Water way: new projects on the Parana River will cement Argentina's position as a top global grain exporter.

At the beginning of the last century, grain exports made Argentina famous as one of the strongest economies on the planet and helped it earn the nickname "the world's breadbasket." Although the country's economy is currently far from strong, owing to its historic 2002 collapse, farm exports--suddenly competitive on the world stage thanks to the country's beleaguered currency--could benefit immensely from new investments that numerous companies are making near the Parana River in central Argentina. In addition, the Andean Development Corporation, among others, is providing US$100 million in financing to widen the river itself.

Most Argentine grain is processed and exported from port terminals in Rosafe, near the city of Rosario. The decision by several companies to expand processing and export installations there will convert the area into the world's largest grain milling center. Among companies constructing terminals or expanding existing facilities are Bunge, Cargill, Noble, Louis Dreyfus, AGD and Molinos Rio de la Plata.

Such capital spending decisions by major world food companies "show that Argentina's [edible] oil industry is capable of planning ahead to absorb future expansion of oleaginous production and adjust to greater market demand for our projects." says Alberto Rodriguez, director of Argentina's Oil Industry Chamber.

Thanks to the $475 million in investments that companies are making along the river, Argentine factories are expected to be able to process more oil than their counterparts in the United States by 2006, according to a report from the Rosario Chamber of Commerce. These investments will help boost Argentina's daily milling capacity to 164,000 from 64,000 tons now. In comparison, China--a much larger country in both land and population--processes 160,000 tons, the same as the United States, while Brazilian grain producers can process 145,000 tons each day.

Raul Padilla, president of Bunge Argentina, says that these advances in infrastructure for the milling industry will be apparent in capacity, scale and efficiency seen in no other country "The sector faces the challenge of raising production to meet the capacity that we're going to have," he says.

Apart from volume, the domestic oil industry has several advantages over its counterparts abroad. One such advantage is that Argentine plants are located, for the most part, on the banks of the Parana River. In contrast, in Brazil, industry hub Ponta Grossa is 220 kilo-meters from Paranagua port, in the southern Brazilian state of Parana. Brazil's exports have been hampered in part by overcrowded ports, including at Paranagua, where trucks wait in huge lines to load waiting ships.

The highway from Ponto Grosso to the port is new and well-kept, unlike many export routes in Brazil, but it still leads to Paranagua, where exporters are waiting for the government to disburse part of a $250.5 million redevelopment plan, nearly half of which is expected to come from private companies interested in better trade routes for exports. Nevertheless, roads--expensive and slowest to rebuild--now move 62% of all goods transported in Brazil; rail carries 21%, and rivers most of the remainder.

The Argentines have some disadvantages as well. For example, port terminals on the Parana River are concentrated in an area that is just 9.7 meters deep, whereas the Brazilian ports of Paranagua and Santos are 12.2 meters deep.

Deep. A meter or two can make a big difference. According to figures from Rosario port administrator Enapro, the shallowness of the Parana River prevents Argentine grain producers from fully loading vessels in the port, costing the industry $400 million a year in lost exports. The largest ship capable of crossing the Panama Canal, a 9.7 meter Panamax class vessel, must sail out of Rosario with two empty holds that could hold 15,000 tons of grain. "The boats leave without being able to fill their cargo holds, which they then do in Paranagua, and transfer the shipping costs to the producer," says Juan Carlos Venesia, president of Enapro.

There have been instances in which, due to congestion, boats have had to wait close to 20 days to leave Paranagua with a frill load, says Venesia. Grain producers have to foot the bill for the delays, which in the case of a Panamax-class boat costs $40,000 a day.

Once the Argentine terminals are deepened, bigger boats will be able to dock and load up on the Parana River without having to stop in southern Brazil for more cargo. This would lower shipping costs and improve prices for Argentine grain producers by $5 per ton. Meanwhile, improvements in the waterway would also allow for a large portion of Brazilian, Bolivian and Paraguayan grains and oils now shipped out of Brazilian ports to sail out of Rosario instead.