Waterway improvements are making Argentina more competitive U.S. corn and soybean growers are facing increasing competition from their South American neighbors. With the growing power of Mercosur - the Southern Cone trading bloc that includes Brazil, Argentina, Uruguay and Paraguay - there is a stronger push for the building or revitalizing of infrastructure to export corn, soybeans and other ag commodities.

Although much attention has been paid to Brazil, South America's dominant economy, Argentina is increasing in significance, through the combination of private investment and decreased government restrictions on exports.

Argentina already ranks as our leading competitor in corn exports, and beginning in the 1998-99 season it moved up to third in soybean exports, behind Brazil. Its inland waterway system, dominated by the Parana River, is being developed as a major artery for the transportation of these commodities. U.S. ag giants such as Cargill, the largest U.S. company in Argentina, and Monsanto have made major investments in the inland waterways, from construction on the Parana to the building of grain terminals, which include soybean crushing facilities.

Says Dwain Ford, chairman of trade policy and international affairs for the American Soybean Association: "Infrastructure - or a lack thereof - was what was holding up the competitiveness of Argentina's soybean exports. Now that is changing."

The Parana, known as the "Mother of the Sea," is the vital artery in northeastern Argentina, flowing into the Atlantic Ocean from the north where the Paraguay River joins it in Paraguay. Its flow is powerful - 1 11/42 times that of the Mississippi River. Although there has been construction on the Parana since 1991, says Ford, it was only in the late 1990s that the time frame for project completion was put into place.

The major activity taking place is deepening the river's shipping channel to allow oceangoing ships to load at interior points. The upper reaches of the river system are conducive to barge transportation, especially since there aren't any locks or dams in the major corridor. The Hidrovia_Paraguay-Parana project involves five countries: Argentina, Brazil, Bolivia, Paraguay and Uruguay, although most of the territory lies within Argentina. The project, which officially got under way in 1989, now has an expected completion date of 2004.

The most significant obstacle to the development of the waterway system is the depth of the Paraguay and Parana Rivers. Experts estimate the system's load capacity could reach 20 million tons in the next five years. But that would involve dredging an additional 10' in most places, says Pablo Adreani, director of Agripac, a Buenos Aires-based ag consulting firm. This won't be done completely until all of the parties involved in this aspect of the project - Brazil, Argentina and Paraguay - have reached an agreement. When it's complete, though, ocean vessels will be able to move hundreds of miles inland for grain, cutting transportation costs well below present levels.

"The effect of Argentina's infrastructure investments has been phenomenal," says Adreani.

Most of the changes in the last decade occurred in the area of port, railroad and road privatization. An investment of $600 million, along with about $500 million in the soybean crushing sector, have coincided with an explosive growth in Argentina's soybean production, from 11.5 million tons in 1996-97 to an estimated 21 million tons for the 1999-2000 marketing year. As the chart shows, increased production has also resulted in increased exports, with the highest levels since the beginning of the 1990s expected for the current marketing year.

According to Adreani, "There was an 80% increase in the traffic on the Parana River, from 5 million tons in 1995 to 9 million tons in 1998. The countries that benefited the most so far from inland river trade have been Argentina and Brazil, to be followed by Bolivia and Paraguay in the near future."

At the farm level, though, things aren't as optimistic. Although farmers have invested in storage capacity, only a relatively small portion of total output may be kept on the farm. This forces farmers to move most of their grain from the farm immediately, and to sell at prevailing prices.

One cannot discuss the inland waterways of Argentina without discussing its points of export - the ports. Ports were privatized beginning in 1990, and today reflect considerable investment by the ag sector. Buenos Aires is the dominant Argentinean port, according to a recent report by the U.S. Foreign Commercial Service.

"Since about 1993, there has been increased investment in storage capacity and loading facilities at four of Argentina's main port complexes," says Randall Hager, agricultural attache of the Foreign Agricultural Service's Buenos Aires office.