Hidrovia Canal Plan and Environment (HIDROVIA Case)

          CASE NUMBER:          154
          CASE MNEMONIC:      HIDROVIA
          CASE NAME:          South American Waterway

A.   IDENTIFICATION

1.   The Issue

     A waterway that will link the heart of South America with
the Atlantic Ocean could grant an outlet to the sea to landlocked
Paraguay and Bolivia, a financial boost to Brazil's poor western
region, increased export for Argentina, and a renovated,
international port for Uruguay. The project will expand  Brazil,
Argentina, Uruguay, Bolivia and Paraguay's navigation
possibilities on the Parana and Paraguay rivers, which is
considered South America's second most important riverway system.
The world's largest wetland, the Pantanal, could be ruined by the
construction of the waterlink. Sprawling over 53,760 square miles
in Brazil, Paraguay and Bolivia, the Pantanal is home to 650
species of birds, 240 varieties of fish and more than 90,000
types of plants.   

2.   Description

     On January 1, 1995 the Southern Cone Common Market or 
Mercosur' was officially implemented joining the economies of
Brazil, Argentina, Uruguay and Paraguay.  With a market of nearly
200 million people,  Mercosur is the second largest trade bloc in
the Western Hemisphere after NAFTA.  The liberalization of these
four countries represents a huge change from the economic
policies of only a few years before when closed economies and
import substitution were the rule.  As would be expected with any
change of this magnitude, the effects are potentially wide
reaching.  In order to take advantage of the newly freed borders
an old idea has been revived.  The four nations of Mercosur,
along with their western neighbor Bolivia, have for years been
discussing the idea of an international waterway navigable from
the Atlantic to presently landlocked Bolivia.  That dream has now
moved into the planning stages with a project called Hidrovia.

     If and when it is completed Hidrovia will allow ocean going
vessels to make the 2,000 mile trip from Argentine and Uruguayan
ports of the Atlantic to currently landlocked areas in Paraguay
and Bolivia.  The proposed route would begin at Caceres in
western Brazil, run through the center of Paraguay (including the
capital Asuncion), through portions of Argentina and finish at
Nueva Palmira in Uruguay.  The project would essentially expand
navigation of the Paraguay and Parana river system, which is the
second largest in South America.  The result, say proponents,
would be a massive economic boom for the region, drastically
reducing transportation costs and providing the resource rich but
landlocked areas of Argentina, Paraguay, Bolivia and Brazil with
direct access to the Atlantic Ocean and thus the entire world.

     As currently envisioned, the project would require massive
dredging, the construction of dozens of dikes and straightening
curves in the Parana river.  The aim is to provide a navigable
waterway at least ten feet deep from the Atlantic Ocean to Puerto
Caceres in Brazil.  A preliminary project dredging and upgrading
portions of the lower Parana river is scheduled to get underway
shortly.   This project, undertaken solely by the government of
Argentina is seen by many as an obvious precursor to the larger
Hidrovia project.  Cost estimates for the entire waterway range
from $560 million to over $1 billion for construction and an
additional $1 billion for maintenance.  Partial funding may come
from the Inter-American Development Bank(IADB) depending upon the
environmental impacts of the project.  The IADB has just begun
work on a $6 million environmental impact study.

     It is the environmental aspects of the project that present
the greatest difficulty to its full implementation.  A number of
organizations including Greenpeace, The World Wildlife Fund and
the Environmental Defense Fund have pointed out major problems
with Hidrovia.  Hydrologists point out that dredging and
straightening will cause the rivers to run faster and thus flood
faster. Many fear that a  domesticated' river system will
eventually result in very costly flooding that would not occur if
the rivers were left in their natural state.  Experts point to
the floods on the Mississippi in 1993 as an example of what might
happen in South America if the Hidrovia project is completed. 
While flooding along rivers is to some degree inevitable, manmade
manipulation (such as removing wetlands along the banks,
straitening curves, and the construction of massive dikes and
levees) is thought by many experts to have been greatly increased
the intensity and duration of the 1993 flooding.

