Arbitration would postpone Majes II for a minimum of four years

Majes Siguas II could follow the path of Chavimochic III. The irrigation project in the La Libertad region has been stopped for more than six years. The damming works are intended to irrigate 63,000 new hectares and improve irrigation conditions for another 48,000 hectares in the north. The concessionaire Chavimochic SAC was made up of Odebrecht and Graña y Montero, who were in charge of the construction, operation and maintenance of the work.

These companies submitted their request for arbitration in February 2017 for breach of contract by the Regional Government of La Libertad. This is due to the non-delivery of control of the project (land), a similar accusation for the case Majes II. The arbitration award concluded in April 2022 and, mostly of points, in favor of the Peruvian State.

Chavimochic SAC sought payment of US$118 million, for damages (US$50 million), general expenses (US$26 million) and unpaid works executed (US$41 million). Finally, the arbitrators resolved to declare the expiration of the contract, that the Government pay US$25 million in general expenses and that the company deliver 70% of the performance bond for not complying with the financial closure of the project (US$25 million).

The private got almost nothing. Despite the “triumph” in court, the work is still stopped. It is now managed by the Ministry of Agricultural Development and Irrigation (Midagri) which launched the international bidding process under the government-to-government modality. There are five interested countries. Will Majes Siguas II go through the same thing? So far all roads lead to international arbitration, except a miracle.

The concessionaire Angostura Siguas SA, made up of Cobra, activated the expiration of the contract accusing the Regional Government of Arequipa (GRA) of breaches. The entity did the same. The former manager of the Autonomous Authority of Majes (Autodema), Isaac Martínez, hopes that by now the GRA has already defined what it failed to comply with and what it complied with to defend itself against Cobra. Although the Chavimochic arbitration lasted 5 years, the resolution itself did not exceed two, he said.

For Martínez, the postponement for Majes II will be extended for at least 3 years, due to delays such as the appointment of arbitrators and until a new concessionaire is sought. The works are already stopped for more than five years (December 2017) when the project began. analysis of Addendum 13. “During arbitration, nothing can be done on Majes II,” he said.

While Arturo Arroyo, also a former manager of Autodema, maintains that it can reach 5 years of postponement. Martínez maintains that he only finds two similar things in the case Chavimochic III with Majes II. One, that the problem is due to the delivery of land, and two, that the financial closing was not carried out. Otherwise, each irrigation project has its particularities. For example, that the northern project had Odebrecht, a private accused of corruption, and here is Cobra. “It seems to me that the arbitrators ruled against Odebrecht because it was a company accused of corruption,” he said.

Rather, Arroyo asserts that the award of chavimochic bodes well for the GRA. He explained that it ruled in the sense that the company was not prevented from carrying out the works with partial deliveries of land and that there was the will of the GRL to deliver them. “We at Majes II are 90-95% in handing over control of the project and Cobra can move forward with the diversion tunnels and the Angostura dam,” he said. He highlights that the activation of the expiration date is a pretext because Cobra could not comply with the financial closure, that is, by demonstrating that it has the US$372 million to finance the hydraulic infrastructure works that correspond to it. “Cobra has never intended to work. They will have to prove in arbitration that they can do the financial closure, ”he concluded.

Arroyo was the most enthusiastic for the signing of Addendum 13. He was asked why he didn’t crack down on Cobra. “A heavy hand would have been not signing Addendum 13 and we would be in the same situation as arbitration. Without the addendum we would be in worse conditions, ”he asserted. He is sure that, as in Chavimochic, they would not agree with Cobra either and that the State must request payment of damages. The private sector is requesting US$ 205 million for unpaid executed works. Martínez recommends that it is better to reach an agreement, but “not at any price.” “They have to analyze Cobra’s observations very well because nothing can be negotiated with state money. Everything has to be done according to the contract,” he said. He described it as a shame that Autodema, after 13 years of signing the contract, has not handed over the land to Cobra.