The ports of Arco Norte and the main barrier to its growth

A few posts have been talking about the success of the Arco Norte ports in exporting grain production from Brazil. This was a factor that, until recently, was known only in theory and that is now proving to be a success in practice as well. However, an important barrier is already jeopardizing the investments that traders have been making in port terminals in the region: the state of conservation of Brazilian highways.

Despite the road turn that Brazil had in the 50s, what is often seen in the country are roads that do not have any conditions for passing traffic, but which are on important routes for the flow of cargo. This is the case of the BR-163, on its stretch between the border of Mato Grosso and Pará and the city of Santarém (PA). Main route connecting the Midwest with the ports in the North, the highway still has 100 km unpaved!

The consequences of this lack of investment were seen again in the first quarter of 2017. The heavy rains that usually fall in the region during this period (yes, the North region is famous for its rains) created real quagmires on this unpaved stretch and even interrupted the passage of vehicles in a certain period, preventing their arrival in Miritituba (PA), from where they would embark on barges to Santarém and other ports in Arco Norte.

Seeing soybean shipments stopped on the road, unable to fulfill the contracts already negotiated and with the risk of losing the product, many traders were forced to send the vehicles back to their origin. In addition to the risks of loss of production and payment of overstaying for ships (demurrage), traders are threatened by fines for non-compliance with contracts, which can cause incalculable losses, in addition to damaging Brazil's image. As a result, many are rescheduling the arrival of ships to ports in the South and Southeast, which increases production outflow costs.

The paving of the BR-163 to Santarém is a work that was already expected to be carried out since the PAC 1, announced in May 2007. At the time, the forecast was that the work would be completed in 2010, but several problems along the way have left 100 km to be paved.

According to USP's calculations, the current condition of the BR-163 means that the costs of transporting grains to the ports in the North are R$40 per ton higher than to other destinations with a similar distance and a better quality road. In addition to impacting costs, the poor conditions on the route push away possible logistics operators that could operate on the stretch, increasing competition and possibly reducing freight prices.