20/09/2021

THE PARAGUAY-PARANÁ WATERWAY: HOW NOT TO MISS THE BOAT OF REGIONAL DEVELOPMENT

The concession contract for the Argentine section of the longest waterway in the Latin American region and one of the most important in the world, the Paraguay-Paraná Waterway, expired on 30 April 2021. It is over 3,400 km long and runs along the Paraguay and Paraná rivers, flowing into the Atlantic Ocean through the Río de la Plata, allowing continuous navigation between the ports of Argentina, southern Brazil, Bolivia, Paraguay, and Uruguay and to the rest of the world.

The Argentine government faces the challenge of calling for tender for the Trunk Waterway between km 1,240 of the Upper Paraná River (Confluencia) and km 239.1 of the outer Río de la Plata (Punta Indio Channel), thus guaranteeing the continuity and steady improvement of the waterway, a river network of great strategic value for foreign trade and economic and productive development of Mercosur member states.

As per Decree No 949/20, the Argentine Executive Power delegated to the Ministry of Transport the power to call for tender for the concession of the waterway. At the same time and until then, Decree No 427/21 established that the concession of the Waterway would be temporarily held by the General Administration of Ports S.E. (AGP SE), as of September 11th, 2021, for twelve (12) months, to be extended until the new tender is awarded, the terms and conditions of which must be established by the Undersecretary of Ports, Waterways and Merchant Navy (SSPVNyMM).

80% of Argentine foreign trade circulates through the VNT, most of the export of agroindustrial products -82% of solid bulk and 95% of liquid bulk, mostly from the ports of Gran Rosario-, 90% of transportation of containers -mainly from the ports of Buenos Aires and Dock Sud-, 100% of the cruise ships that arrive in the country –port of  Buenos Aires-, 100% from the automotive industry -through the port of Zárate-, and a large part of the flow of the metallurgical industry as well as transshipment and cabotage operations. In addition, it is worth mentioning that the Waterway is vital for the country's energy supply, as it constitutes one of the central routes for supplying natural gas and transporting crude oil and refined products.

The Waterway has a key strategic geopolitical value for foreign trade and for the economic and productive development of Argentina, as well as for the rest of the member countries of the La Plata basin: Bolivia, Brazil, Paraguay and Uruguay; yet especially so for Bolivia and Paraguay, since for these countries the Waterway constitutes the only access route to the ocean.

Its strategic value increases exponentially if we take into consideration that 90% of international trade moves by means of water transport. And even more so, considering that, from the COVID-19 pandemic, the world is characterized by presenting a global scenario of collapsed logistics, with a shortage of freight and containers and delays caused in international maritime traffic, aggravated by other specific events such as the blockade of the Suez Canal (Ever Given stranding) or the suspension of operations in the ports of China as a result of the outbreak of new strains of the virus.

Faced with this crisis scenario, Argentina has the challenge of ensuring that the main maritime lines decide to continue including our ports as destinations on their international routes. It is not an easy task to fulfill, considering the remoteness of its geographical location with respect to the access ports to the main markets of North America, Europe and Asia, and the extraordinary downspout registered in the Paraná, Paraguay and Iguazú rivers that forced to declare the State of Water Emergency in the basin (cf. Decree No. 482/21).

As was recognized in the recitals of the applicable regulations as well as in the statements of President Fernández himself, the Argentinian State lacks the necessary technical resources to undertake by itself the execution of the dredging and beaconing works of the VNT.

This matter, although obvious, deserves to be emphasized as a reality of a technical nature, which must overcome the specter of any ideological rift and which goes beyond the imposition of certain bastardized political concepts intentionally taken out of context, such as sovereignty, control, and even gender equality.

The concession of the Waterway must and can be made by adjudication to the private sector through the collection of tolls, at business risk and without the State's endorsement; a system which on the other hand has proven to be virtuous for more than twenty five years, since 1995. This being so, in addition, without subsidy from the National State. In other words, the State should not disburse money for the concession.

Equally important and necessary is to project new deepening works, sill width, and crossing areas, in order to avoid congestion and reduce the transit time of ships, generating (1) greater efficiency in the use of up-river warehouses; and (2) greater efficiency in navigation times.

It is therefore worth considering changing the layout of the navigation system –incorporating the Bravo-Guazú-Talavera section–, and reviewing and improving the signaling systems, taking advantage of the proliferation of new technologies. All this considering the evolution of the shipping market and the characteristics of the new ships and the operational capacity of our ports, obtaining greater productivity and increasing safety in navigation, which together should result in a reduction in aggregate logistic costs.

On the other hand, it is necessary to take into account the need to improve the current pricing system, based on the computation of the net registered tonnage (“TRN”) and design draft of the vessels, which applies a system of cuts in sections of the distance traveled, and which in turn generates distortions in addition to not representing an objective value, such as the proportional dredging and beaconing effort.

In this sense, it is worth highlighting the rate improvement analysis work developed by the Navigation Center and presented to the national authorities in 2020, which aims to obtain a significant reduction in the toll rate, equitably applicable for all types of ship (liner, bulk carrier, RoRo and cruise ships), and that guarantees the sustainability of the maintenance of the inland waterway and a sufficient income for the concessionaire within the parameters applicable globally.

The aforementioned study proposes a new formula based on the computation of the TRN but applying different coefficients, also establishing a maximum rate ceiling in order to reduce distortions in the current formula. The tariff cost of vessels that must make longer journeys, such as bulk carriers and tankers, is amply offset by the deepening of the VNT, allowing the optimization of the use of the warehouse at a lower cost per vessel, all of which translates into a more equitable scheme, where everyone wins.

Furthermore, it is positive and convenient that the Waterway has a decentralized control body of the central structure of the State, such as the National Entity for the Control and Management of the Waterway, created through DNU No. 556/21.

Now, beyond the manner chosen to form this entity, a concession contract of this magnitude requires an agile and efficient control structure, with an adequate budget, for which the toll resources must be allocated, without detours, to the maintenance and constant development of the waterway infrastructure.

In this sense, it will be essential that the Entity be made up of trained technical staff who can collect data and generate statistics and use them strategically, in such a way as to favor the proliferation of continuous improvement actions in the system.

Argentina needs to put an end to its deep economic crisis, aggravated by the pandemic. Ports are the main entry and exit route for our foreign trade, an essential activity to boost the growth of our economy; and the Waterway stands as the navigable route par excellence to be able to fulfill this purpose.

Seeking a new concession contract to guarantee a more efficient Waterway is the way to go to guarantee the flow of vessels to and from our ports and to achieve a significant reduction in costs for the benefit of all actors in the logistics chain (cargo, ports and ships).

This would enhance the competitiveness of our foreign trade, with growth of our exports and imports, of our national production and of our regional economies, generating a greater income of foreign exchange while protecting and generating thousands of direct and indirect jobs in our country.

Alfonso Mingo Jozami is a lawyer specialized in corporate law and foreign trade. Master in International Relations (Universita di Bologna) and Master in Business Law (Austral University). Author of the book "Law of Port Activities revised, ordered and commented" (Cathedra Jurídica, 2018) and Director of the Journal on Foreign Trade Law published by IJ ILG - Austral University. Since 2004, he has worked in the field, advising both national and multinational companies, as well as the Argentine government. He was Legal Director of Exolgan and Legal Advisor to the Undersecretariat of Ports, Waterways and Merchant Marine, participating in the assembly of the bidding documents for the Waterway. Since 2020, he is General Manager of the Navigation Center.