
How Droughts in Brazil Are Impacting South America’s Key Rivers and Grain Trade
South America‘s vital waterways, particularly the Paraguay and Parana rivers, are facing a critical situation due to severe drought conditions, primarily in Brazil. These rivers play an essential role in the transportation of agricultural goods like soy and corn, but recent developments have raised concerns about the sustainability of these trade routes.
The Paraguay River, an essential artery for grain shipments, has hit an alarming record low in Paraguay’s capital, Asuncion. This has raised concerns about the implications for trade in the region, as the river’s water levels continue to drop due to a persistent drought in Brazil. Meanwhile, Argentina’s Parana River, another crucial waterway, is also experiencing near-record lows, further complicating grain exports from the continent.
The Paraguay River Crisis
The Paraguay River, which is central to Paraguay’s grain trade, has dropped to levels below minus 0.82 meters, surpassing its previous record low set in October 2021. Unlike typical water measurements, this depth is calculated against a “zero” index rather than the riverbed itself. Unfortunately, the situation is expected to worsen in the coming months as no significant rainfall is forecasted.
The river’s low water levels are severely affecting the transportation of grains and other trade goods. According to Paraguay’s oilseed and grain crushing chamber (CAPPRO), navigation along the northern section of the Paraguay waterway has almost come to a standstill due to the extreme drop in water levels. With around 60% of Paraguay’s soybean exports handled by CAPPRO’s members, including multinational giants like ADM, Bunge, and Cargill, the impact on trade is immense.
While the grain trade has not yet reached its peak season, vessels are already being forced to reduce their cargo loads, further delaying shipments and increasing transportation times. CAPPRO reports that shipments have had to decrease their volume well below the average normal cargo capacity, a situation that has generated significant delays and extended travel times.
The Impact on the Parana River
Argentina’s Parana River, which starts in Brazil and runs through Argentina before flowing into the sea near Buenos Aires, is also facing near-year-low water levels. This river serves as a crucial trade route for soy, corn, and other agricultural goods produced in the region, particularly around Argentina’s Rosario port, a major hub for grain exports.
The Parana River is part of the larger Paraguay-Parana system, a 3,400-kilometer waterway that flows through Argentina, Brazil, Uruguay, Paraguay, and Bolivia. Both rivers are indispensable for the grain trade in South America, particularly Paraguay, the world’s third-largest soybean exporter. Approximately 80% of Paraguay’s grains travel down these waterways to seaports. However, the current drought conditions are causing delays and uncertainties for agricultural exports.
Navigating Brazil’s Drought: Challenges for Trade
The drought in Brazil, where both the Paraguay and Parana rivers originate, is primarily responsible for the decline in water levels. The country has been experiencing severe dry conditions, exacerbated by climate change and weather phenomena like La Niña. This weather pattern typically brings drier conditions to southern regions like Paraguay and Argentina, although it usually causes wetter weather in northern Brazil.
However, La Niña’s effects have been delayed this year, and meteorologists expect its impact to be felt between October and November. Even then, the expected rains are not forecasted to be sufficient to bring water levels back to normal, according to Jorge Sanchez, Paraguay’s deputy director for the Meteorology and Hydrology Directorate. The traditional rainy season between October and November may alleviate the situation slightly, but it will not be enough to restore the rivers to their usual levels.
In Brazil, the drought has not only affected the water levels in the Amazon but has also led to record wildfires. The reduced water levels are leaving some communities in the Amazon region isolated, cutting them off from essential supplies and services. Additionally, the drought is affecting soy and corn shipments from Brazil’s center-west states, particularly Mato Grosso, the country’s largest grain-producing region.
Economic Ramifications for Paraguay and Argentina
The drought and low river levels have profound implications for the economies of Paraguay and Argentina. Paraguay, a landlocked country, relies heavily on its waterways to export agricultural products. With water levels so low, vessels are forced to carry reduced loads, increasing shipping costs and reducing export volumes. This has caused delays in shipments, which, in turn, could affect Paraguay’s standing as the world’s third-largest soybean exporter.
In Argentina, where the Parana River is a key route for grain shipments, the low water levels are causing similar disruptions. Argentina is the world’s top exporter of processed soy, and most of these shipments are transported down the Parana River from the port city of Rosario. As with Paraguay, the low river levels are increasing transportation times and costs for exporters.
Outlook for the Coming Months
The outlook for South America’s waterways remains bleak. While the rainy season may bring some relief, it is not expected to reverse the effects of the current drought. The La Niña phenomenon, typically associated with drier weather in the southern part of South America, is predicted to exacerbate the situation through the second half of the year. Even though northern Brazil may experience more rainfall, it will likely not be enough to counter the effects of the drought in the south.
Climate change is adding to the unpredictability of these weather patterns, making it difficult for meteorologists and policymakers to forecast and plan for future conditions. As a result, agricultural producers and traders in the region must prepare for continued disruptions to the shipping of their goods. With the importance of waterways to the economies of Paraguay and Argentina, the situation is critical, and any relief in the coming months is likely to be short-lived.
The ongoing drought underscores the need for long-term solutions to climate change and its impact on vital infrastructure like South America’s waterways. Without significant intervention, the future of grain exports and economic stability in the region remains uncertain.