Uruguay to provide port space for landlocked Bolivia

Uruguay to provide port space for landlocked Bolivia

Uruguay has signed an agreement with the Bolivian President Evo Morales to provide the landlocked Bolivia an outlet to the sea. The project will allow the country to access the Atlantic by building a deep water port in the Uruguayan state of Rocha.

Jose Mujica, former President of Uruguay, has had this project on his agenda for many months, and it was one of the most important negotiations that Uruguay had with Bolivia in the past year. Although the agreement was signed by both countries this past February, when Jose Mujica was still in office, it will be relying on the administration of Tabaré Vázquez, the new President of Uruguay, to be executed.

The new port will be constructed with the support of the Brazilian National Development Bank and Mujica has described this new deep water port as “a port for the region.” This is a very important asset for Bolivia, given that for many years Bolivia has battled in court with Chile to gain access to the Pacific Ocean with no positive outcome.

The construction of the port includes an agreement that it will be co-managed by the MERCOSUR countries. At this stage, Paraguay, which also lacks ocean access, is one of the other main countries with a strong interest in the success of this new project.

The agreement will guarantee better conditions for trade in the region. Countries like Bolivia are exporting products at prices that include high transportation fees, making their products less competitive abroad.

Given that the costs of maritime transportation are low compared to transporting goods on land, the Bolivian government is expecting to export minerals and agricultural goods through the new port, which will be 32 meters deep, allowing transatlantic ships that cannot cross the Panamá Canal because of their size to anchor in Uruguay.

President Evo Morales said that the agreements between the two countries will also result in the construction of railroads that will link the cities of Motacucito with Puerto Busch in Santa Cruz to be able to export gas and farm products. Carlos Flanagan, the Ambassador for Uruguay in Bolivia, noted that with this investment Bolivia will be able to export its products to overseas markets, to which it had no previous access.

The Parana River is also being considered as a way to connect both ends of the supply chain, if this option is cheaper than sending gas to Uruguay by pipeline. The possibility of transporting gas by ship from Bolivia to Uruguay is currently under analysis.

The value of Bolivian hydrocarbon exports has dropped 32.14% between January 2014 and the same month in 2015. Importantly nearly 50% of the Bolivian GDP comes from the export of raw materials and resources, primarily natural gas, the price of which has risen more than ten times from its original value in the last decade.

Although Bolivia has a growing middle class, one quarter of Bolivians still live in poverty and the macroeconomic success experienced in the past 10 years might be coming to an end.

Brazil, one of the biggest importers of liquid gas in the region, is moving towards energy self-sufficiency. The energy trade agreements that both countries currently have will expire in 2019 and that is the year when Brazil is aiming to supply its own energy.

However, with this new port agreement between Uruguay and Bolivia, the latter could be able to increase its exports to cross-Atlantic countries, substituting or expanding upon the Brazilian demand for liquid gas and sustaining its economic momentum.

About Author

Miguel Ferreyra de Bone

Miguel is a guest lecturer of Macroeconomics at the Universidad del Salvador in Buenos Aires, Argentina. His past experience includes an advisory role at Banco Galicia, the largest private bank in Argentina by AUM, and as a commodities analyst at both Cargill and Ledesma. Miguel is proficient in Spanish, English, and Portuguese.