     Wetlands act as regulators, soaking up water like giant
sponges and slowly releasing it into a waterway. Removing them
forces rainwater directly into a river, greatly increasing the
amount of water in a very short period of time.  The many bends
and curves in most rivers act as a brake on the flow of water
downstream.  Straightening rivers not only increased the speed
with which barges and other river traffic are able to move, but
also increases the speed of the river itself.  The faster the
water moves downstream the greater the likelihood of flooding. 
The construction of dikes and levees may have the largest impact
on downstream flooding.  Every dike built reduces the area over
which a river may spread out.  While flooding may be reduced in
the upper reaches of a river, the effect is to force more and
more water into a smaller and smaller area.  Dikes downstream
have to be larger and higher to cope with the increased amount of
water.  When flooding does occur, upstream dikes force more water
downstream and thus contribute to larger and more destructive
floods.  With far fewer economic resources than a country like
the United States, a major flood in the Hidrovia countries would
be relativley more devastating.  "The five country region can
little afford the destruction seen in the Mississippi and
Everglades the Environmental Defense Fund, a Washington based
group warned recently about the Hidrovia."(James Brooks, 1995)

     The Pantanal represents a pristine wetland area in
southwestern Brazil. The area, which acts as a sponge, regulating
water flow and taking suspended solids from the Paraguay River,
is estimated to encompass between 140,000-200,000 square
kilometers (56,000-80,000 square miles) today. It extends as an
immense, kidney-shaped lowland compromising Upper Paraguay in
western Brazil, eastern Bolivia and northeastern Paraguay. This
area represents one of the world's most ecologically diverse
areas. The area in Brazil is officially protected in a National
Park and in a small ecological reserve in the state of Matto
Grosso. As explained before in the effort of improving
navigability the project could disrupt the annual water cycle
that has shaped life in that area and it could increase the
volume of the waterway by as much as 35 percent and as stated by
a specialist "this would lower the level of the Pantanal swamp by
26 centimeters and could endanger and wipe out many unique and
undiscovered forms of life and it could also provoke dangerous
climate changes."

     During the wet season, which usually goes from October
through March, the Paraguay river and its Brazilian tributaries
flood their banks and put three-forth of the Pantanal under
water. When the rains stops, the water levels drop, and as the
dry season advances, millions species gather , specially birds
that use the Pantanal as part of their migratory routes.  The
increase of development and urbanization that the project implies
will eventually affect the uniqueness of the area as well.


      The potential for devastating flooding is only the tip of
the iceberg though, according to many environmentalists.  A
report from the Woods Hole Research Institute cites the following
environmental impacts: Alteration of the natural aquifer system,
increased water contamination, growth in local populations as a
result of increased commerce, and the loss or damage to wetlands
in the area, particularly Brazil's Patanal region.  While all of
these impacts are significant, the last would be the most
dramatic.  The Patanal is a huge wetland roughly the size of
Nebraska.  It is home to a tremendous variety of plants and
wildlife, including jaguars, giant anteaters, caymans, marsh
deer, giant otters, toucans and the rare hyacinth macaw.  The
Patanal is thought to act like a giant sponge, soaking up
rainwater and slowing releasing it into the river system.  Damage
to this sponge would not only increase the likelihood of flooding
in times of heavy rainfall, but also increase the chances of
drought in dry times. Some environmentalists claim that in the
first year of Hidrovia's operation some 17 billion cubic meters
of water would be lost.  This would not only pose a threat to
wetlands and animal life in the region, but could create a
problem with the regions drinking-water supply.

     Over the longer term the impact of Hidrovia would be even
greater.  By reducing transportation costs many activities now
economically infeasible would become so.  Areas now largely
uninhabited would be converted into farmland.  This could create
even greater environmental problems.  According to a Paraguayan
conservation group, "this is a very delicate ecosystem that
simply shouldn't be used for agriculture.  Clear-cutting forest
isn't exactly what we'd call sustainable development
either."(Lawrence Speer, 1995 p. A10)  The situation is one faced
by many developing nations; how to develop and modernize without
completely destroying the environment.

     The argument over Hidrovia will not end quickly.  Proponents
see vast economic opportunities, opponents environmental
devastation.  A great deal is riding on the current IADB impact
statement.  It is unlikely however, that either side will be
completely satisfied with the result.  The dream of a navigable
Paraguay-Parana river system has been around for a long time, it
is not likely to disappear anytime soon.

