May 15, 2017

BR-163 Improvement Project in Central Brazil hits Roadblock

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

Large infrastructure projects in Brazil are rarely easy to complete and the improvement of highway BR-163 is a good example. BR-163 is arguably the most important highway in Brazil for the agricultural sector, and farmers have been waiting decades for improvements, so you would think it would be high on the list for improvements, but the project just hit another roadblock. The highway is scheduled to be expanded from a treacherous 2-lane highway to a 4-lane freeway or limited access highway from the border with Mato Grosso do Sul to the city of Sinop in the northern part of the state for a total distance of 850 kilometers.

The company that won the right to improve the highway and operate the toll road is Odebrecht, but the company has indicated that they do not have the financial wherewithal to complete the project and construction has basically been halted. They have completed approximately 75 kilometers of the project between the city of Rondonopolis and the border with Mato Grosso do Sul, but for the remainder of the highway, most of the work has been to just build the toll plazas.

Senators are calling for a meeting with the Minister of Transportation to discuss the situation and they are demanding that if Odebrecht cannot do the job, that the company be removed from the project. Meetings with the Minister are scheduled to be held in the cities of Rondonopolis and Sinop. The process of removing the company from the project could take up to two years and then the project would have to be rebid, which could take up to a year. Once that is done, the actual construction could take up to five years to complete. In a worst case scenario, it might be 2025 before the entire project is completed.

The main problem at Odebrecht is that the company is in the midst of a huge bribery and kickback scandal involving dozens of politicians and company officials. Odebrecht is one of the largest construction companies in Brazil and they are being investigated for inflating the cost of numerous projects in exchange for bribes and kickbacks to officials in charge of authorizing the projects.

In the meantime, 1,400 kilometers of state highways in the state of Mato Grosso are scheduled to be turned into toll roads and bidding on those projects is scheduled to take place before the end of 2017 with construction starting in 2018. In 2015, the government announced that 14 state highways would be converted into toll roads, but the final list of which highways would be involved has not yet been approved.

Farmers in the state have been pushing for improved highways in order to lower the cost of transporting their grain, but they are opposed to converting all the highways in the state to toll roads, because they realize that they will pay the tolls for the trucks hauling the grain in the form of lower prices paid for their grain.