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Reuters reports:

Brazil's worst water crisis in almost a century will impact river navigation and make transportation of goods more expensive in the world's largest exporter of commodities ranging from soybeans to coffee and sugar.

On Wednesday, Infrastructure Minister Tarcisio de Freitas said measures to save water and direct it to power generation would inevitably disrupt navigation on the Tiete-Parana waterway, which is suffering the most from a prolonged drought in the heart of Brazil's farm country.

Freitas said the government will reduce the draft of ships on the Parana river basin, disrupting cargo movements to and from farm states like Goias, Minas Gerais, Sao Paulo, Parana and Mato Grosso do Sul. That basin forms part of Brazil's fourth-largest waterway for cargo transport.

"If companies are unable to use the river to move goods because water levels fall, they would resort to trucks," said Thiago Pera, logistics research coordinator at ESALQ, Sao Paulo University's college of agriculture. "This will raise the cost of freight as diesel prices are rising."

Pera said a reduction of water levels would potentially impact longer cargo journeys on the Parana-Tiete system, while shorter trips may still be possible. He added that because of an interruption of navigation in 2014, operators are better prepared for such events. At the same time, the issue hampered investments to improve that waterway, which is also used to import grains from Paraguay.

Last year, almost 3.9 million tonnes of goods including soybeans and corn were moved on the Parana system, according to data from port regulator Antaq. This is down from an average of 5.6 million tonnes between 2017 and 2019, the data showed.

Freitas also said the government will need to turn on thermal power plants to guarantee power supplies as Brazil's hydroelectric generation potential is compromised by the drought.

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