Dispute over Paraguay public works contractor debt heats up

Construction firms in Paraguay are once again up in arms over delayed payments from the public works ministry (MOPC), with construction chamber Capaco claiming authorities still have to pay US$100mn in interest. 

MOPC paid US$350mn earlier this year to contractors, a debt that had ballooned under the previous government as a result of a mechanism that allowed contractors to transfer the right to charge for work certificates to local banks, which would pay the firms and get reimbursed by the ministry.

The scheme was set up as fiscal spending was limited by the COVID-19 pandemic but companies claimed the banks were not paying the associated interest.

“The government not fulfilling this commitment immediately would obviously mean serious damage to the construction sector’s economic stability,” Capaco said in a press release last week.

In response, economy and finance minister Carlos Fernández admitted there are pending debts with construction contractors, though he questioned the number mentioned by Capaco.

“I’m in charge of defending the State’s interests,” he told daily Última Hora, claiming that Capaco made the US$100mn claim based on a 24% annual interest rate, while the government is currently using a 7% rate for its bond issuances. 

“We can agree that it is impossible that the State is acquiring debt at a 24% yearly interest rate,” he said.

MOPC declined a request for comment from BNamericas, saying the economy and finance ministry is the one authorized to speak on this issue. 

During the previous debt dispute, works on a US$130mn bridge in Asunción stopped briefly because of pending payments to the contractor.