Argentina forms agency to manage cargo river, grain exporters worry

Added bureaucracy in grain shipping feared

Grain is loaded onto ships for export at a port on the Parana River near Rosario, Argentina on Jan. 31, 2017. (File photo: Reuters/Marcos Brindicci)

Buenos Aires | Reuters — Argentina said on Wednesday it had formed a new government agency to manage dredging operations needed to ensure navigation of the Parana River, which carries about 80 per cent of the country’s grains exports from the Pampas farm belt out to sea.

For decades, cargo ships have paid tolls directly to the private dredging company in charge of keeping the river open.

Industry executives worry that government intervention in the waterway will heap bureaucracy and extra costs on the grains export sector, which is the main source of hard currency needed to refresh central bank dollar reserves strained by a three-year recession exacerbated by the COVID-19 pandemic.

Grains powerhouse Argentina is the world’s No. 3 corn exporter and top supplier of soymeal livestock feed, used to fatten hogs and poultry from Europe to Southeast Asia.

The National Ports Administration has been given authority over the next 11 months to subcontract management of the waterway, while the transportation ministry evaluates bids from dredging companies for the long-term concession to follow.

“The strengthening of policies on the management of inland waterways is a priority objective of the national executive,” the government said in a decree published on Wednesday.

The tolls paid by ships for dredging services performed by the company that wins the upcoming Parana contract will be received by the newly established agency, the decree said.

“This decree looks like the government does not only want to set up conditions for the tender and the dredging tariff. It looks like an excess of bureaucracy that might mean additional costs for export operations on the river,” said Gustavo Idigoras, head of the CIARA-CEC export companies’ chamber.

“We welcome the idea of having a control agency, but we are concerned about additional bureaucracy and costs. So we need to have close conversations with the government,” Idigoras said.

A transportation ministry source, who asked not to be named, said the new dredging oversight board could actually make it less expensive to ship grains from Argentina.

“The price of tolls paid by cargo ships to the dredging company is something that will be determined in the bidding process. The tolls could end up going down,” said the source. “One of our objectives is to lower logistics costs.”

This is the latest chapter in a long saga of farmers and exporters opposing government intervention in the sector.

The dredging of the Parana gives Argentina an edge over rival exporters Brazil and the U.S., which rely more on less efficient trucks and slow-moving barges.

The new agency has inflamed exporters and farmers already worried about the policies of centre-left President Alberto Fernandez, a Peronist whose administration has curtailed beef exports as a way of controlling domestic food price inflation.

The industry is fretting that if the flow of toll money goes through the state, it would dilute and increase dredging costs.

The river at Rosario is dredged to about a depth of 10 metres, and industry leaders want the next long-term contract to provide for a deeper, wider shipping channel.

— Reporting for Reuters by Hugh Bronstein and Maximilian Heath.

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