The opinions that will define the future of Majes Siguas II in Arequipa

After four years, the outcome of addendum 13 for Majes Siguas II, a halted project that seeks to irrigate 38,500 hectares for agro-export, will be known. The members of the Regional Council of Arequipa (CRA) will decide this Friday the 25th whether or not to allow Governor Kimmerlee Gutiérrez to sign. The proposal proposes to modify the hydraulic distribution system due to the risk of availability of water for irrigation. Instead of open channels, they propose to install closed pipes to avoid losses.

It will cost an additional $104 million. With this, it will go from US$ 550 million to US$ 650 million. Majes II seeks to be self-sustaining and recover the investment with the sale of land and water. The Agriculture Commission of the CRA presented two opinions, one of the majority of the councilors Elmer Pinto and Edy Medina; and another minority authorship of Harberth Zúñiga.

Zúñiga’s opinion touches several points. Start by ruling out a new selection process for Majes II. This is because with addendum 13 the total cost of the project exceeds a 19% increase. Take Autodema’s arguments: including the addendum as a new component is unfeasible; and that terminating Cobra’s contract would lead to arbitration. He also recalls that, by majority, the CRA approved the regional agreement No. 047-2020 for the addendum. With this, he allowed them to be managed in the Congress sovereign guarantees to finance the necessary US$104 million.

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Then, he states that the “technological change” passed the evaluations of the Ministry of Economy and Finance (FEM), Proinvestment and Comptroller: the MEF concludes that the economic-financial model is not altered by the addendum; and Proinversión, which does not alter the contract nor generate additional benefits for Cobra. On the four risks detected by the Comptroller, the opinion indicates that action plans were taken to mitigate it. Here it is omitted that Cobra did not agree to comply with the recommendations due to the risks. Quoting Autodema, it is indicated that “the risks indicated lack a legal basis.”

If not approved

Pinto and Medina analyze the financing. They explain that the US$104 million will be paid in two installments of US$54 million to Cobra. They question the surplus of US$ 4 million. This amount must be covered with the sale of land or the grantor’s budget (GRA) in case the resources are insufficient. This is stated in the draft addendum.

About the income from the sale of land, between US$204 and US$304 million, which would largely cover the addendum, they specify that it is not a “surplus” since the GRA needs the resources to pay the loans it has assumed before the State and CAF to execute the project. They argue that the TUO considers technological changes, but without recognizing additional payments.

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They resort to the 2016 Agreement of Understanding, in which the second clause establishes that “the project may be improved, but at the grantor’s risk.” In addition, they assure that the decrease in the water quota and the loss of resources in conduction were already contemplated in the TUO, as argued by the Comptroller.

Majes Siguas II: crucial hours for agriculture in the south of the country

Zúñiga’s approach points out that the decrease in the water quota of the Apurimac River could not be foreseen, as well as the losses of 5% of the water in the open channels, which put the value of the land at risk. However, he contemplates the possibility of continuing without an addendum, with this same technology. Autodema in the opinion indicates that 31.8 hm3 would be lost and that 2,355 hectares would be damaged.

The proposal contrary to addendum 13 states that the technological change does not have sufficient technical support and that, therefore, there is no reason to raise the cost of the project. It should be noted that climate change was qualified by the Comptroller as a new circumstance. “Regardless of the acceptance of this proposal, the concessionaire maintains the obligation to execute the project,” they refer.