July 26, 2007

 

Brazil's "Soy Highway" still awaiting environmental approval

 

 

Brazil's controversial 800-kilometre "soy highway" connecting Mato Grosso soy producers to the Amazon River is still waiting for environmental approval, but the private sector expects construction to start next month.

 

Civil engineers from the Brazilian Army have plans to rebuild five bridges and pave some 217 kilometres of road connecting Ruropolis to Santarem, a port city on the Amazon River.

 

BR-163 is a federal highway that runs from northern Mato Grosso, the No. 1 soy-producing state, to Para state in the heart of the Amazon jungle. Para doesn't have any significant soy production, but Mato Grosso soy growers have waited and hoped for three decades that BR-163 would be made suitable to truck thousands of tonnes of soybeans out by boat from the Santarem river port to the Atlantic Ocean. Right now, the road is mostly dirt and is impassable in the rainy season.

 

Whether BR-163 ever gets paved depends on the government environmental protection agency, Ibama. Ibama's environmental licensing director was unavailable for comment and the press office said it didn't know how far along Ibama was in granting the required environmental permits to start the work.

 

"We've talked about this to death with everyone, even the local indigenous population. This is going to happen next month," said Jorge Baldo, president of the BR-163 Committee, a group of private-sector associations and government agencies working to promote sustainable development along the so-called "soy highway."

 

The idea was to build the road so Mato Grosso soy growers could reduce transportation costs for soybeans. Baldo said if BR-163 was paved, farmers would save at least US$2 per 60-kilogram bag of soy in transport costs.

 

As it stands, soy growers in Mato Grosso ship soybeans by truck and rail more than 1,300 kilometres away to ports in Sao Paulo and Parana states.

 

"Farmers up in north Mato Grosso bought land, planted, and pressured the government for 30 years to get that road suitable for truck transportation," said Flavio Franca, a commodities analyst for Safras & Mercado, one of Brazil's top agribusiness consulting firms.

 

"Their lobbying never worked," he said. "When the dollar was stronger, they didn't mind. But now that the dollar is weaker, bottlenecks like this become more evident and cut into profit margins in a big way."

 

The dollar is currently trading at seven-year lows at BRL1.86.

 

Over the last several years, transportation agencies, soy growers and executives in logistics companies have argued in favour of BR-163 and more investments in shipping infrastructure.

 

"We haven't had any logistics problems with the soy crop this year. The sector has invested in added capacity and space in the southern ports over the last few years," Franca said.

 

"With the dollar declining the way it is, there will be more pressure to invest in better logistics for Mato Grosso," he said.

 

The BR-163 project promises to slash transportation costs, hasten economic development in the region, and modernize one of Brazil's most undeveloped areas.

 

But the new road has had environmentalists, including Ibama, worried that further development would lead to deforestation in the Amazon.

 

Brazil is the world's No. 2 soy exporter behind the US.