     The project to developed the waterway from Uruguay's port of
Nueva Palmira to the state of Mato Grosso in Brazil's wild-west
interior would follow the Parana and Paraguay rivers and run
along 3,300 kilometers (2,062 miles)of borders of the five
countries, ending in the Brazilian city of Caceres in the
environmentally sensitive Pantanal swamp. The project is
considered to have extremely positive' effects for the landlocked
Latin American countries, Bolivia and Paraguay, who are now
reliant on expensive overland transport. The purpose of the
Hidrovia is to ease access to the Atlantic for countries like
Paraguay, Bolivia the northern part of Argentina and the western
Brazil. This is a way to exploit the potentialities of the
world's largest estuary, the Plate River and to promote the
development of the region by reducing the cost of transport and
improving links with commercial centers.

      The infraestructural requirements of the plan include
substantial dredging, channel stabilization and realignment, and
rock excavation to allow freighters and large barge trains to
travel more upriver. It will also require the straightening out
of curves along the Paraguay and Uruguay rivers, dredging of 86.6
million cubic meters (303 million cubic feet) of silt and
creating 32 dikes to increase the volume of the water. Among the
future investment are the erection of lights and traffic signals
along the river to allow for day and night shipping, the building
of riverside ports and other spinoff industries.

     The project would be beneficial to 17 million people living
in the region but it will affect the rich environmental setting
of the Pantanal and its unique biological richness. The problems
that the project implicates are fundamentally grouped in three
set of issues: biological changes in species and ecosystems;
social changes surrounding populations; and changes in water and
the accompanying problems of overexpansion in river front
communities. Experts are questioning if the economic worth of the 
project and of course are measuring the eventual environmental
effects that it could have in the area. In this respect the
project presents it biggest risks: it would drain vital wetlands
and wreak havoc with eco-systems up and down the course of the
waterway. 

3.   Related Cases

     PAATANAL case
     ATATURK case
     COLORADO case
     MEKONG case
     THREEDAM case
     ISRAELH2 case

     Keyword Clusters    

     (1): Trade Product            = MANY
     (2): Bio-geography            = TEMP 
     (3): Environmental Problem    = Species Loss Land [SPLL]

4.   Draft Authors: Daniela Perovic and Peter Kelly

B.   LEGAL Clusters

5.   Discourse and Status:  AGREement and INCOMplete

     The legal and administrative framework of the project is
shaped by the so-called Acuerdo de Transporte Fluvial. The
agreement was negotiated among the five countries. 
 
6.   Forum and Scope:  BRAZIL and MULTilateral

7.   Decision Breadth: 5 (ARGENTINA, BRAZIL, PARAGUAY,
     BOLIVIA, URUGUAY) 

8.   Legal Standing:  TREATY

C.   GEOGRAPHIC Clusters

9.   Geographic Locations

     a.   Geographic Domain : South America [SAMER]
     b.   Geographic Site   : Southern South America [SSAMER]
     c.   Geographic Impact : Brazil (Pantanal)

10.  Sub-National Factors:  NO

11.  Type of Habitat:     TEMP

D.   TRADE Clusters
     
12.  Type of Measure:         [REGBAN]

13.  Direct vs. Indirect Impacts:INDirect

14.  Relation of Measure to Environmental Impact

     a.  Directly Related     : YES TRANSport   
     b.  Indirectly Related   : NO
     c.  Not Related          : NO
     d.  Process Related      : YES  Species Loss Land [SPLL]

     Hidrovia is such a huge project that its impact would be
felt in a vast number of areas.  First and foremost would be a
direct effect on river life and that which depends upon it.  The
dredging would instantly alter the river ecosystem. The exact
effect on wildlife is impossible to determine with any certainty. 
However, it seems likely that native species would be adversely
impacted in a number of ways.  Changing the nature of the river
system would result in habitat loss for certain species and
likely create opportunities for non-native species to flourish. 
Increased human activity in the area would almost certainly bring
non-native species into the area (see HAWAII and BALLAST cases) 
Indirectly the impacts would be equally large, influencing
adjacent ecosystems such as the Patanal and encouraging increased
human intrusions.  Decreasing transportation costs and easier
access to this area will likely lead to an influx of people  in
search of improved economic conditions.  This will likely result
in increased pollution, increased deforestation, greater clearing
of land for agriculture and increased development and
industrialization to meet the needs of the new population.

