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October 2, 2013

Brazil's "Soybean Highway" to be Widened to Four Lanes

Brazil's President Dilma Rousseff took the occasion of her recent visit to Rondonopolis, Mato Grosso to announce funding under the Accelerated Growth Program (PAC) for the widening Brazil's "Soybean Highway"H (BR-163) to four lanes for most of the length of Mato Grosso. This current two lane highway runs north and south through the middle of the state and is the only major highway leading into and out of the main grain producing region of Mato Grosso. Eight hundred and fifty kilometers of the highway is expected to become four lanes when the project is completed in five years. The highway is also being turned into a toll road operated by various private companies.

Within the state of Mato Grosso, Br-163 is entirely asphalted (albeit poorly maintained and full of potholes), and now work is nearing completion on asphalting the remainder of BR-163 northward all the way to the Amazon River and the same port city of Santarem. This asphalted road was envisioned more than thirty years ago and it should finally be completed sometime in 2014. The distance from Rondonopolis in southern Mato Grosso to Santarem on the Amazon River is 1,950 kilometers.

Grain companies have already constructed export facilities at the Port of Santarem in anticipation of the highway's completion. Once the highway is completely asphalted, it is expected to result in a 30% saving in transportation costs over trucking the soybeans and corn south to ports in southeastern Brazil.

Long term plans in Brazil call for highways, rail lines, and barging operations to carry grain north in Brazil to the Amazon River instead of south to ports in southern Brazil, but Brazil only spends about 1.5% of its GDP on infrastructure, while the long-run global average is 3.8%. To catch up with the rest of the world, Brazil would need to triple its infrastructure spending for the next 20 years. Additionally, much of the infrastructure spending in recent years has been on a dozen new soccer stadiums for the 2014 World Cup and they will spend even more on the 2016 Olympic to be held in Rio. The stadiums may be nice, but they have siphoned away resources that could have been used for highway and rail construction.

The Mississippi River and the Amazon River will eventually become the two main water routes for the transportation of grain to export markets. Fortunately for American farmers, the Mississippi cuts through the heart of the U.S. production areas, whereas in Brazil, the Amazon River is a very long distance away from the main production regions of the country. The Amazon River will eventually become a major export corridor for Brazil, but it will not reach the level of importance that the Mississippi represents for the U.S.