Peru could suspend airport project if comptroller objects: government

Reuters News
Posted: Mar 15, 2017 8:09 PM

LIMA (Reuters) - Peru could suspend a $525 million airport project if the country's comptroller recommends doing so amid questions over controversial changes to the contract, the transportation minister said Thursday.

The consortium Kuntur Wasi, led by Peruvian company Andino Investment Holding SAA, won the rights to build and operate an airport for 40 years near Peru's popular Machu Picchu ruins in 2014.

But President Pedro Pablo Kuczynski, who took office in July, modified the contract in a bid to keep the project's pricetag from doubling by compensating the company for some work upfront - reducing the need for the consortium to take out private loans with high interest rates.

Lawmakers in the opposition-controlled Congress have accused the government of trying to benefit Andino, where the prime minister's sister worked as a manager until resigning this month to calm criticism of a potential conflict of interest.

The comptroller has been reviewing the contract change, signed by the government and Kuntur Wasi last month, and is expected to report its findings in about a month.

"We're going to wait and implement whatever they tell us to implement," Transportation Minister Martin Vizcarra told a news conference. "If it has to be postponed, we'll know that we did all we could to get this project going."

Andino did not immediately respond to requests for comment.

Suspending the project could further dampen Peru's economic growth prospects as a massive graft scandal stalls public work projects and heightens scrutiny of new contracts.

Vizcarra called the airport contract - written during the government of former President Ollanta Humala - "half-baked" in its original form because it lacks a ceiling for interest rates for the consortium's financing, some of which the state must pay back.

Vizcarra said the government could cancel the contract but would risk potential fines or a lawsuit in an international investor rights panel.

"The contract is so poorly designed that we wouldn't even have arguments for cancelling it," Vizcarra said.

Public prosecutors are investigating potential wrongdoing in the process of designing and awarding the contract after Kuczynski's government requested a probe.

(Reporting by Mitra Taj; Editing by Lisa Shumaker)