Hidrovía – time and tide

As the moment of truth approaches for the Hidrovía Paraguay-Paraná waterway, with the deadline for offers expiring at 1pm next Friday, this key export outlet continues to be entangled in a series of vicious circles – or perhaps cross-currents, to employ a more hydraulic vocabulary.

The first such cross-current is that a pro-market government keener on export-led than consumer-led growth and committed to opening up Argentina to the world at all odds with the protectionism made so fashionable by the otherwise idolised Donald Trump – all traits enhancing the waterway’s importance – is nevertheless singularly indifferent to the infrastructural pillars of growth, sacrificed to an obsessive fiscal surplus. Not only did President Javier Milei’s government fail to register any dismay when the previous Hidrovía tender so ineptly assembled collapsed dismally just over a year ago – there is also minimal interest in the roads and railways transporting the grain to the waterway accounting for some 80 percent of Argentine exports, leaving them at the mercy of neglected roads and the trucks of the teamsters union.

Yet the Hydrovía’s battle is not only with man but even more with nature. Infrastructural projects like building a dam, a road or a railway are almost invariably one-off efforts but this waterway system faces the permanent challenge of dredging a nine-digit tonnage of silt annually from the rivers along its length of over 3,400 kilometres passing through half the 10 South American republics (the average volume of sediment dredged every year of 123 million tons almost equals Argentina’s average annual grain exports of 130 million tons).

Not only is this challenge constant but also mounting with the passage of time – ever since work began on the Hidrovía just over three decades ago in the immediate wake of Mercosur’s creation, the draught of increasingly big cargo vessels has deepened enormously since then while the sporadic droughts of climate change have made the Paraná River shallower (more cross-currents). This only increases the need for dredging, which would seem to be falling short judging from the rising number of half-empty freighters obliged to complete loading in Uruguayan or Brazilian seaports or Bahía Blanca, hardly good news for logistical costs.

Will next Friday’s tender be third time lucky after two resounding failures? Not just anybody can participate – the sheer dimensions of the dredging required limit the field to perhaps half a dozen companies worldwide with the necessary expertise (mostly from the aptly named Low Countries with the CCC Shanghai Dredging Company Co Ltd taboo for the Javier Milei administration at least for reasons which should be obvious, despite being founded by Western capital under the Manchu dynasty). Even for this select group, winning this tender would seem to be a fool’s errand – in order to upgrade dredging to the demands of modern cargo shipping, the winner would need to invest billions in the course of the contract, a sum which could only be recovered little by little with tolls sure to be resisted by already overtaxed farmers and their lobbies.

Yet from the standpoint of the latter, the smaller the field of bidders, the less chance of the best possible service at the lowest possible cost. This without politics rearing its ugly head. Last February’s tender was reportedly tailormade for Belgium’s Jan De Nul (operators of the Hidrovía for almost a quarter-century and allegedly favoured by  top spin doctor Santiago Caputo), only for another Belgian firm DEME to present the only bid – according to Milei’s then-presidential spokesman (now Cabinet Chief) Manuel Adorni, by muddying the waters with threats of taking corruption charges to court (with Jan De Nul’s local partner now a co-defendant in the ‘Cuadernos’ corruption notebooks graft trial). But even leaving all that aside, a genuinely competitive bidding process would seem utopian with such a narrow field.

In order to avoid repeating the embarrassment of a single bidder and in order to take into account that the draught of cargo vessels and the depth of the Paraná River are trending in opposite directions, the government has raised the toll floor for bidders well above the current levels. There is also an implicit recognition of a recent backlog in dredging work – both from the current administration’s indifference to infrastructure and the decision of the previous 2019-23 Frente de Todos administration under Alberto Fernández to hand over effective control of the Hidrovía to La Cámpora by placing it under the aegis of the AGP port administration then in the hands of the Kirchnerite militant grouping, even if there was nominally coordination with riverside provinces. True to type, La Cámpora treated the waterway tolls as their own slush fund rather than any obligation to finance dredging.

Given so much pressure on costs with the bill being handed down to farmers via higher tolls, it is perhaps worth asking whether libertarian free-market purism is a realistic approach. Nor would this necessarily entail Milei having to sacrifice his principles because there are plenty of other governments strewn along the waterway – five republics (Bolivia, Brazil, Paraguay and Uruguay besides Argentina with the governments in Brasilia and Montevideo at least far from averse to state intervention) and seven provincial administrations although the latter almost unanimously feel that far too much of the public works buck has been passed down to them already. Nor need government assistance be confined to the region – a memorandum of understanding was signed with the Engineering Corps of the United States Army at one stage, although it now seems dormant.

Experts claim that with a normal degree of public-private partnership and erasing the sins of the past, the Paraná could be dredged down to a depth of 40 feet at a toll below US$3 per ton but we will have to wait until next weekend to see how the bids in the current tender closed before having any idea where the next chapter in the saga of the Hidrovía is heading.