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The government of Brazil’s Minas Gerais state is adopting a new regulation to facilitate procedures for companies to operate short-distance rail networks, a measure that could attract significant investments to the rail sector in the state.
"Our idea is to attract new participants to railway projects, including logistics companies that operate using trucks, which now may realize that it would be cheaper to operate using railroads instead of highways," Fernando Marcato, the infrastructure secretary of the state government, told BNamericas.
The government signed a decree allowing private sector players to operate on such lines under rights of use to be issued by the state government. Under this model, contracts signed between companies and the government for transportation of cargo or passengers can be valid from 25 to 99 years.
The government has mapped out 19 sections of railway with the potential to receive investment and be controlled by the private sector under the new authorization model, which can serve for both passenger and cargo transportation. It estimates that investments of some 26.7bn reais (US$5.27bn) could be generated in the state as a result of the change.
Previously, any company that was interested in operating or investing in a specific railway network was re obliged to deal with a prolonged process involving a tender that had to be organized by the federal government, which can take years.
The new government permitting model will only cover short extensions of rail lines that are entirely within the state.
“The rail model is essential for adequate infrastructure to serve the productive sector. I hope the decree will result in a series of inaugurations of short lines, a business model that has been proven to be viable in other countries. Here it will be no different," said Minas Gerais governor Romeu Zema in a release.
Minas Gerais, a state with intensive mining activity, has one of the biggest rail networks in the country at around 5,000km, equivalent to 16.3% of the national network. According to the government, a total of 1,500km of lines in the state are currently abandoned or unused.
The move by the state government was applauded by experts.
"This initiative is good and is likely to be replicated by the governments of other states as well to encourage investments in their respective railway networks," Paulo Dantas, a lawyer specialized in infrastructure and project finance at law firm Castro Barros Advogados, told BNamericas.
This article first appeared on www.bnamericas.com
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