Arequipa will lose US $ 3.4 billion if Majes II is not reactivated

Majes Siguas II will leave millionaire losses if it does not materialize. The Arequipa Regional Council (CRA) only has until December 30 to authorize the regional government to sign Addendum 13.

After the term, Cobra, the concessionaire in charge of the execution of the agro-industrial project, will begin the expiration process of the contract. That will cause a process of international arbitration and the indefinite postponement of the most important project for the development of the Arequipa region.

What does it involve not running Majes II with everything already advanced? The Autonomous Authority of Majes (Autodema), has estimated that lOpportunity cost losses, that is, the resources that the Region could gain and that it would renounce if addendum 13 is not signed, they amount to US $ 3.47 billion. (See infographic)

This as a result of the investment itself in the project (US $ 654 million), income from land sales (US $ 430 million), agricultural and industrial development, that is, the capital that companies and farmers must invest to develop the production of plots (1,550 million) and the investment of Lluta and Lluclla hydroelectric plants (US $ 950 mlls). It should be noted that this last project will only be viable with Majes II. If this is not executed, the power plants, whose concession was given to Luz del Sur, will not come true either. It is not ruled out that this company also initiates a contentious process.

At the same time, there are annual revenues, which would be relegated as annual investment in agricultural production (US $ 1,150 million), sale of water for the plots (US $ 35 million) and energy (US $ 150 million). Additionally, the manager of Autodema, Arturo Arroyo, recalls that the project would generate 106 thousand direct jobs and 80 thousand indirect ones, which would not materialize. “With Majes II, the Gross Domestic Product of the region would increase by 12% and the agricultural GDP by 120%. All this would come to nothing, “he says, concerned.

Investments already made

Majes II is not only a dream of figures and projections. It has a physical progress of 27% and there are currently tangible investments that the Regional Government of Arequipa (GRA) and the Peruvian State have already executed by 2017, the year in which the works were paralyzed.

The project, considering addendum 13, will cost US $ 654 million. Of this amount, the GRA and the central government, through their own income and with the loan made by the Andean Development Corporation (CAF) must contribute US $ 282 million, while the concessionaire will put US $ 372 million.

The progress of the works has been eminently carried out with the contribution of the Region. US $ 114 million has been disbursed, this represents 40.4% of the total value of the contribution that the entity must make. Part of that amount has been financed with the CAF loan, for which there is an acquired debt and whose payment commitment, the GRA will have to assume regardless of the execution or not of Majes.

The disbursement of this significant item began on August 14, 2012, two years after the signing of the contract between the Peruvian State and the concessionaire. To date, four disbursements have been made. The fifth, valued at US $ 48 million, is pending and is subject to the signing of Addendum 13. In short, In addition to the losses due to the opportunity cost of the project, the annual income from its development, the GRA would remain in debt if Majes does not materialize this time.

“Counselors should consider all of this before making a decision. The addendum must be signed yes or yes, otherwise as a region there would be a gloomy outlook ”, Arroyo recalls.

Pusa Pusa, a pending issue

The acquisition of lands of Pusa Pusa, upper area of ​​Caylloma, cHis lands will be flooded with the waters of the Angostura dam, infrastructure that will provide the resource to the 38,500 hectares of Majes II, registers significant progress.

Of the 49 properties to be acquired, only 6 remain to be completed, of these in two cases the direct sale will be made and for the other 4 expropriation will be applied. To achieve this, this year the GRA had S / 2 million 761 thousand of which only S / 780 thousand 28% have been executed). Arroyo assures that with the changes that come from addendum 13, the GRA has 21 months to be able to conclude with the acquisition of the properties.