Argentina: The main transport artery, the Parana River, is drying up

Argentina: The main transport artery, the Parana River, is drying up
Argentina: The main transport artery, the Parana River, is drying up
Anonim

Making its way through thousands of kilometers of South American rainforests and pampas, past overgrown soy and corn farms, the Parana River is the main artery of Argentine trade. About 80% of the country's agricultural exports pass through its murky waters en route to the Atlantic Ocean.

So when the river's water level fell to its lowest level since the 1940s - the result of years of scorching drought that scientists have linked to climate change - it exacerbated the pressure on an economy that was already struggling to recover from the pandemic collapse.

Grain traders were suddenly forced to reduce the amount of cargo they load on cargo ships, fearing that they would get stuck on shallow river banks, and then either reload them when they reach deeper seaports, or hire additional ships. Both options are costly and time consuming, making it difficult for an industry that receives more than $ 20 billion in exports annually. Gustavo Idigoras, head of Ciara-Cec, a crop export and processing group that includes Cargill Inc. and Glencore Plc, called it an "emergency" that is likely to last until the end of the year.

Imports also suffer financial losses: Low water levels in rivers mean less hydropower and, as a result, more money to shell out for the supply of diesel fuel for power plants. Diesel imports jumped to their highest level since 2018 as the Yasireta Dam, which typically supplies about 14% of Argentina's electricity from the country's northern border, is running at just a third of its capacity.

The combination of a slowdown in exports and a rise in imports is cutting the country's trade surplus and adding to a host of factors that are driving the peso, the lowest-yielding currency in emerging markets this year, to plummet. This has prompted the central bank in recent days to return to foreign exchange markets and sell dollars to prop up the peso and try to prevent inflation from spiraling out of control. Inflation, reaching 50% a year, is already a major impediment to economic growth, as it eats away at the purchasing power of tens of millions of Argentine consumers.

Argentine export problems have global implications. The country is a powerful center for the production of oilseeds, soybeans and grains, ranking first in the world in the supply of soybean meal for livestock feeding and soybean oil for cooking and biofuels. It is the third largest corn exporter.

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