October 25, 2013

Tolls Increasing on Brazil's "Soybean Highway"

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

Farmers and agribusiness leaders in Mato Grosso have long complained about the poor condition of highway BR-163 which is the only major highway running north and south through the middle of the state. This two-lane highway, sometimes called the "Soybean Highway" is the primary exit route from the state for tens of millions of tons of soybeans and corn produced in the state. Travel times on the highway can be very slow as thousands of trucks try to navigate over the hills and curves and around the numerous axil-breaking potholes.

Well, relief is on the way, but it is not going to come without a cost. BR-163 is scheduled to be widened to four lanes and turned into a toll road from the southern border of the state to the city of Sinop in north-central Mato Grosso, a distance of 850 kilometers. The construction and the toll collection will be done by private companies bidding on the project and the construction is scheduled to be completed within five years.

The bids are currently being submitted to the National Agency for Ground Transportation (ANTT) and they will be opened on November 25th at the Sao Paulo Stock Exchange. ANTT is scheduled to announce the winners on January 15th. The winning company will be allowed to operate their section of the road for a period of 30 years and the tolls may only start to be collected after 10% of the widening work has been completed.

Eight toll plazas will be constructed along the highway and the toll for a passenger vehicle was scheduled to be R$ 4.17 (US$ 1.93) for each 100 kilometers. Even though no winning companies have been announced yet, the tolls have already been increased by 31%. The increasing tolls are the result of a less rosy forecast from the Brazilian Central Bank. The Central Bank had been estimating that Brazil's GDP would increase 2.7% in 2014, but in their latest assessment, that has been lowered to 2.5%. As a result of the slower growth, less vehicular traffic is predicted for the highway and thus the tolls have been increased so that the companies don't lose money. The new toll will be R$ 5.50 every 100 kilometers or US$ 2.55 every 60 miles.

Farmers are poised to pay a lot more in tolls than the average passenger vehicle. The toll for a dual semi-tractor trailer hauling soybeans could be as much as 20 times more than a passenger car and the cost of that toll will be paid for by the farmer in the form of lower soybean prices. Farm organizations want an improved highway, but they strenuously opposed turning the highway into a toll road. Their argument was that their taxes have already paid for the road and its upkeep, so why should they pay again for the same highway.

Their protests were not successful and in fact many of the major highways in Brazil are all scheduled to become toll roads. When the entire system is in place, it will be virtually impossible to transport soybeans from Mato Grosso or any other major production area to a Brazilian port without encountering toll roads along the entire route.