Argentina, Brazil head for showdown over rail seizure

June 6, 2013 at 5:32 PM
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BUENOS AIRES, June 6 (UPI) -- Argentina triggered a new political confrontation with neighbor Brazil as it appropriated two railway concessions from Brazilian freight company America Latina Logistica S.A.

The seizures capped a year of nationalizations by Argentine President Cristina Fernandez de Kirchner that have antagonized an international business community already leery of the investment climate in the Latin American country.

ALL said it would challenge Argentina's revocation of its licenses. Diplomatic tensions between Fernandez and Brazilian President Dilma Rousseff over previous trade-related spats have overshadowed ties between the Mercosur trade pact partners.

Argentina is fighting an international legal battle with Spain's Repsol S.A. after Fernandez seized YPF, the Argentine energy company that was majority owned by the Spanish oil giant.

Buenos Aires has ignored calls for talks on compensation.

In earlier measures Fernandez nationalized Aerolineas Argentinas and subsidiary airline Austral. About $24 billion of private pension funds were also seized by her government, their current status unknown.

The seizure of the Brazilian-owned concessions is a different matter, however, as it puts at risk a relationship that has benefited Argentina and taxed the patience of Brazilian government and private sector, analysts said.

Affected by the seizure are a cargo railway concession and a tourist train concession owned by ALL. Argentina accused the companies of non-compliance with contractual agreements, citing "grave" contract violations.

The companies were also accused by Argentine Interior and Transport Minister Florencio Randazzo of failing to invest and accumulating fines worth 30 percent of the concession.

ALL has been operating railway services between Mendoza province and the Rosario port as well as between the Buenos Aires port and the northeastern Misiones province in the Mesopotamiсa region.

Randazzo warned the government would take over more railways if the companies did not improve services.

ALL said after the Argentine announcement it hasn't been notified of the revoked licenses.

Argentine railways were developed by Britain from 1870 to 1914 and were first nationalized in the late 1940s. President Carlos Saul Menem gave the concessions in the 1990s.

Agentine railway operations have drawn criticism for deteriorating service, fragmentation of network and lack of an adequate regulatory framework. A major commuter train crash in Buenos Aires last year killed 51 people and injured more than 500. Trenes de Buenos Aires S.A., the company operating the service, lost the concession in the aftermath.

The government wants to attract foreign investment in industries it has seized but has faced problems raising cash for YPF after taking it over in 2012.

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