October 24, 2019

Condition of Brazil's Highways Deteriorated in 2019

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

The Brazilian National Transportation Confederation (CNT) conducts an annual survey of the condition of the nation's highways and in their latest report, they concluded that Brazil's highways deteriorated in 2019. The newspaper Diario de Cuiaba reported that CNT classified 59% of Brazil's major highways as having significant problems. Of that, 34% was classified as regular, 17% was poor, and 7% was very poor. A year earlier, CNT had classified 57% of Brazil's highways as having problems.

The condition of the nation's highways is very important for the agricultural sector because approximately 60% of Brazil's grain production moves by truck at very high transportation costs. It is estimated that the poor condition of the highways adds as much as 33% to the already high cost of transportation in Brazil. The poor condition of the highways also increases the number of accidents, reduces revenue for transportation companies, and increases the amount of fuel consumption.

Highways are especially important for the agricultural sector in Mato Grosso, which is Brazil's largest producer of soybeans, corn, cotton, and cattle. CNT reported that 68% of the state's highways had significant problems with only 31% classified as good or excellent.

The CNT Transportation and Logistic Plan 2018 estimated that R$ 496 billion was required in 981 projects across the country to upgrade the highway system. In the state of Mato Grosso, the plan estimated that R$ 1.3 billion would be required for emergency repairs and upgrades.

One way Brazil has tried to improve the highway system in recent years has been to convert major highways into toll roads and use the collected tolls for maintenance and improvements. Of course, everyone wants better highways, but farmers contend that the cost of the tolls are being passed on to them in the form of lower prices paid for their grain.

The tolls also increase their cost of production because the majority of Brazil's fertilizers are imported through ports in southeastern Brazil and transported by truck into the interior of the country. As a result, farmers feel they are being forced to pay higher production costs while at the same time, they are receiving lower prices for the grain.

Farmers have also complained bitterly about the new mandatory minimum freight rates adopted in Brazil. The combination of tolls and higher freight rates have significantly reduced their profit margins.