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April 8, 2016

Promising a Railroad is a "Smoke Screen" for not Fixing BR- 163

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

A senator from the state of Mato Grosso recently complained at a meeting of the State Legislature that the Brazilian federal government's promise to build a railroad from northern Mato Grosso to the Amazon River sometime in the future is really a "smoke screen" to divert attention from the more immediate need of completing and repairing highway BR-163. Highway BR-163 connects northern Mato Grosso with the Amazon River port city of Santarem.

Asphalting of the highway was scheduled for completion years ago, but the project has run into numerous delays and cost overruns. It is now scheduled to be completed sometime in late 2016. Meanwhile, the older southern sections of the highway are in need of immediate emergency pothole repairs. A new railroad will help in the future, but fixing the existing highway would have an immediate impact yet this year on shipping grain north out of Mato Grosso. Currently, this highway is the principal route for transporting soybeans and corn from northern Mato Grosso to ports on the Amazon River. The state of Mato Grosso is Brazil's largest soybean and corn producing state.

The proposed 1,140 kilometer-long railroad has an estimated cost of R$ 11.5 billion and it would run alongside highway BR-163 from northern Mato Grosso straight north to the Amazon River. Approximately 250 kilometers before reaching the Amazon River, the railroad would reach the port of Miritituba on the Tapajos River, which is a southern tributary of the Amazon. At that port numerous grain companies are constructing barging operations that will transport soybeans and corn by barge to ports near the mouth of the Amazon River. The proposed railroad is already being called the "Grain Railroad."

If the railroad is built, it will probably be largely funded by BNDES, which is the Brazilian National Development Bank. Once fully operational, it could transport 30 million tons of grain annually at a savings of approximately 40% compared to shipping the grain to the traditional ports in southern Brazil.