South America Calling

Brazil Government Spending Freeze Stymies Grain Infrastructure

A freeze in Brazilian government spending is undermining industry efforts to expand grain-exporting capacity through northern ports, industry executives said Wednesday.

Grain exporters have made massive investments in terminals and ports across the Amazon but government is not meeting its end by completing road and rail links, they told journalists Wednesday.

"The reduction in government transport investment amid the current economic crisis is of real concern," Daniel Furlan Amaral, economy manager at the Brazilian Oilseed Industry Association, told journalists.

Investments in northern ports has already added capacity at ports at the mouth of the Amazon river and beyond, prompting soybean shipments through northern ports to rise from 6.5 million metric tons in 2014 to a projected 10 mmt in 2015.

With projects continuing to progress over the last year, terminals would expect to ship even more in 2016 but the broken government promises on building infrastructure means that probably won't happen.

That's a problem because Brazilian soybean output and exports continues to rise inexorably. Abiove estimates 2016 soybean output will total 98.6 mmt, up 3.5% on the year before and 45% higher than 2012. Meanwhile, soybean exports are pegged at 53.8 mmt in 2016, up 1.5% on the year and 63% higher than 2012.

Of biggest concern is the failure to pave the BR-163, an emblematic highway that connects central Mato Grosso with the Amazon ports of Miritituba and Santarem.

Slated to become the main route for beans out of the No. 1 producing state, the plan is for the road to carry upwards of 20 mmt of grain to Amazon barge terminals in the future.

There is already substantial capacity at these terminals, but the government still hasn't paved 75 miles of the road, something that it first undertook to do 30 years ago.

"The exporters have made big investments but aren't being backed up by the government," said Amaral.

The problem is that the unpaved road becomes a quagmire in the rainy season, which is just starting.

The story is similar on other key northern roads, like the BR-158/155. Meanwhile, a completed portion of the north-south railway that links the growing Mapitoba region in the eastern Cerrado to northern ports is not being used amid disputes with operators over lack of government payments.

With Brazil's economic crisis showing no sign of easing, the concern is that these investments won't be made in 2016 either.

"Unfortunately, the government views this as spending, not investment that brings returns in the future," said Amaral.



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