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Brazil Lures Fresh Infrastructure Investors

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By Reuters 2016-11-06 18:14:51

Brazil will allow investors to return concessions for road, railroad, port and airport projects that have not taken off in an effort to attract fresh private investment to modernize decrepit infrastructure, a government source said on Friday.

A presidential decree will be issued as soon as next week to revise concessions granted by the previous leftist government that failed to take effect, the source, with knowledge of the government's plans, said.

Outdated infrastructure has hobbled exports of commodities by Brazil, one of the world's biggest food and minerals producers, adding to shipment costs and reducing the South American nation's competitive edge.

Current railroad concessions will be extended but will require that private investors match public investments and allow third-party freight on their lines, the source said.

The measure is being fine-tuned by President Michel Temer's office before he signs it, said the source, who requested anonymity because he was not authorized to speak publicly on the matter.

Companies can negotiate the return of "problematic" concessions and be compensated for non-amortized investments, but they will not be able to bid again for the assets they have returned, he said. However, they could seek other concessions.

Temer last month launched a sweeping plan to auction off licenses to operate oil and gas, electricity and infrastructure projects in an attempt to boost local and foreign investment and pull Brazil out of its deepest recession since the 1930s.

His center-right government plans to sell concessions for private companies to operate airports and railroads and build roads and port terminals needed to ship exports by the South American agricultural powerhouse.

One current contract that has run into difficulties is Brazil's third-largest airport, Galeão, in Rio de Janeiro.

Singapore Changi Airport is seeking a potential new partner for its investment in the international airport in case its existing partner, a division of Brazilian conglomerate Odebrecht SA, leaves the project.

Changi partnered with Odebrecht and state airport operator Infraero in 2013 for the rights to expand and operate Galeão. But Odebrecht has been rocked by corruption scandals that landed its chief executive in jail and have held up disbursement of a long-term loan from state development bank BNDES.