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Argentina Seizes Railway From Brazil’s ALL Over Contract Breach

Argentina expropriated a cargo railway concession from Brazil’s All America Latina Logistica SA (ALLL3) and a tourist train concession, citing noncompliance with contractual agreements.

ALL, a freight company based in Curitiba, Brazil, incurred “grave” contract violations by failing to invest and accumulating fines worth 30 percent of the concession, Interior and Transport Minister Florencio Randazzo said today in Buenos Aires. ALL operated the railways between Mendoza province and the Rosario port as well as the railway between Misiones province and the Buenos Aires port since 1999.

Argentine President Cristina Fernandez de Kirchner has nationalized the country’s largest oil company, an airline and $24 billion of private pension funds during her six years in power. Argentina won’t hesitate to nationalize other railway concessions if companies don’t improve services, Randazzo said, adding the government won’t pay for the rail concessions.

“If the government has to take over more railways we are willing to do so,” Randazzo said. “We want to reduce our freight costs.”

ALL said in a regulatory filing after the announcement that it hasn’t been notified of the revoked licenses. Its Argentine operations made up 6.5 percent of net revenue and didn’t contribute to earnings before interest, taxes, depreciation and amortization or Ebitda.

Argentina’s ALL unit has lost representation in the company’s consolidated earnings while demanding disproportionate attention from its administration,” the Brazil company said in a note to Sao Paulo’s stock exchange.

Amusement Park

The tourist train north of Buenos Aires known as “Tren de la Costa” was also seized from Argentina’s Sociedad Comercial del Plata SA along with an amusement park in Tigre, north of the capital, Randazzo said.

Matias Brea, vice president for SCP in Buenos Aires, operator of the train and amusement park, didn’t immediately reply to an e-mail and a telephone call seeking comment. An ALL press officer in Sao Paulo had no immediate comment.

Railways were first nationalized during the first Juan Domingo Peron administration in the late 1940s. President Carlos Saul Menem granted the concessions in the 1990s.

Once Crash

On Feb 22, 2012, 51 people were killed and more than 500 injured when a packed commuter train slammed into the buffers and safety barriers at one of Buenos Aires’ busiest railway stations in the Once neighborhood. The concession was owned by closely held Trenes de Buenos Aires SA.

The Once crash was the second-worst in Argentina’s history after the 1970 railway crash when two trains collided near Benavidez, 48 kilometers (29 miles) from Buenos Aires, killing more than 200 people.

In March, Brazil’s Vale SA terminated development of a potash venture in Argentina after inflation, exchange rate fluctuations and demands from provinces pushed up costs.

To contact the reporters on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net; Fabiola Moura in Sao Paulo at fdemoura@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Andre Soliani at asoliani@bloomberg.net

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