15.  Trade Product Identification:  SOYBEAN

     The project will be beneficial to all the participant
countries in their commercial output. It will open up South
America's heartland to new economic venture. The countries that
will benefited the most will be the Mediterranean countries,
Bolivia and Paraguay. The trade product could be identified as
any product produce and commercialized by those countries, within
the region or beyond it. Manganese from western Brazil and iron
from Bolivia, sugar from the largest Refinery in the world goes
from Tangara in Brazil to Argentina, and in return barges will
bring wheat from Argentina to the northern markets. There is
though a particular case of interest, the soya. Soya will be the
main crop to be shipped along the waterway from the Paraguayan
plantations to the European markets. It only grows in the seven-
month rainy season when the river is deep enough to sustain
commercial traffic. One problem is that profitability estimates
assume bumper crops every year and ignore competition from
highways and railways.

16.  Economic Data

     The project cost will be approximately $3 billion and will
take twenty years to finish it, $1 billion will be a combination
of private and public investments and will be directed towards
the construction, $2 billion will be spent on maintenance, such
as daily dredging in the silt-laden rivers during construction.
Studies for the project are financed by the Inter-American
Development Bank, the United Nations Development Program, the
Corporacion Andina de Fomento and the European Union. The inter-
American Development Bank will finance a major portion of the
project with matching funds from the five countries involved in
the project.  

17.  Impact of Measure on Trade Competitiveness:  HIGH

18.  Industry Sector:    TRANSPORT and SERVICE 

19.  Exporter and Importer:MANY and MANY

E.   ENVIRONMENT Clusters

     The construction of Hidrovia will cause environmental
degradation across the region. The greatest concerns are the
impacts that it will have in the Upper Paraguay and particularly
in the Pantanal wetland. The increased traffic on the Upper
Paraguay River, along largely undeveloped forest land, will
increase the process of deforestation to create agricultural
surface. The major impacts of the construction of Hidrovia
include:

     * Alteration of the hydrological regime;
     * Water quality deterioration;
     * Loss of regulatory effect of the Pantanal, resulting
     in increased flooding;
     * Loss of local, regional, and global biodiversity,
     particularly among fish;
     * Decline in biological productivity, specially
     fisheries; and 
     * Loss of landscape complexity.

     Channelization, dredging, channel simplification and water
control structures will drastically change the hydrology of the
area. Currently the wetland absorbs the floodwater, releasing
water back into the river later in the year. It now takes about
six months for water to flow from the Pantanal to the Atlantic
Ocean. If this stops, there will be more flooding downstream.
Also the process of dredging will increase the amount of sediment
suspended in the water, blocking out light and retarding the
growth of algae and aquatic plants. 

     In the longer run the increased development that will follow
the building of the waterway will lead to the expansion of
agriculture of land now covered by forest and wetland, pollution
by agricultural chemicals, and the introduction of alien species
both deliberately and accidentally.   
     
20.  Environmental Problem Type:  HABITat Loss

21.  Name, Type, and Diversity of Species 

          Name:          MANY      
          Type:          MANY           
          Diversity:     MANY
     
     Among the many species are: Birds: owl (Pulsatrix
perspicillata) ovenbirds (Seirus aurocapillus), cuckoos (Coccyzus
species), ani (Crotophaga species), savanna hawks, snail kites
(Rostrhamus sociabilis), apple snail,black hawks, Amazon
kingfishers, snowy egrets, cattle egrets, Maguri storks, toco
toucans, swallows, great egrets, night jars, crested caracaras,
wood storks, buff-necked ibis, gray abis ( Treskiornithidae
species), amazon parrots, monk parakeets, warblers, corcomorants,
stork fledglings (Jabiru mycteria). Mammals: capybaras, coatis,
marsh deer. Reptiles: anaconda (Eunectes murindus), caimans
(caiman yacare), iguanas, lizards. Fish: tropical oscar
(Astronotus ocellatus), capybara (hydrochoerus hydrochaeris),
pacu (Colossoma species), dorado.
 
