Airport Dispute Escalates

Threats of reneged contracts and multimillion-dollar lawsuits this week intensified a dispute between government officials and Alterra Partners, the consortium that holds a 20-year concession to remodel and operate the Juan Santamaría International Airport outside of San José.The future of the country’s main airport hinges on the ability of both sides to reach an agreement in the next two months that will allow the stalled project to move forward.ALTHOUGH the contract dispute has been going on for more than a year, the Minister of Public Works and Transport, Javier Chaves, this week announced the beginning of a two-month period of last-ditch negotiations between Alterra and the Public Works and Transport Ministry (MOPT) and the Technical Commission of the Civil Aviation Authority (CETAC).If no agreement is reached, the matter could be taken before an international arbitration panel or the parties could sue each other for breaching the airport concession contract. Alterra issued a statement earlier this week warning the government of the potential dire consequences if a solution is not found.IF the contract is revoked, according to Alterra Partners, the government would be required to pay the consortium more than $150 million in damages.This, Alterra warned, would make the country’s government lose credibility with investors and international banks interested in financing future development projects in the country.Government and the private sector have viewed the contract to renovate and operate Juan Santamaría as a pioneering model, the start of a broader strategy that will allow private firms to supply the country’s growing infrastructure needs.ON Tuesday, Chaves attempted to downplay fears that Alterra could sue the government or abandon the airport project, which is in the middle of renovations. He said he was confident the government would be able to “sit down [with Alterra] and find another way” and “keep the dialogue open.”He insisted international arbitration and lawsuits were just a few of several possible scenarios.The 14 international banks that until March 2003 had provided financing for the airport have said they will not provide Alterra with more funding unless the government agrees to allow the airport manager to collect $18.6 million from airport user fees for “development and financing expenses.”SO far, Alterra Partners has received $90 million in loans. The company is still awaiting $30 million from the original $120 million loan to complete the airport’s renovation (TT, June 27, 2003).Alterra and the banks, along with MOPT, CETAC and the airport’s inspector general, had reached an agreement in 2001 on the development expenses, placing them at $18.6 million, according to Chaves and Alterra.However, the amount allotted for this expense in the original contract bid could not exceed $3.4 million, according to the Comptroller General’s office. This figure has been in dispute since last year and caused the freeze of funds by the banks.A scathing report by the Comptroller’s Office in March 2003 raised questions about many of the fees Alterra had been charging, particularly those for development and financing expenses (TT, March 28, 2003).CETAC later said the amount of these expenditures that could be recuperated through airport tariffs was $15.2 million. Last month, after Chaves asked the Comptroller to resolve the issue, the Comptroller ruled that the sum must stand at the original $3.4 million (TT, April 23). The minister said the government cannot legally ignore the Comptroller General’s ruling.“We are going to follow the Comptroller’s report,” Chaves said during Tuesday’s weekly cabinet meeting. “We’re starting this negotiating process, and we have two months. We will do everything possible to reach an agreement. After that, the matter could go to arbitration.“… We have the best intention to reach an agreement,” he said. “We care about the project being completed. (…) We’re all looking for a yes, not a no. I’m sure it will be solved.”ALTHOUGH Alterra called the process “normal,” it insists the government must honor the August 2001 agreement. “It is not about a financing problem or that the shareholders don’t want to put in more money, it’s about a principle of legal security for the investors and international banks that have trusted the country,” said a statement from the company.“It is about recovering an investment through means designed by the government (tariffs), not through legal proceedings,” the statement continued.The consortium warned that if the government “insists on not recognizing” the agreements it signed, the contract could be terminated.This would unleash dire consequences for Costa Rica, according to Alterra. In addition to having to pay more than $150 million in damages, the government would have to resume control of an incomplete airport and pay its operation costs. Canceling the contract also would make the country lose credibility among investors and foreign banks, which could raise the country’s risk rating, making it costlier for the country to manage its growing debt, Alterra warned.