Argentina: A major transportation artery, the Paraná River, is drying up

Winding its way through thousands of miles of South American rainforest and pampas, past sprawling soy and corn farms, the Paraná River is the main artery of Argentine trade. About 80 percent of the country’s agricultural exports pass through its murky waters on their way to the Atlantic Ocean.

So when the river’s water level dropped to its lowest level since the 1940s – the result of years of scorching drought that scientists attribute to climate change – it added to the strain on an economy that was already struggling to recover from the pandemic collapse.

Grain traders have suddenly been forced to reduce the amount of cargo they load on cargo ships, fearing they will get stuck on shallow river banks and then either load them up 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 annually from exports. Gustavo Idigoras, head of Ciara-Cec, a crop export and processing group that includes Cargill Inc. and Glencore Plc, called it an “emergency situation” that is likely to last until the end of the year.

Imports are also taking a financial toll: Low water levels in rivers mean less hydropower and, as a result, more money that has to be shelled out for supplies of diesel fuel for power plants. Diesel imports have jumped to their highest level since 2018, as the Yasiret Dam, which normally supplies about 14 percent of Argentina’s electricity from the country’s northern border, is operating at just a third of its capacity.

The combination of slowing exports and rising imports is shrinking the country’s trade surplus and adding to a host of factors that are leading the peso, the lowest-yielding currency in emerging markets this year, to fall. This has prompted the central bank to return to the foreign exchange markets in recent days and sell dollars to support the peso and try to prevent inflation from spiraling further out of control. Inflation as high as 50 percent a year is already a serious obstacle to economic growth as it eats away at the purchasing power of tens of millions of Argentine consumers.

Argentina’s export problems have global implications. The country is a powerhouse of oilseeds, soybeans and grains, ranking first in the world in supplying soybean meal for livestock feed and soybean oil for cooking and biofuels. It is the third largest exporter of corn.

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