Paraguay rejects guarantee request over scrapped US$54mn Metrobus project

Paraguay said it would not stop executing guarantees linked to the partly built Metrobus bus rapid transport project in capital Asunción.

This is despite an arbitration body asking authorities to cease executing such guarantees while proceedings are underway, state news agency IP reported.

The landlocked nation is at loggerheads with Portuguese construction firm Mota-Engil. 

Work stopped on the project in 2018 and the government revoked the company’s contract, alleging that it had breached the terms. 

Halting guarantee execution processes underway could result in claims deadlines being missed and, in turn, the state losing the guarantees, Paraguay’s attorney general, Sergio Coscia was reported as saying by IP, citing broadcast comments. 

Bank Itaú holds two guarantee and insurer Royal another, IP said.

Mota-Engil has filed a US$25mn Uncitral claim against Paraguay. The firm alleges the state failed to procure 100% of the land needed to complete construction.

Mota-Engil had signed a US$54mn concession agreement with the country. 

“The Portuguese company seeks compensation derived from the failure of the state to procure 60% of the land earmarked for construction, as well as compensation for the fines imposed on the company for not having completed certain works for which, it is alleged, it did not have access to the necessary land,” law firm Garrigues said in a bulletin.

The Metrobus project was part of a US$160mn Asunción revitalization scheme. An associated bill submitted in 2011 sought approval for multilateral funding.

Paraguay’s government launched a new bus project for the capital, called Sitibús. Work, originally due to get underway earlier in the year, has not started because amendments are being made, and an agreement between the public works ministry and city authorities needs signing when lockdown measures ease, local paper ABC Color reported in late April.

A consortium formed by Paraguay's DC Ingeniería and Uruguay's Stiler holds a US$24mn contract to build the first phase of Sitibús, the paper said.