overcrowded southern ports, where they often wait weeks before loading.
Brazil has historically failed to make use of its extensive river network, one reason why its transport costs are up to four times higher than in the United States or neighboring Argentina.
That could change in coming years as officials, under pressure from the growing farm lobby in soy frontiers such as Mato Grosso, are vowing to take the tough steps necessary for river travel to become more widespread.
“River transport is something we are looking at very carefully as we speak,” Transport Minister Paulo Passos told Reuters in an interview. “There are challenges, but it would benefit many people.”
Brazil’s numerous transport bottlenecks are in the spotlight after President Dilma Rousseff announced a $65 billion plan to boost infrastructure investment earlier this month. The plan targets improvements to about 10,000 miles of highways and railroads, and another package involving seaports and airports is likely in September.
Passos said river transport would not be addressed in such dramatic fashion in the short term, because projects are “less mature” than those in other sectors. But he said the growing clamor from farmers and others is having an effect, and technicians are looking carefully at the logistical hurdles to river travel.
That usually means hydroelectric dams — and the case of the Teles-Pires is emblematic.
While the river is not currently navigable, a series of dams planned along its course could raise water levels high enough to allow barges to pass through. The problem is, Brazil’s government failed to include the requirement for navigation locks in the bidding process, meaning a long-held desire to use the river to transport crops may have to wait.
Farmers are enraged, saying electric companies are monopolizing the use of a public resource at their expense. Mato Grosso’s Institute of Agricultural Economics says a working waterway on the Teles-Pires could cut freight costs in the region by as much as 55 percent.
“We are throwing away 3 billion reais ($1.5 billion) (in shipping expenses) every year and it’s just going to get worse,” said Leonildo Bares, a soy farmer and president of a local agricultural union.
Luis Siqueira, president of São Paulo’s waterway transporters union, said the time for action is now as policymakers become increasingly attentive to complaints from farmers. “It’s a moment when we need to seize on the enthusiasm, because while all these discussions are going on hydroelectric dams are being built without locks. It’s absurd.”
Brazil’s energy policy, however, may be standing in the way.
Rousseff has made it a priority to lower energy prices — currently the world’s third highest — by offering tax breaks to electric companies and increasing supply. The country plans to build as many as 48 new hydroelectric plants by 2020, but most of them will not include navigation locks, which would add to costs and potentially delay construction.
Passos acknowledged that officials at Brazil’s energy ministry are “worried” about the possibility of more expensive dams translating into higher power costs.
Some companies say they would not be opposed to building waterway provisions, such as locks and canals, as long as Brazil’s government included those requirements as part of the bidding process, which is rarely the case.
“The responsibility of the company is to follow all the conditions that were imposed when it won the auction,” said Luiz Ramires, financial director for Hidreletrica Teles Pires, the group building the hydroelectric dam.
For Brazil’s farmers, the benefits of requiring locks and developing waterways are clear. According to Brazil’s grain exporters’ association, it costs an average of $85 per metric ton to ship crops out of Brazil but just $23 in the United States and $20 in Argentina. While freight accounts for 13.3 percent of the final cost of soy in the United States, it accounts for a whopping 30.6 percent in Brazil.
Another issue that could help waterway proponents to prevail is the environment. In recent years Brazil’s Transportation Ministry has increasingly aligned itself behind the movement for waterway transport by highlighting not only the cost savings but also the environmental benefits. Barging releases six times less carbon dioxide and 18 times less nitrous oxide than a truck, and is 29 times more energy efficient.
Still, new waterways in areas such as Mato Grosso pose a dilemma to conservationists. While they would contribute dramatically to a reduction in greenhouse gasses, the increase in land value caused by lower freight costs from the region could stimulate deforestation.
The farmers, however, see it differently.
“If we didn’t have to deal with the high freight costs, the farmers of Mato Grosso would be investing in technology so that we could produce more within the space we have, which would reduce pressure to expand into forested land,” Bares said. “If we had better machinery, for example, we could double production without knocking down a single tree.”
Recent developments suggest Brazil’s government is starting to listen. The country’s latest national logistics plan calls for waterways to account for 29 percent of the transportation network by 2025, up from 13 percent currently, and to bring roadways down to 33 percent from 58 percent today.
The Transportation Ministry pushed things one step further in April when it said it would fund the construction of locks on hydroelectric dams, and technicians are working to establish a national strategic waterway plan.
“I admit it’s absurd that this subject has taken so many years to be resolved but now we are getting to a conclusion,” said Nilson Leitão, who represents Mato Grosso in Brazil’s lower house of Congress. “Now I want to see dam construction stopped until we get a guarantee that the projects will be built with locks.”
“Only then will we say that the battle has been won,” Leitão added. “For now it’s all just poetry.”
Additional reporting by Brian Winter in Brasilia; Editing by Kieran Murray and Eric Beech