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January 14, 2015

Brazil's New Minister of Agriculture to Address Infrastructure

President Rousseff recently appointed a new Brazilian Minister of Agriculture, Senator Katia Abreu, and she is going to have a lot of decisions to make especially concerning Brazil's lack of adequate infrastructure needed to accommodate the expanding agricultural production. Brazilian farmers are hoping she will be a "Minister of Logistics" in order to address the various inadequacies in the Brazilian infrastructure including: highways, railroads, barging, and ports.

Highways - Highway improvements are the most immediate concern in Brazil because 60% of Brazil's grain production is moved by trucks over very long distances and improving existing highways would be the easiest problem to tackle. The most important highway project in Brazil as far as agriculture is concerned is the completion of BR-163 from Mato Grosso northward to the Amazon River. This highway is sometimes referred to as the "Soybean Highway" because of its importance in transporting soybeans produced in Mato Grosso.

The highway is currently being asphalted all the way to the Amazon River and there still 300 kilometers left to asphalt as well as many bridges to construct. The project is expected to be completed sometime in 2016. Once completed, it will allow millions of tons of soybeans produced in central and northern Mato Grosso to move northward to ports on the Amazon River instead of southward to ports in southern Brazil.

Additionally, an 800 kilometer stretch of BR-163 that is within the state of Mato Grosso is going to be converted from a two-lane highway to a limited access four-lane highway. Once started, this project is expected to take five years to complete and all the improvements will be paid for by converting the highway into a toll road.

Railroads - The two main railroads that farmers would like to see improved and expanded are the Ferronorte Railroad and the North-South Railroad. The Ferronorte Railroad currently connects southeastern Mato Grosso with the Port of Santos in southeastern Brazil. Millions of tons of soybeans currently move from Mato Grosso to Santos via this railroad, but the railroad needs to be extended further into Mato Grosso to expand its reach.

The North-South Railroad cuts a path north and south through the center of Brazil, which includes many of the regions where agricultural production is expanding. The northern end of the railroad is currently used mainly to move iron ore from mines in the Carajas Mountains in eastern Para to export facilities in northern Brazil. Some grain moves along this route, but that is expected to increase in the coming years. The southern end of the railroad needs to be extended in order to connect with other existing railroads.

Barging - The most efficient way to move a bulk product like grain is to move it by barges and currently a limited amount of grain is moved by barges in Brazil, but that is about to change over the next few years. The one major barging operation that currently exists in Brazil is along the Madeira River from the city of Port Velho in the state of Rondonia to ports on the Amazon River. This operation moves soybeans primarily produced in western Mato Grosso.

An extensive and much larger barging operation is currently under construction on the Tapajos River in the state of Para. Seven different grain companies are in various stages of constructing barging operations that will transport grain from Miritituba in Para to export facilities at Santarem, Para and new facilities that will be built near the city of Barcarena at the mouth of the Amazon River. When fully operational, as much as 20 million tons of grain may be transported along this route.

An additional barging operation is proposed for the Tocantins River, but the locks and dams needed to make this river navigable are only in the planning stages.

Ports - The vast majority of exported grain from Brazil leaves the country via the large ports in southern Brazil such as Santos, Paranagua, and Rio Grande. All of these ports have made major improvements in recent years to accommodate the ever expanding grain production, but major congestion still occurs during peak periods. Relief is on the way for congestion at these ports from a project called the "Northern Arc".

This project is currently underway in Brazil and it involves the expansion of existing ports on the Amazon River as well as the construction of new ports. It also includes the expansion of ocean ports in northeastern Brazil. Eventually, millions of tons of soybeans and corn produced in central and northern Brazil will be exported via these northern facilities, thus relieving some of the pressure on Brazil's southern ports.

These projects will take years to build and will cost hundreds of billions of dollars to complete and it remains to be seen if there will be adequate funding for all of these projects. Even if only a portion of these projects are completed, it will be the first serious attempt to address Brazil's infrastructure deficit.