BRAZIL OPENING TO FOREIGN-FLAG SHIPS PASSENGER-ONLY CABOTAGE OK'D

BRAZIL OPENING TO FOREIGN-FLAG SHIPS PASSENGER-ONLY CABOTAGE OK'D

Long barred from cabotage shipping along Brazil's 7,000 kilometers (4,340 miles) of coastline and thousands of kilometers of navigable rivers, including the Amazon, foreign-flag vessels will now be able to enter the service if they are carrying passengers.

However, cargo service must await the passage of specific enabling laws, expected later this year.The opening to passenger and tourist service will be effective immediately after the approved amendments are promulgated by Congress next week.

That will be the first practical impact after Congress Tuesday passed the first of a series of proposed amendments ending constitutional monopolies and opening related sectors of the economy to private investment and competition.

In quick succession and with wide majorities, the senate gave its second and final required approval to amendments opening cabotage shipping to foreign- flag vessels; curtailing state monopolies in natural gas pipelines; and ending discrimination against Brazilian companies of foreign capital origin.

The second Senate floor vote for an amendment ending a public telecommunications monopoly is scheduled for today. An amendment that would end state company Petrobras' oil monopoly will see its first Senate floor vote next Wednesday.

The Tuesday voting completed action on three of the first six constitutional amendments presented to congress by President Fernando Henrique Cardoso shortly after he took office Jan. 1.

In the past, foreign-flag ships delivering goods to Brazilian ports could not pick up passengers or cargoes and deliver them to other Brazilian ports, even if they had other stops scheduled along the Brazilian coast. Cabotage transport was reserved for domestic-flag ships, which had little competition, and cabotage freight was expensive.

Now the reserve is no longer a part of the constitution.

The government is expected to propose some enabling laws to continue guaranteeing Brazilian-flag ships a minimum level of protection.

The new transport opening should have an important impact in lowering transport costs and in integrating Mercosur, said deputy Jose Carlos Aleluia, project leader in the lower house, which passed the amendments during the first half of the year.

Private investors will be able to enter natural gas pipeline services with concessions from individual states. Several of the 11 state companies operating in the sector also need infusions of private capital if they are to improve their services.

With the end to constitutional discrimination against them, foreign company subsidiaries operating in Brazil will be able to compete for government contracts and official credit on an equal footing with domestic companies. Ending the discrimination is expected to stimulate foreign investment.

The amendment also ends the 1988 constitution's bar against foreign capital companies operating in mining.

Some government sources cautioned that passing the enabling laws could prove much more difficult than amending the constitution.