South American Waterway Plan Sparks Economy-Vs.-Ecology Debate : Environment: Planned 2,130-mile link from Uruguay to Brazil will bring prosperity, backers claim. Foes fear effect on world’s largest wetlands.

Years ago, the idea of freighters steaming from the Atlantic Ocean into the heart of South America seemed little more than a daydream.

Today, the dream looks much more real.

Businessmen and farmers say a planned 2,130-mile river link from Uruguay to western Brazil could open South America’s heartland to prosperity, much as the Mississippi River did for the United States a century ago.

But environmental activists say the waterway would doom the Pantanal, the world’s largest wetlands and home to one of the richest collections of wildlife on the planet.

The Hidrovia project, scheduled to start in 1997, would link the Uruguayan port of Nueva Palmira to the Brazilian city of Caceres in the frontier state of Mato Grosso.

Engineers plan to join the Parana and Paraguay rivers that run past Uruguay, Argentina, Paraguay and Bolivia and cut across the heart of Brazil’s Pantanal--Portuguese for swampland.

initial cost would be $1.3 billion, plus $2 billion more for maintenance, such as daily dredging during the 20 years of construction.

The dream became a possibility as longtime national rivalries gave way to economic cooperation and the Mercosul tariff union among Brazil, Argentina, Paraguay and Uruguay.

Proponents say the waterway would give landlocked Paraguay and Bolivia an outlet to the sea, boost Argentine exports and create a modern international port in Uruguay.

Brazil, it could trigger an economic boom for mining companies and farmers in the central plains, which are rich in soybeans, wheat, rice, hardwoods, iron, manganese and precious stones.

“This is the most important economic venture the region has seen for quite some time,” said navy Capt. Jorge Bandani, a Bolivian representative on the five-nation commission coordinating the project.

“It’s the first major push away from the coasts and into the interior of South America,” he said. “The Hidrovia could change the economic course of the continent.”

Environmentalists say it also could spell disaster.

They say that even a study by the Internave engineering firm of Sao Paulo, which found the waterway would be profitable, has warning signs.

The study says engineers would have to build at least 32 dikes to straighten the curves of the Paraguay River and dredge 112.5 million cubic yards of silt along its banks to allow ships through.

Activist groups fear that would disrupt the movement of water into the Pantanal, which now soaks up millions of gallons of water a year, moderating the flow of rivers and preventing flooding.

The study also says the waterway would have to increase the volume of the rivers by as much as 35% to accommodate shipping, meaning less available water for the wetlands.

Katherine Fuller, president of the World Wildlife Fund, said the project would lead to gradual desertification, with a drop of 10 inches in the water level of the flood plain.

“That would unleash a series of changes in all the region’s wildlife,” Fuller said. “Entire species of fish and birds would die off, and massive flooding down river would put people and buildings at risk.”

The Pantanal sprawls across 53,760 square miles of the Upper Paraguay River Basin in eastern Bolivia, northeastern Paraguay and the Brazilian states of Mato Grosso and Mato Grosso do Sul.

It is a sanctuary for a wealth of animals, including jaguars, giant anteaters, caymans, marsh deer, giant otters, toucans and rare hyacinth macaws.

The World Wildlife Fund says the Pantanal is home to 650 species of birds, 240 varieties of fish, 80 types of mammals, 50 kinds of reptiles and more than 90,000 varieties of plants.

e waterway would kill ecological tourism in the Pantanal,” said Paulo Lyra, a World Wildlife Fund activist in Brazil. He noted that Club Med, the international resort chain, recently announced plans to build a $3-million resort there.

The group advocates a more modest waterway beginning farther south, below the headwaters of the Pantanal. But Bolivian, Paraguayan and Brazilian officials are rallying to maintain the original project.

Besides reducing transport costs, spinoff industries from the project will bring jobs and investments to the region, said Bandani, the Bolivian naval officer on the waterway commission.

The waterway would cut the price of Bolivian and Paraguayan soybeans, cotton and wheat 45%, supporters say. Bolivia relies on expensive trucking to get produce to port now, Bandani said.

In Brazil, a river link would induce companies to mine the country’s second-biggest deposit of iron and manganese near Corumba in Mato Grosso do Sul.

Farmers now producing record harvests of soybeans, wheat, beans and coffee in Brazil’s western savanna could cut the cost of trucking produce to the port of Santos by a third, according to government studies.

“The benefits far outweigh the ecological costs,” said Jose Martinez, a senior official at Paraguay’s embassy in Brasilia. “There is no evidence of an ecological catastrophe. That’s all a little exaggerated.”

A six-month international bidding for construction contracts is scheduled to start in June. The World Bank and the Inter-American Development Bank are financing the project.

But Marc Dourojeanni, the Development Bank’s regional environment advisor for Bolivia and Brazil, says the bank has serious doubts about the economics of the project and the information in the Internave study.

Ecologists say Internave’s conclusion that the waterway will be profitable is flawed because it assumes bumper harvests every year and ignores competition from highways and railroads.

A second feasibility study by U.S., Canadian and Argentine experts is expected to be ready by November 1996.