The Paraguay River teetered just a centimeter above its historical minimum in the third week of August, signaling trouble ahead for Paraguayan foreign trade and freight rates. The country heavily relies on barge transport through the Paraná and Paraguay Rivers for its import and export operations. However, with lower water levels hindering navigation and shrinking cargo capacities per vessel, costs have surged by 29.2% compared to the previous year.
Here’s why this matters:
- Imports have spiked by 20.6% year on year, totaling 938,451 tons.
- As a result, average freight prices have risen by 7.1%, leading to inevitable cost transfers to retail prices.
The repercussions of critically low water levels are not limited to navigation woes; they extend to escalating freight expenses. Héctor Cristaldo from Paraguay’s Union of Production Guilds (UGP) expressed concern over the challenges posed by the uncertain climate forecast, with La Niña looming on the horizon and prices hitting rock bottom. This ominous scenario paints a bleak picture for the 2024/25 campaign, with estimated losses of $1.8 – 2 billion within the Paraguayan economy in 2025.
Moreover, Paraguay’s over-reliance on fuel imports exacerbates the situation. Scaled-down barge capacities and reduced sailing speeds hint at a grim outlook. Cristaldo emphasized the need for caution and meticulous planning in the face of these uncertainties, stressing the importance of adapting to the ever-changing landscape while the agricultural sector soldiers on.
Looking ahead, forecasting operating costs remains a challenge as persistent low water levels loom over future projections. The only constant in this turbulent environment is the resilience and determination of Paraguay’s workforce, forging ahead despite the unpredictable circumstances.
In essence, the interplay of low water levels, escalating freight costs, and economic uncertainties underscores the urgent need for strategic reassessment and proactive measures. It’s imperative for stakeholders to navigate these challenges collectively, embracing innovation and adaptability to weather the storm that lies ahead. Paraguay’s foreign trade and freight rates hang in the balance, awaiting decisive action to steer them towards calmer waters.
