Brazil Mulls Dam Flush to Protect Ally’s $20 Billion Exports
(Bloomberg) -- Argentina is asking neighbor Brazil to release water from the giant Itaipu Dam into the Parana River, where low levels are stymieing a $20 billion-a-year crop export business.
Diplomats from the South American neighbors will hold a fresh round of talks on Friday, according to an official at Argentina’s Foreign Ministry. Brazil depends on Itaipu, one of the biggest hydroelectric facilities in the world, for its energy needs but has shown willingness to help, the official said.
A drought during the southern hemisphere summer means the Parana is at its lowest level since 1989, costing Argentina’s crop traders money at a time when the soybean harvest is starting to roll in. The country is the world’s biggest exporter of soy meal and soy oil.
Brazil sometimes releases water from Itaipu when it’s dry to top up the Parana as part of a longstanding deal with regional ally Argentina, said Joao Carlos Mello, head of Thymos Energia, a consulting firm in Sao Paulo. But that can weaken Itaipu’s supplies to Brazil’s energy grid. The dam provides 11% of Brazil’s energy needs, according to its website.
“It’s a sensitive issue,” Mello said. “But there’s always room for an agreement.”
One possible barrier to a deal is the poor relationship between the nations’ leaders, who have clashed over how to deal with the coronavirus pandemic. Argentina’s Alberto Fernandez has taken a highly cautious approach, imposing a strict lockdown since March 20 and criticizing Brazilian President Jair Bolsonaro, who’s been more laissez faire.
“If it depended only on Bolsonaro and the foreign ministry, Brazil would probably reject Argentina’s request,” said Matias Spektor, international relations professor at the Getulio Vargas Foundation. “But the decision will have to take into account the opinion of the technical staff and engineers at Itaipu.”
The water level in Rosario, a river-port city that’s Argentina’s hub for crop exports, is just 78 centimeters (31 inches), nearly five times lower than the average for this time of year, government data show. Exporters have lost three feet of loading capacity in bulk carriers, which means they’re filling as much as 7,500 fewer metric tons, depending on the ship.
Eventually, it may be difficult for crushing plant and port complexes to receive cargoes trucked in by farmers at the usual pace, tightening supply to the global soy-meal market, said Esteban Moscariello, a trader in Rosario for brokerage house Diaz Riganti Cereales.
Already, topping up at sea ports in the Atlantic is adding to costs. The difficulties come at a time when exporters have been grappling with Covid-19, including problems with providing safe conditions for port workers and feuds with mayors on the Pampas growing belt: The mayors have been blocking trucks that load port-bound cargoes from accessing their towns in a bid to halt the spread of the virus.
Belgian dredging company Jan de Nul is doing emergency work to add depth to the river channel. But with dryness persisting, the water could continue to ebb more quickly than its dredgers can dig, said Gustavo Idigoras, president of crop crushing and export group Ciara-Cec, whose members include the so-called ABCD giants of agricultural trading.
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