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December 4, 2017

Company Requests 10-year Extension to Complete Work on BR-163

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

The frustration levels of Brazilian farmers is increasing once again as the company in charge of improving and widening highway BR-163 within the state of Mato Grosso is petitioning the Brazilian government to push back the deadline for completing the project to 2028. The entire improvement project was supposed to be completed in 2019.

The contract called for 850 kilometers of Highway BR-163 within the state of Mato Grosso to be improved with 453 kilometers turned into a four-lane highway. The project was to be paid for by turning the highway into a toll road operated by Odebrecht, the company that won the contract.

Thus far they have expanded 117 kilometers of the highway into four lanes, but much of the remainder of the work has been suspended. The company maintains that the tolls are not enough to complete the project during the original timetable.

The original timetable was to complete the entire project within five years from when it was started in 2014 and now they want to extend the completion date to 14 years from when it was started. The state legislature in Mato Grosso is up in arms over this request to extend the deadline. They contend that the company's performance has been in "bad faith" and that the real reason for the requested delay is the fact that the company has been convicted in a worldwide scandal of paying bribes to politicians and company executives accepting kickbacks from subcontractors on numerous construction projects.

Odebrecht is Latin America's largest construction company and it has been convicted of numerous offences connected to the "Lava Jato" (Car Wash) scandal in Brazil. Dozens of company officials as well as 90 politicians, 2 presidents, and 200 other individuals have been implicated in the scandal with many individuals already serving prison terms.

The state legislature contends that 14 years is not a "reasonable" time for improving the most important highway in Brazil for the movement of grain to export facilities. Mato Grosso is the largest grain producing state in Brazil and approximately 60% of the grain moves by truck. Highway BR-163 is by far the major highway into and out of the state and much of the highway is a 2-lane road filled with potholes. This improvement project was envisioned decades ago and now it may take at least another decade before it is completed - if ever.

BR-163 also extends northward from Mato Grosso to the Amazon River and that segment of the highway is in the process of being paved. Approximately 118 kilometers of the 1,100 project is not yet paved and heavy rains last February closed the highway to truck traffic for several weeks. As a result, export facilities on the Amazon River ran out of grain stocks forcing exporters to divert vessels to other ports in Brazil. Federal officials contend that similar problems will not reoccur this rainy season (December to February).