22.  Impact and Effect:  MEDIUM and SCALE

23.  Urgency and Lifetime:  MEDIUM and 100 years

24.  Substitutes:  Conservation [CONSV]

VI.  OTHER Factors
25.  Culture:  YES

     The area was settled more than a 100 years ago and is still
largely owned by cattle ranchers, who have adapted their farming
methods to the wetland rather than attempting to alter its
dramatic annual water cycles. Pantanal's animal life has been
able to live in remarkable harmony with this ranching culture,
the area faces now serious threats from different factors among
which is the construction of Hydrovia. This effort to improve
navigability could disrupt the annual water cycle that has shaped
life and culture in the Pantanal and could increase urbanization
and development in the area. Ranchers have managed to make a
living without radically altering or destroying the wetland by
developing extensive rather than intensive ,ranching that relies
on cows adapted to the tropical heat and wetness. "If you lose
this culture ,you will lose a lot of the biological diversity as
well" (Janice Wiles, Senior Program Officer for the World
Wildlife Fund). Newcomers generally do not have the same respect
for the area as those who have been living in the area for
generations.
       
26.  Trans-Border:  NO

27.  Rights:  YES

28.  Relevant Literature

Banks, Vic. "Pantanal: Brazil's forgotten wilderness." 1991. San
Francisco: Sierra Club Books. 

Brooke, James. "South America Dreams of a Mega-Canal,"
International Herald Tribune, May
29, 1995

Bureau of National Affairs, Inc. International Environment  
Reporter Current Report. June 28, 1995. Vol. 18, No.13; Pg. 507
"Environmentalists on three continents oppose hidrovia as threat
to ecosystems." 

Bureau of National Affairs, Inc. International Environment  
Reporter Current Report. April 5, 1995. Vol. 18, No. 7; Pg. 269
"Environmental concerns may doom bank financing for waterway
project."

Bureau of National Affairs, Inc. International Environment  
Reporter Current Report. March 8, 1995. Vol. 18, No. 5; Pg.
197."Bank begins studies on waterway planned through five South
American Nations."

Bureau of National Affairs, Inc. International Environment  
Reporter Current Report. February 9, 1994. Vol. 17, No. 3; Pg.
136. "The divisiveness on Environmental Issues, Policy reflected
at IUCN Triennial."

"Collaborative Planning for wetlands and Wildlife. Issues   and
Examples." Ed. Douglas Porter and David Salvensen. 1994.

Environment Watch Latin America. "South American Waterway Attract
Consultants, criticism from Environmentalists," Nov. 13, 1993.

Environment Watch Latin America. "NGO's Attack South American
Waterway," Nov. 1994, Vol. 4, No. 11.

Environment Watch Latin America, "Mercosur Agreement Takes
Effect, Environment Not a Priority," Feb. 1995, Vol 5.

Ferreira, Lenilson. "Brazil Eyes Overland Link to Pacific to
Boost Asia Trade," Kyodo News Service, Sept. 20, 1995.

Homewood, Brian. "Canal Threat to Brazilian Wetland," New
Scientist, Vol. 140, No. 1896, p. 5.

Latin American Newsletters, Ltd., "Hidrovia Causes Concern," Aug.
10, 1995.

Latin American Newsletters, Ltd., "Bolivar's Vision Not Just a
Pipe dream," Sept. 14, 1995.

Latin American Newsletters, Ltd., "Eco-Battle Looms over Parana
-Paraguay," Feb. 3, 1994.

Latin American Newsletters, Ltd., "New Impetus for  Hidrovia'
Project," Nov. 18, 1993.

Lewis, William. "Wetlands: Characteristics and boundaries." 1995.
Washington, D.C. National Academy Press. 

McGraw-Hill Encyclopedia of Environmental Science and  
Engineering. New York, 1995.

Mitsch, William; Gosselink, J. "Wetlands." 1995. Ed. Van    
Nostrand Reinhold.  

Muller, Analzita; Ninio, Alberto. "Pantanal: paradise in    
danger." 1992. National Wetlands Newsletter  

National Geographic, October 1992. Vol.182, No. 4. "Our     
disappearing Wetlands."

Pagan, Rafael A. "Paraguay Emerges...," Business America, Aug
1995, Vol. 116, No. 8, p.27      

Reuter Textline. " Argentina: Special Report-Argentina-Hidrovia
Project Offers Access to World Markets," Nov. 17, 1993.

Reuters, "Environment on Mercosur Back Burner--Greenpeace," Dec.
5, 1994.
Speer, Lawrence J."Paraguay by Ship?," The San Francisco
Chronicle, Aug. 9, 1995, p. A10

Stein, Edith. "The Environmental Sourcebook." 1995.