US$741 million needed to finish Peru-Brazil Transoceanic Highway

Approximately $741 million – which is about $200 million more than initially planned – will be needed to complete the Peru section of the Transoceanic Highway, a roadway project to connect Brazil’s Atlantic ports with the Pacific coast of Peru, Finance Minister Luis Valdivieso said Wednesday.

Peruvian officials may directly provide additional funding for the construction of three segments of the Transoceanic Highway, which would connect the southern Peruvian ports of Ilo, Matarani and Marcona to the Brazilian ports of Rio de Janeiro and Santos.

“We are giving serious consideration to direct financing by the state,” said Valdivieso, “or at least some kind of dual financing until things calm down.”

“I believe in taking preventative measures rather than being sorry later,” said Valdivieso. “We are in a complicated economic situation where the costs of financing are very volatile.”

The mega-project entails the repair and new construction of roughly 2,600 kilometers, or 1,615 miles, of roads and 22 bridges. Peruvian authorities say it will promote development through an increase in forestry, agriculture, and mining investment.

The total distance of the highway is approximately 5440 kms (3400 miles), of which over 4650 km (2900 miles) are complete and fully asphalt covered. Work continues in Peru on the final section of 736 km (460 miles) from the Amazon basin and over the Andes to the coastal ports of Callao, and Matarani in the south.

“We are preparing a decree that will allow (direct) financing in order to avoid the high volatility in the (international) financial market,” said Valdivieso in comments to daily La Primera.

“If it isn’t approved now (Wednesday), then it will have to be approved next (week),” he added. “In any case, it has to be approved in the next few days because it is very important that we have alternative means of financing (the additional costs).”

Estimates by the Finance Ministry reveal that the total cost has risen to US$741 million for completion of the three segments, higher than the original estimate of US$531 million. An additional $4.3 million will be needed for supervision of the works.

“I agree with the supervision because it is essential,” said Valdivieso in comments to Radio Nacional, “but it also implies costs. Approximately $3.4 million will be needed for what is left of 2008.”

“If the supervision isn’t efficient, we’ll have to change it,” he added, “but we do expect it to be efficient.”

Pachamama Radio reported Wednesday that Congressman Yohni Lescano accused a supervision official’s son of accepting bribes in exchange for not reporting delays and problems encountered on some segments of the highway.

Although the governments of Peru, Brazil and Bolivia enthusiastically emphasize the commercial development benefits of the highway, environmentalists have been expressing concern that the project was approved with atypically little effort on environmental impact studies, and that the highway will have grave and irreversible environmental and social impacts on the region, and jeopardize sustainable ecotourism, a sustainable industry that is increasingly profitable even for local communities.

Development and climate change have already made an impact. Meticulous research on the ground and up-to-the minute data from satellites confirms the Amazon forest is getting hotter and drier. The burning forest releases more carbon gases and smoke particles into the atmosphere. The new roads and farmland break up the natural expanse of the forest and are leading to significant regional climate changes.

According to a 2006 environmental impact study led by leading ecologist Marc Dourojeanni, within 10 years the Transoceanic Highway will bring “a rapid increase in deforestation, degradation of natural forests, invasion of protected areas, increased forest fires, expansion of coca cultivation, uncontrolled gold exploitation, degradation of urban areas, the loss of biodiversity and major problems to water resources, including water quality for human use.”

The study adds that “The highway will have severe social impacts, in relation to native communities living in isolation, increased Andean migration to the Amazon region, and invasion of native land in general.”

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