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August 12, 2016

Mato Grosso Governor Pushes Railroad Projects in Brasilia

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The governor of Mato Grosso, Pedro Taques, recently met with the Brazilian Minister of Transportation and other government officials in Brasilia to press for funding for three railroad projects in his state. The Minister indicated that these projects, along with a list of other infrastructure projects, would be discussed with the interim president, Michel Temer, but nothing is expected to be decided until the impeachment of President Rousseff is resolved later this month.

The first railroad project that Governor Taques elaborated on is a railroad liking the city of Lucas do Rio Verde in central Mato Grosso with the North-South railroad at the city of Anapolis in the neighboring state of Goias. The North-South railroad terminates at the Port of Itaqui in the city of Sao Luis in northeastern Brazil where a deep water port is destined to be Brazil's third most important grain exporting facility after the Port of Santos and the Port of Paranagua. This railroad would allow grain from Mato Grosso to move east to ports in northeastern Brazil. This 900 kilometer railroad would become part of the proposed railroad linking the Atlantic Ocean and the Pacific Ocean, if the project ever gets approved and built.

The second railroad project is a 600 kilometer extension of the Ferronorte Railroad from the city of Rondonopolis in southeastern Mato Grosso to the city of Sorriso in central Mato Grosso. The Ferronorte Railroad is currently the only operating railroad in the state and it links the southeast corner of the state with the Port of Santos in southeast Brazil. It is currently the only option for shipping grain by rail out of the state and extending the railroad into the central part of the state would allow more grain to move to the Port of Santos in southeastern Brazil.

The third project is a completely new railroad linking Mato Grosso with ports on the Amazon River. This railroad is being called the Ferrograo Railroad (Grain Railroad) and the 1,140 kilometer railroad would link the city of Lucas do Rio Verde in central Mato Grosso with the Port of Miritituba on the Tapajos River, which is a southern tributary of the Amazon River. At that point the grain would be barged down the Amazon River to various ports near the mouth of the Amazon. The total cost of the project is estimated at R$ 9.9 billion and the winning bidder would be given 5-7 years to complete the project.

Of the three projects, the Ferrograo Railroad (Grain Railroad) probably would have the biggest impact on reducing transportation cost because it includes barging the grain to ports near the mouth of the Amazon River. The Ferrograo Railroad would parallel highway BR-163 from central Mato Grosso to the Port of Miritituba on the Tapajos River. Grain already moves by truck to the port where numerous barging operations move grain on the Tapajos/Amazon river system. The other two projects only involves rail transportation.

All of these projects are also being pushed by the China Railway Construction Corporation Limited (CRCC), which has completed preliminary studies concerning the feasibility of the various projects. CRCC is one of the largest railroad construction companies in the world with more than 60,000 kilometers of completed railroads. They are also being pushed by the Chinese government in an effort to reduce the cost of transporting grain from Brazil, which is China's biggest grain supplier.

The Mato Grosso governor reiterated to the government officials that his state is the largest grain producing state in Brazil and a major contributor to Brazil's overall exports. He indicated that lowering the cost of transporting grain is essential if the state is to remain competitive with the United States and Argentina, both which have much lower transportation costs.