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Brazil congressional committee passes higher mining royalties

BRASILIA, Oct 25 (Reuters) - A Brazilian congressional committee approved on Wednesday a proposal by President Michel Temer to raise mining royalties, amending it to favor smaller miners and support infrastructure development, before passing it on for full approval.

Temer proposed sweeping mining reform in July in three decrees aimed at attracting foreign investment to help the country exit its worst recession on record. The measures, considered by separate committees, must be approved by both houses of Congress by Nov. 28 to become permanent.

The proposal to create a new mining regulatory agency passed a committee vote on Tuesday, while the third and final proposal on streamlining mining rules is set for a vote later on Wednesday.

The committee on royalties amended Temer's proposal so that miners by default will pay 4 percent rate on iron ore, with a measure that allows exceptions lowering the rate to 2 percent and mainly favors small miners over majors like Vale SA .

Originally the decree proposed a rate varying from 2 percent to 4 percent based on the market price of iron ore.

The committee also amended the proposal to give 10 percent of the proceeds to municipalities affected by the mining, such as by transport or shipping, rather than only those where mining occurs.

"It's not a solution for everything but those that got zero will now get around 300 million reais ($92.35 million) for construction of viaducts, railway crossings, to protect the population and minimize the urban impacts of railroads that sometimes have big impact on municipalities," said Deputy Marcus Pestana, who oversaw amendments for the committee.

($1 = 3.2486 reais) (Reporting by Jake Spring; Editing by Bill Trott)