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Brazil's early highway infrastructure push suffers setback

BRASILIA (Reuters) - Brazil's early attempt at a badly needed expansion of its highway infrastructure sustained a serious setback on Friday when the government said one of two road concessions up for auction next week got no bids from investors.

The two highway projects on offer in the first-round auction scheduled for September 18 were seen as the most attractive in a series of concessions that the government expects to create 7,000 kilometres of new roads eventually.

The delay in investment could affect near-term growth in Latin America's largest economy, growth the government was counting on. Nor will it help ease the drag that bottlenecks in transport infrastructure are putting on the economy.

While the BR-050 highway project in the agriculturally rich region of Goias and Minas Gerais got eight bids from interested investors, the BR-262 highway project in Espirito Santo and Minas Gerais got none, Transport Minister César Borges said Friday.

"We were surprised that BR-262 received no proposals. The segments were attractive," Borges told reporters.

The deadline for bids for Wednesday's auction closed Friday.

Even after last ditch efforts to lift environmental licensing risks off the private sector's shoulders and on to the government, investors still balked in the face of unattractive returns.

Government officials have had to push back auction dates for major infrastructure projects several times over the past year and raise the returns offered in the concession contracts after would-be investors said they were too low.

Without bidders for the BR-262, the government will have to go back to the drawing board to bring the project back up for auction in a later round. By law, regulators and bidders are granted several weeks to consider projects after the final terms of the auction are set.

"BR-262 was not economically viable," said the commercial manager of new projects at the Fedens Engenharia engineering firm, Nilton Chaves.

(Reporting by Leonardo Goy and Roberta Vilas Boas; Writing by Reese Ewing and Bob Burgdorfer)