Argentina advances with termination of road PPPs

The Argentine government is close to rescinding the PPP contracts for the construction of roads and highways that the previous Mauricio Macri administration signed in July 2018.

National roads authority DVN signed on Monday the cancellation of the concessions for corridor A with the consortium made up of local firms Paolini Hermanos, Vial Agro and INC and for the south corridor with Argentina’s Rovella Carranza and JCR and Portugal’s Mota-Engil Latin America.

The terms and conditions were similar to those that the agency had agreed in September with the partnership between Helport, Panedile Argentina, Eleprint and Copasa for the termination of the PPP contracts for corridors E and F, according to a source close to the DVN who asked not to be named.

The government will return the guarantees for the projects and pledged to find a solution or resort to independent arbitration to reimburse the companies for investments made.

The way in which the remaining two contracts will be resolved will be different from the previous ones due to the particularities in the relationship of the consortiums with the government, the same source said.

In the case of corridor C, which was awarded to José Cartellone Construcciones Civiles, the DVN executed the guarantees because it considered that the milestones agreed in the concession were not met.

Banco de Galicia, which issued the surety bond for the contract, has already been notified of the measure by the government, according to another source close to the process who asked to remain anonymous.

However, Cartellone has not yet received official notification of the termination. Even the execution of the guarantees is not sufficient cause for the cancellation of the concession, the source said.

The government is not happy that the company resorted to the courts, which ruled in its favor, halting the process that the public works ministry was engaged in to end the PPP.

"This will end up being settled in the courts," said the source close to the DVN.

The other pending contract is for corridor B that was awarded to the consortium made up of China Construction America (CCA) Civil Panama and local firm Green, although the Asian company later required the latter’s share.

In this case, negotiations are advanced at state-to-state level, according to the same source. Talks are focusing on rescinding the contract then having DNV take over the route and hiring the same company to carry out the work, but at prices the state is currently paying, the source said.

According to the public works ministry, the government would save 60% of the cost if it decided to build corridors A and Sur (south), which were canceled on Monday, since under the PPP modality they were worth US$3.15bn compared to the US$1.96bn it would pay by direct contracting.

CCA representative David Wang, meanwhile, wrote a letter to foreign minister Felipe Solá to tell him that China is willing to finance the US$1.15bn required to develop the nearly 500km of route 5, corresponding to corridor B.

The government's idea is also to hire the same company to carry out the works, which will be financed by the Chinese but paid for by the State, without the company receiving the tolls as under the concession contract, said the DNV source.