Road and rail investments considered in Brazil

Five exporters are considering a joint venture to tackle logjams that slow export deliveries

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Sao Paulo | Reuters – The world’s big four agriculture traders and Brazilian rival Amaggi could make a joint bid to operate a road connecting Brazil’s grain belt to northern ports, while also considering an investment in a parallel railway, said the firm that conducted a study on the potential venture.

Archer Daniels Midland Co. (ADM), Bunge Ltd., Cargill Inc., Louis Dreyfus Co. (LDC) and Amaggi have commissioned a study on operating a 968-kilometre stretch of the BR-163 highway for 10 years, according to infrastructure and logistics business development firm EDLP.

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Why it matters: Highway BR-163 is the leading grain artery to northern ports that were responsible for 28 per cent of Brazil’s soybean and corn exports in 2018. Backlogs caused by road congestion cause delays and cancelled shipments of key agricultural goods.

ADM, Bunge, LDC and Amaggi did not immediately respond to requests for comment. Cargill referred questions to EDLP.

Roberto Meira, a director at São Paulo-based EDLP, said March 11 that the plan with a proposed model for handing over the roadway to private investors would be submitted to the government. The plan would involve convincing the government to offer a 10-year concession on the road, far shorter than the typical 20- to 30-year tenure on projects currently approaching auction.

Brazil’s infrastructure ministry previously said it intends to put a concession to operate the BR-163 highway up for bid. Details have yet to be announced.

The shorter tenure would account for the fact that grains shipped by truck would gradually be migrated to the proposed Ferrograo rail line that runs a similar route to BR-163 starting in 2025 until eventually the road concession expired, Meira said.

The government’s privatization secretary said in January that the Ferrograo rail project could be ready for bidding this year or early in 2020.

Meira said the grain traders could invest equity capital in both the road and the rail projects, although the bidding could attract other investors.

He said the companies hope making logistical investments will cut costs and remove the uncertainty of trying to move grains up north without a railroad.

Every year, long lines of trucks form at certain towns in Mato Grosso and Pará state because of BR-163’s poor condition.

Last week, two riverside ports in Pará state nearly ran out of soybeans due to closures on the BR-163 highway after rains and heavy traffic blocked sections of the road, underscoring infrastructure woes in the world’s top soybeans exporter.

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