The governments of Argentina and Brazil are in talks to release water from the giant Itaipú Dam with a view to topping up the Paraná River, where ebbing levels are stymieing a US$20-billion-a-year crop export business.
Diplomats from the South American neighbours will hold a fresh round of talks on Friday, according to an official at Argentina’s Foreign Ministry. Brazil epends on Itaipú, one of the biggest hydroelectric plants in the world, for its energy needs, but it has shown willingness to help Argentina, which is suffering from the low river levels, the official said.
A drought over the southern hemisphere summer means the Paraná 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 Itaipú when it’s dry to top up the Paraná as part of a longstanding deal with regional ally Argentina, said João Carlos Mello, head of Thymos Energia, a consulting firm in São Paulo. But that can weaken Itaipú’s supplies to Brazil’s energy grid. The dam provides 11 percent of Brazil’s energy needs, according to its website.
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“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. President Alberto Fernández has taken a highly cautious approach, imposing a strict lockdown since March 20 and criticising 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 Getúlio Vargas Foundation. “But the decision will have to take into account the opinion of the technical staff and engineers at Itaipú.”
The water level in Rosario, a key river-port city that’s Argentina’s hub for crop exports, is just 78 centimetres (31 inches), nearly five times lower than the average for this time of year, according to government data. 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-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.
by Jonathan Gilbert & Samy Adghirni, Bloomberg