INFRASTRUCTURE IN BRAZIL: THE TIETE RIVER

UNCLAS SECTION 01 OF 03 SAO PAULO 000766

SIPDIS

SIPDIS

STATE FOR WHA/BSC, EEB/TRA/OTP, OES/PCI
STATE PASS USTR FOR KDUCKWORTH
TREASURY FOR JHOEK
NSC FOR TOMASULO
SOUTHCOM ALSO FOR POLAD
USDOC FOR 4332/ITA/MAC/WH/OLAC
USDOC FOR 3134/USCFS
USAID FOR LAC/AA

E.O. 12958: N/A
TAGS: EWWT ETRD ECON SENV ELTN BR
SUBJECT: INFRASTRUCTURE IN BRAZIL: THE TIETE RIVER

Summary
--------------


1. (U) The Brazilian Transportation Ministry hosted the
first Bilateral Brazil-U.S. Inland Waterways Navigation
Conference August 28-30 in Brasilia that brought together
experts to discuss the challenges and opportunities presented
by inland waterways. The U.S. delegation included
representatives of the Coast Guard, the Army Corps of
Engineers, and private industry. Likewise, the Brazilian
delegation was comprised of representatives from several
industries and different levels of government. The event,
sponsored by the Brazilian National Agency for Waterway
Transportation (ANTAQ) and USSOUTHCOM, looked at the overall
waterborne transportation infrastructure in Brazil and
culminated with a trip down the Tiete River in the state of
So Paulo in order to look at the potential benefits and
hurdles involved with improving infrastructure along this
waterway that serves as an important transportation link for
agricultural producers. While improvements in waterborne
transportation would benefit agricultural producers,
geographical, political, and environmental concerns combine
to make some hard choices for the future of this waterway.
End Summary

Transportation Infrastructure in Brazil
--------------


2. (U) The combined team first looked at the overall state
of Brazil,s waterborne transportation infrastructure by
reviewing the most recent ANTAQ report published in 2005.
The report outlines in detail the volume and type of goods
that go through the country's ports. The report indicated
that four out of the top nine Brazilian ports, in terms of
volume, are located in the So Paulo consular district
(composed of the states of Sao Paulo, Matto Grosso do Sul,
Parana, Rio Grande do Sul, and Santa Catarina). These ports
include Santos and Sao Sebastiao in Sao Paulo state,
Paranagua in Parana, and Rio Grande in Rio Grande do Sul, and
the report cited the Tiete River as the primary inland
waterway used to transport goods to these four ports. While
these ports move a large percentage of total Brazilian
exports (the top nine ports together handles over 82% of
Brazilian exports in 2005, and Santos alone accounts for
about one fourth of Brazil's trade and 40 percent of
merchandise moved by container),weak port infrastructure has
been a drain on the growth of exports from these ports and
represents a considerable cost of doing business in Brazil.


3. (U) Transportation infrastructure development faces a
number of challenges. While there is general agreement that
infrastructure deficiencies impede Brazil's competitiveness,
development of roads, railways, ports, and waterways remains
controversial for environmental and other reasons. For
instance, major projects such as the proposed construction of
two hydroelectric dams on the Madeira River along the border
with Bolivia in the Amazon region have been slowed by
environmental licensing requirements as well as cross-border
concerns with Bolivia. Brazil's environmental licensing
agency, IBAMA, has denied permits to other proposed dam
construction projects to the point that President Lula
himself has expressed impatience with Environment Minister
Marina Silva and IBAMA. Environmental scrutiny has thus
slowed river construction across the board and has brought
much negative attention to the impact of dam construction.
At the same time, the Lula administration's Growth
Acceleration Program (PAC),a multi-year public works program
designed to advance economic development by promoting

SAO PAULO 00000766 002.2 OF 003


incentives for infrastructure expansion, has helped make
commercial transportation development a hot topic in Brazil.
Due to this attention, investors are becoming interested in
financing major construction projects. The PAC calls for a
"multi-modal" transportation system designed to help move
goods to port and market. As a result, inland waterway
transportation has grown in significance, giving
encouragement to prospective investors.


4. (U) Waterway transportation has proven to be much more
cost-effective than transporting goods on roads, the common
practice in Brazil. It costs $100 to transport a ton of soy
beans - Brazil's powerhouse crop - by truck from the interior
where they are grown to the Port of Santos for export. Use
of waterborne transportation would reduce transportation
costs. One river barge can hold 400 truckloads of soy beans
reducing the cost per ton of soy bean transported to 30
dollars. Currently, up to one million tons of bulk
agricultural products, representing 25% percent of total
Brazilian agricultural exports, are taking advantage of the
lower transportation costs of waterways like the Tiete a
figure that could increase with further development.

