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September 13, 2016

Many Highway Improvement Projects in Northern Brazil on Hold

The Agriculture and Livestock Confederation of Brazil (CNA) reported in their recent meeting in Brasilia that a majority of the work on highway infrastructure projects in northern Brazil have either been halted or slowed down significantly due to lack of resources. According to the National Department of Transport Infrastructure (Dnit), 20 highway improvement projects associated with the "Northern Arc" of ports have practically been stopped.

Dnit indicated that the slowdown on 21 highway projects was due to a number of factors including: lack of funding from the federal government, lack of land purchases needed for the projects, delays in obtaining the needed environmental licenses, errors in the conception of some of the projects, and the need to redo the plans for some of those projects. Dnit indicated that there is still R$ 1 billion in resources available for these projects until the end of 2016 according to the law under which they were approved.

An example of the impacted projects is the completion of highway BR-163 from northern Mato Grosso to the Amazon River. This is probably the most important highway project in Brazil as far as the movement of grain is concerned. The project is 66% complete with construction now expected to be completed by the end of 2017. Upon completion, grain will move north to ports on the Amazon River instead of south to the ports of Santos and Paranagua in southern Brazil. Moving grain north could reduce the transportation cost by US$ 46 per ton from the current cost of US$ 126 per ton.

The completion of BR-163 has been promised for many years. One of the major problems is that the highway is also being converted into a toll road and the tolls would be used to expand the highway from two lanes to a limited-access four lane highway. Individual companies were allowed to bid on the right to build and operate sections of the highway. Some of the winning bidders were ill prepared for the undertaking and have since gone out of business. This has thrown the project into the Brazil's notorious slow court system for resolution.

In addition to a lack of funding, a major stumbling block for many of these projects is obtaining the needed environmental licenses and the permission to pass through indigenous lands in the Amazon Region. The issues involving indigenous rights have paralyzed some of these projects.