Waterway toll generates crisis with Argentina – 09/21/2023 – Market

It is July 28th and a Paraguayan-flagged vessel sails through the waters of the Paraná River carrying 13,561 tons of Brazilian soybeans to Argentina. Upon arriving to unload the grains in the city of San Lorenzo, around 300 km from the coast, however, the tug refuses to pay the toll and is detained by court decision.

The boat is released ten days later, with payment of the fare, and brings to the surface a discussion that until then had been taking place below the surface: the imposition of a tax by Argentina, since January, on anyone passing through a section of the Paraguay- Paraná, which cuts through five countries connecting Mato Grosso to the River Plate.

Without reaching an agreement at the technical level in the last ten months, the matter ended up in political offices, escalating last week to exchanges of public accusations and even practical retaliations between Argentina and Paraguay. The latter even suspended the sale of energy to Argentines, who had to resort to more expensive Brazilian plants.

Tension rose throughout the region, generating a four-against-one scenario: Brazil, Bolivia and Uruguay joined the Paraguayan chorus in asking that neighbors remove the toll until the issue is resolved. Meanwhile, the countries have already started the procedures for a possible international arbitration, which is seen as a setback for the regional integration so desired by President Lula.

The waterway under debate, 3,442 km long, has been managed jointly between these nations since the end of the 1980s, serving as a cheaper route for soybeans, corn and derivatives, as well as fuels, fertilizers and iron ore.

The route is especially important for Paraguay, which has no connection to the sea, so depends on it to transport almost 80% of its foreign trade, and has the third largest fleet of vessels in the world.

The four countries criticize mainly two points: first, they say that Argentina imposed the toll — of US$ 1.47 or R$ 7 per ton — unilaterally and arbitrarily, which goes against the treaties that provide for a joint decision. Then, they complain that, by retaining the boats, the nation restricted the freedom of navigation of strategic goods, again going against current agreements.

“In the understanding of Brazil, Bolivia, Paraguay and Uruguay, the Argentine government has not been able to demonstrate, to date, that the toll constitutes reimbursement for services actually provided on the waterway, a condition provided for in the agreement for any charge”, he stated the Itamaraty to Sheet. Paraguay said it would not be possible to appoint a spokesperson.

Argentina argues that the fee is compensation for structural improvements made to the river in the last 13 years and insinuates that the situation escalated on the Paraguayan side, which was acting under pressure from the local business community. When contacted, Casa Rosada stated that it is respecting the agreement not to make statements on the matter and that the environment of the negotiations has been positive.

The tone began to rise on August 24, after the Minister of Economy and Argentine presidential candidate, Sergio Massa, made a stop in Asunción to talk with the recently inaugurated president Santiago Peña.

They posed together for a photo, but hours later the Paraguayan Ministry of Foreign Affairs criticized Argentina on social media for not having fulfilled the supposed agreement to remove the toll. Diego Giuliano, Argentine Transport Minister, responded in the post that he regretted “that the content of such a fruitful meeting was distorted.”

“I don’t know if it’s a lack of communication, I believe they are different moments. In the case of Paraguay, it’s very clear: when we say something, it comes true”, Peña told journalists the following day. “We do not deny the charging option […]but we cannot charge unilaterally, it must be an agreement between the five countries”, he added.

The milestone in the escalation of the conflict, then, occurred on the 6th, when a second Paraguayan vessel was stopped in Zárate, a city 90 km from Buenos Aires, after also refusing to pay the toll for transporting Paraguayan diesel to Paraguay itself. She was only released five days later, after paying a fee.

Meanwhile, the barbs turned into concrete actions: on the 8th, Peña decided to stop selling the surplus energy produced by the Yacyretá hydroelectric plant, shared between the two countries, accusing Argentina of not paying an old debt — on the other side, the Argentines also claim a smaller historical liability for the construction of the dam.

“The decision to withdraw 100% of the energy available to Paraguay was intentional, and Argentina had to buy energy from Brazil at a higher cost. We made great efforts to restore the relationship […]but significant delays with Paraguay persist”, President Peña told the Argentine newspaper La Nación on the 10th, later denying a relationship with the toll issue.

On the same night, the four countries released a note asking Argentina to suspend the tax and guarantee free navigation until the impasse is resolved, which has not been done so far. The following day, a delegation linked to Massa traveled to Asunción to reduce tension. It was indicated that both sides agreed on the right to charge tolls, but still did not know how much or how.

“We think that US$ 1.47 is an excessive value, the cereal producers calculate that it should be US$ 0.66 [ou R$ 3,20]. Depending on the cargo, this increases the cost of shipping by up to 10%, and those who end up paying are the general population when they buy imported products”, says Raúl Valdez, president of the Center for River and Maritime Shipowners of Paraguay (Cafym).

He says that tolls paid since January amount to around US$50 million, double the US$25 million that Argentina claims to have spent on improvements to the waterway — the country did not respond about the figures. “We recognize the investments and the need for the toll, but the dredging and signaling carried out so far have not translated into more efficiency and safety. We need to work together, we know what has to be done.”

Now, technical meetings have begun to decide the amount and method of payment, in addition to discussing the situation of the Yacyretá hydroelectric plant. If the two sides cannot reach an agreement, the case must go to international arbitration, as indicated by Peña. Paraguayan Chancellor Rubén Ramírez also said that he had called the Mercosur Permanent Review Court.