The Tiete, a Case Study
--------------


5. (U) One of Brazil's largest inland waterways, the Tiete
River is highly developed for the transportation of bulk
agricultural products. The Tiete flows northwest across Sao
Paulo state for about 1150 km before emptying into the Parana
River, which in turn flows southwards to the Rio de La Plata
estuary. The Tiete's source is located in the municipality
of Salesopolis in Serra do Mar, only 22km from the Atlantic
Ocean, but the geography of the area forces the river to run,
anomalously, towards the center of the continent. A total of
seven dams have been constructed along the river with each
dam containing a lock that makes navigation possible. By the
time it reaches the sea, the Tiete-Parana waterway is 3,900
km long.


6. (U) The use of the river for transportation has not come
without an environmental and social impact on the interior of
Sao Paulo and its inhabitants. In 1992, residents of
Guarapiranga pressured the state government into trying to
reverse the damage to the river caused by the dams and
artificial lakes. With funding from the Inter-American
Development Bank, the state launched a program entitled
"Projeto Tiete" to respond to these concerns. The purpose of
the project is to treat the wastewater that pollutes the
river. (Note: The municipality of Guarulhos continues to
discharge waste into the river, which is noticeably
malodorous as it passes through metropolitan Sao Paulo. End
Note.) The program also focuses on monitoring the industries
in the vicinity of the river. At present, 1,200 industries
have agreed not to discharge their waste into the river and
similar programs are being designed to address issues of
transportation and construction of dams on the river.


7. (U) ANTAQ is currently re-assessing a 1975 research
project proposing a series of 16 dams above Barra Bonita -
about 300 km west-northwest of Sao Paulo - to enable barges
to carry cargo from further up the Tiete toward port. To
date, while a series of locks and dams exist below (west of)
Barra Bonita, no dams have been constructed above Barra, and
only two appear viable. Engineers argue that the other
fourteen proposed dams are too costly and difficult to
construct given the significant elevation changes along the
part of the river between Barra Bonita and Piracicaba.

SAO PAULO 00000766 003 OF 003


According to engineers' assessments of the 1975 study by the
Secretaria de Transportes, the most viable of the proposed

SIPDIS
dams are the Barragem de Tiete and the Barragem Porto Feliz.
These are the two proposed dams in closest proximity to the
Barra Bonita dam. Construction of these two dams would
significantly extend the distance by which goods can be
transported along the river, reducing the distance products
would have to be transported by road and thus reducing costs.
Other potential options include making significant
structural changes on the existing dams; however this would
be extremely costly and controversial. It would also involve
widening and deepening the Tiete River, a process that proved
to be very unpopular when proposed under the state government
of Geraldo Alckmin in 2004.


8. (U) Differing geographical and institutional conditions
between Brazil and the United States help explain why Brazil
today faces many more challenges in developing waterway
transportation mechanisms than the United States did in an
earlier era. According to the American engineers, dam
construction in the U.S. was facilitated by a lack of
environmental scrutiny at the time of construction. In
addition, because Brazilian rivers such as the Tiete are
characterized by large and sudden differences in elevation,
engineers must build high dams with very narrow openings to
hold back the large quantities of water. U.S engineers,
impressed by the quality of construction at Barra Bonita,
commented that these physical constraints dictate a need for
more expenditure on repairs and maintenance than a comparable
dam in the United States would require. The narrow openings
limit the entry of only a few barges at a time, lined up one
after another. The average width for a lock in Brazil is 12
meters, whereas the average in the U.S. is 35 meters. Thus,
in the U.S., barges enter locks not only one after another
but also side by side, often increasing the number of barges
transported at one time threefold. One alternative might be
to employ individuals who captain single-propelled vessels,
as is done in Europe, instead of following the U.S. model of
using tow boats and barges. However, Brazilian industries
that use the Tiete to transport their goods all have very
integrated business models. Each farm and processing plant
controls not only its operations but also transportation and
other logistics instead of contracting out for these services.

Comment
--------------


9. (U) Construction of two additional dams along the Tiete
River would significantly reduce the transportation costs for
the country's major agricultural producers. To achieve the
greatest impact, this would have to occur in tandem with the
development of Sao Paulo's railroads as is proposed by the
PAC's "multi-modal" transportation system. Geographic
barriers, institutional hurdles, and environmental concerns,
however, will continue to factor highly in the development of
Brazil's waterway infrastructure for both transportation and
other purposes. End Comment.


10. (U) This cable was coordinated with Embassy Brasilia.

WHITE