Sunday 2 April 2023

China’s Ruta 32 roadbuilder gets free pass: a two year extension and US$100M

MOPT will negotiate an additional US$100 million loan with the Chinese bank to build missing works. In return, it would give CHEC two more years, to 2024, to deliver the road started in 2017

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01 April 2023 - At The Banks - BCCR

Paying the bills


QCOSTARICA – The construction company China Harbor Engineering Company (CHEC) is getting a “free pass” on its inability to complete and deliver the 107 km expansion of the Ruta 32, the essential highway to Limón, between Guapiles and Limon, that started in 2017.

China Harbor Engineering Company (CHEC) was to have delivered the 107 km expansion of the Ruta 32 in May 22 for work it started in 2017.

Instead of getting fined, the company will get a two-year extension and an additional US$100 million dollars.

That was the decision of the Ministerio de Obras Públicas y Transportes (MOPT)  – Ministry of Public Works and Transport – will begin efforts this week to request a loan from the Eximbank Bank of China, with which the Government would use to continue with CHEC, which in three and a half years has only managed to advance less than half (42%) of the total work.

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Rodolfo Méndez, MOPT minister, indicated that if the loan were to materialize, CHEC would be given two more years to deliver the work, that is, by 2024, and not May 2022, as is foreseen by the last extension.

“The Government’s decision is to go ahead with obtaining the financial resources to finish the road in the state that a road of this nature must have. It would be with Eximbank and with the CHEC contract. This is the technical version that the project engineers and the supervisor consider to be the best option,” said Méndez.

But before you go blaming the Chinese for not being able to deliver, the extension is really to give the MOPT the time it requires to comply with the land expropriation procedures that to date face significant delays.

“When looking for an addendum, we are not going to fall into the informality with which this project began (in the previous government of Luis Guillermo Solís), who had no studies. Everything has to be properly designed here. In addition, there is something to recognize: the problems we have had to remove the necessary expropriations,” added the minister.

The US$100 million will require the approval of the Legislative Assembly, through a bill. Meanwhile, the extension of the contract with CHEC will have to have the approval of the Comptroller General of the Republic.

It was not possible

Until a few months ago, MOPT maintained that it was not possible to extend the contract or give CHEC more extensions due to the slow progress of the works.

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It had even completely ruled out a proposal presented by the Chinese firm to anticipate the closing of the contract and renegotiate a new agreement to complete the work.

Why the turn in the MOPT position?

The minister explained that the change occurred because they have noticed improvements in execution.

“My line was that it was not possible to think about that alternative unless a point was reached where execution, commitment and production improved, and that is the recommendation that I receive from the technicians of the work and I am supporting it,” he said.

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He also explained another point, that of financing. He declared that the extension of the term is the most agile way to obtain the US$100 million loan, which funds would be used to build marginal streets, bicycle lanes, pedestrian crossings, sidewalks and access to the neighborhoods that will be on the sides of the road, that were not part of the original contract.

They would also be used to solve deficiencies, defects indicated by the National Laboratory of Structural Materials and Models (Lanamme) in works to drain the amount of rain that falls on sections of the road.

With the US$100 million loans, the project, vital to decongest the busy highway, currently, with only two lanes (one in each direction) and to mobilize exports and imports at a lower cost, would increase to US$565 million.

Very convenient

Orlando Barrantes, the spokesman for the Unión Caribe Ruta 32, said he sees the alternative of going to the Chinese bank as convenient, as it represents the most agile solution.

“If that loan is not made, there is no way to finish this thing. Obviously, money is needed, but let’s clarify things,” he said.

Barrantes warned that they will monitor the works that are included in the contract extension and the costs that are determined for each of the complementary works that would be added.

“We agree, but why US$100 million? We do not understand that, because CHEC does not know how much it will take, much less how long (the money) it will last. Nobody knows what the works are or the amount. CHEC doesn’t know because we met with them,” he said.


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Paying the bills
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"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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