July 13, 2010 / 10:37 PM / 9 years ago

Brazil opens bidding for $19 billion fast train

* Flagship Lula project budgeted at $19 billion

* State bank BNDES to fund up to 60 percent of investment

* Government to create closed capital company for project

BRASILIA, July 13 (Reuters) - Brazil’s government kicked off the bidding process for a high-speed train between its two biggest cities on Tuesday, one of its most ambitious infrastructure projects and expected to cost $19 billion.

The government set Nov. 29 as the deadline for companies to bid on the line that is to connect beach-side Rio de Janeiro and Brazil’s financial center Sao Paulo.

President Luiz Inacio Lula da Silva said he wanted the 280 kilometer per hour (174 mph) train to be running for the Olympics, but the completion date according to the bidding documents is in 2017 - a year after the Rio games.

The 530-km-long (329-mile) line and other massive projects are crucial for Latin America’s largest economy to sustain annual growth rates above 5 percent for the next decade, Lula has said.

Critics contend the money would be better spent in creating several fast rail lines in a country that has a small passenger rail network and relies largely on badly maintained roads for transportation.

Companies from France, Germany, Japan, South Korea, Spain and China have expressed their interest in bidding for the project, Transport Minister Paulo Sergio Passos said.

France’s Alstom (ALSO.PA), Germany’s Siemens (SIEGn.DE) and Japan’s Mitsui & Co (8031.T) are among the possible contenders, Brazilian media has reported.

The line will be built and run on a concession basis and the government will rank bids based on the cheapest economy fare, with a maximum permitted price of 0.49 reais ($0.28) per kilometer. That would would translate into a ticket fare of about $120 for the 430 kms (270 miles) stretch between Rio and Sao Paulo.

The winner of the auction, budgeted at 33.1 billion reais ($18.9 billion) will be announced on Dec. 16.

State development bank BNDES will fund up to 60 percent of the total investment, or almost 20 billion reais.

Brazil’s government will also create a Brasilia-based closed capital company, known as ETAV, to manage the project and will retain a majority share in the entity. ETAV will oversee the construction and operation of the project, as well as the transfer of technology.

The estimated travel time between Sao Paulo and Rio on the proposed bullet train is just over 1.5 hours, compared to one hour by air and six by bus. The line will also reach the city of Campinas in Sao Paulo state.

($1=1.756 reais)

Reporting by Fernando Exman and Bruno Peres, Writing by James Matthews; Editing by Stuart Grudgings and Leslie Gevirtz

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