Brazil's Amazon has the world's largest river system. Not only does it connect the Andes to the Atlantic Ocean, it also links Brazil's fast-growing Cerrado grain regions to northern ports such as Sao Luis and Belem.
If these waterways were utilized for transporting soybeans and corn, Mato Grosso and surrounding states could cut freight costs by as much as half.
That's a big deal, for while Brazilian soybean production costs are comparable to those in the U.S, an overreliance on road transport means farmers spend up to four times more in sending produce to port.
It is one aspect of plans to increase grain shipments through northern ports that I don't touch upon in the series 'Brazil's Port Problem' being published by DTN this week.
The reason isn't oversight, but rather I left it out because plans are still in the embryonic stage.
After a decade of inertia, there has been some progress on these projects recently but major obstacles must still be overcome before we see beans barged directly out of Mato Grosso in substantial volumes.
Let's look at the case of the Teles Pires-Tapajos waterway -- Brazil's principle grain barge project.
The Teles Pires-Tapajos river system connects the north of Mato Grosso with seaports at the mouth of the Amazon. If developed, it could cut the cost of transporting soybeans from the top-producing districts of Sorriso, Lucas do Rio Verde and Sinop by over 50%, estimates Movimento Pro-Logistica, a farm logistics lobby group.
Currently, the majority of soybeans from these regions are trucked the 800 miles or more to the southern ports of Santos and Paranagua at vast expense.
"The Teles Pires-Tapajos has the potential to become as important to Brazil's grain industry as the Mississippi is to U.S. farmers," says Carlos Favaro, president of the Mato Grosso Soybean and Corn Producers Association (APROSOJA).
However, in recent years attempts to persuade authorities to make the rivers barge-worthy have run up against federal budget constraints, apathy among the non-producing states to the north and opposition from environmental and social activists.
Indeed, a measure of the opposition can be seen in the fact that a series of environmentally motivated injunctions have prevented the Transport Ministry from even conducting feasibility studies into the waterway scheme for much of the last decade.
The climate has become more favorable to the project of late, principally because the federal government now realizes it has to do something about Brazil's terrible infrastructure. In August, President Dilma Rousseff launched a plan aimed at stimulating $64 billion in transport investments and the Teles Pires-Talajos waterway was included.
Brasilia has the power to sweep away impediments to strategic infrastructure projects and, in the case of Teles Pires-Tapajos, it has finally exercised that by overturning the injunctions. As a result, the Transport Ministry expects to complete the feasibility study by next year.
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However, Brasilia's growing commitment to development has created new impediments to the nascent grain waterway schemes, most notably in the form of plans to build hydroelectric dams across the Amazon River system.
In the case of Teles Pires-Tapajos, the government wants to put up eight plants along the route, making the waterway project much more complicated and expensive.
A series of bypasses would need to be incorporated into the dam plans to allow barges to pass, but the energy companies are showing great resistance to constructing something that won't benefit them.
This is an urgent issue in the case of Teles Pires-Tapajos as two of the hydroelectric stations are already under construction.
If bypasses aren't incorporated into the original dam build, farmers could kiss goodbye hopes of barging soy to port, says Edeon Vaz, executive coordinator at Movimento Pro-Logistica.
For while it is possible to add bypasses to dams afterward, the costs rise astronomically and environmental opposition would be significant, he explains.
Other potential barge routes to northern ports are along the Arinos Juruena-Tapajos River, which also connects northern Mato Grosso to Sao Luis and Belem, and the Araguaia-Tocantins water system, which links the new frontier regions in Tocantins, Maranhao and northern Goias to northern ports. Meanwhile, the Paraguai-Parana waterway potentially links western Mato Grosso and Mato Grosso do Sul with ports in Argentina.
However, these projects are even more embryonic than Tele Pires-Tapajos and also face dam issues.
In total, some 27 potential dam projects stand in the way of waterway projects and it would cost $5 billion to bypass all of them, estimates Movimento Pro-Logistica.
So, to sum up, while the waterway projects are promising, they remain in the planning stage, face significant activist opposition, have no allocated budgets and could be rendered unviable by dam plans.
The lack of waterway access may limit the success of the northern port projects, according to Sergio Mendes, director general of the Brazilian Cereal Exporters Association (ANEC).
That's because, without them, it will remain cheaper to send beans from southern parts of the Cerrado to Santos or Paranagua than to northern ports, he explains.
As a result, you won't see the mass migration to northern ports that some farm leaders foresee.
That's not to say that the construction of road and rail links to northern ports is a waste of time. It certainly isn't. The new land routes will offer savings, reduce pressure on the southern infrastructure and thus halt the current upward spiral in logistics costs.
But developing river routes represents perhaps the best chance for Brazil's grain industry to address its Achilles' heel, logistics costs, and become competitive on freight with the U.S. and Argentina.
Farm leaders are lobbying hard for this to happen, but there remain few concrete plans to build terminals and the other installations needed and a huge question mark over if the projects will take off at all.
SOME FACTS ON NORTHERN CORRIDORS AND THE WATERWAYS
Brazil is expected to produce 80 to 83 million metric tons (mmt) of soybeans in 2012-13, possibly making it the world's biggest producer.
It is expected to ship approximately 38 mmt of beans and 15 mmt of meal, on top of around 12 mmt of corn.
Grain farming has expanded rapidly across the Cerrado highland regions over the last three decades. These regions are deep in Brazil's interior in the north half of the country.
Such has been the growth that, in 2009, some 52% of grain production occurred north of the 16th parallel south, which more or less splits the country at Brasilia.
However, some 84% of exports were still shipped from ports south of the parallel.
Brazil's traditional farm regions and industrial heartlands all lie south of the parallel, while most of Mato Grosso and the new frontiers of Maranhao, Piaui, Tocantins and Bahia lie to the north.
At present, the only route on which significant volumes are barged is from Porto Velho, in the northwestern state of Roraima, to the Amazon ports of Itacoatiara and Santarem. Approximately 3 million metric tons of soy from western Mato Grosso was shipped via this route in 2011.
Waterways are vastly underused in Brazil in general. Rivers carry only 11% of the country's freight compared with 60% in the U.S.
I have included a map, kindly provided by the Brazilian Agriculture and Livestock Association (CNA). Unfortunately, it is in Portuguese, but hopefully it will let you visualize what I am talking about in this blog post and in this week's series.
Alastair Stewart can be reached at email@example.com
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