San José, Costa Rica, since 1956

Airport Dispute Enters Arbitration Phase

IT could be more than a year and a halfbefore renovation of the country’s main airportis complete, now that a longstandingfinancial dispute between the governmentand Juan Santamaría International Airport’sprivate operator has entered arbitration.The airport modernization project,started in 2001, is already more than a yearbehind schedule. The added delay couldthreaten the increasing flow of tourists intoCosta Rica during the next two tourismhigh seasons, according to Mónica Nágel,executive director of Alterra Partners, theconsortium that holds a 20-year contractfor the airport’s operation.The holdup has been caused by a multimillion-dollar conflict regarding Alterra’sdevelopment and financing expenses.Foreign banks that have provided financingfor the renovation have suspended thelast $30 million from Alterra’s $120 millionloan until the dispute is settled.ALTERRA officials estimate arbitrationwill take at least six months. The earliestconstruction could restart is next year,and it will take at least one year to completerenovation of the terminal and boardinggates and equip the runway with emergencylighting, according to Alterraspokeswoman Gabriela Rodríguez.“Once the conflicts with the governmentare resolved in a positive fashion, theworks can continue,” Nágel said in a writtenstatement to The Tico Times.In addition to the disputed $18.6 millionin developing and financing expenses,Alterra is claiming $9 million in damagesand financial losses in the arbitration complaintfiled July 31.The government is now in the processof preparing a response to Alterra’s complaint,and may present a counter-complaint,Public Works and TransportMinister Javier Chaves told The TicoTimes this week. Once the response is submitted,arbitrators will begin calling witnessesand ultimately issue a ruling.THREE arbitrators will hear the case –Eduardo Sancho, a former justice of theConstitutional Chamber of the SupremeCourt (Sala IV) and selected by Alterra,arbitration specialist Sergio Artavia, selectedby the government’s Technical Councilof the Civil Aviation Authority (CETAC),and Rodrigo Montenegro, former presidentand justice of the Supreme Court’s Civil andAdministrative Law Branch (Sala I) whowill preside over the hearing and wasagreed upon by both parties.The hearing will take place in theCenter for Conflict Resolution of the CostaRican Chamber of Commerce.THE dispute began in March 2003.Alterra claims it is allowed under an August2001 memorandum signed by CETAC andthe Public Works and Transport Ministry(MOPT) to collect $18.6 million in developingexpenses through increased airportuser fees (TT, May 7).However, the Comptroller General’sOffice, which has final say in interpretinggovernment contracts, does not recognizethe memorandum and has on multipleoccasions said development expenses cannotexceed the $3.4 million agreed to in theoriginal concession contract (TT, June 25).A scathing report by the Comproller’sOffice in March 2003 raised questions aboutmany of the fees Alterra had been charging,particularly those for development andfinancing (TT, March 28, 2003). Work onthe airport has been stalled since then.ALTERRA officials said they do notexpect the arbitration to determine airportfees. Rather, they expect a conclusiveinterpretation of the contract to renovateand operate Juan Santamaría.Members of the government and privatesector have viewed the airport contract as apioneering model, the start of a broaderstrategy that will allow private firms to supplythe country’s growing infrastructureneeds through public works concessions.Because Alterra is a pioneer, representativessay they have faced many obstaclesworking with a government inexperiencedin such partnerships. This is the base ofsome of the problems, according to Nágel.“More than a legal problem, it is aproblem of culture, of idiosyncrasy. Thereis a lack of knowledge about the model inmany of the state institutions responsiblefor executing the contract, and not only innot knowing how (to execute), but also innot knowing how to face problems or howto solve them. The government lacks experiencein making contracts … it is not easyto be a partner with the state, because of itsbureaucracy,” Nágel said.PARALLEL to the arbitration, Alterraofficials say they are willing to continuedialogue with the government. However,they have not communicated with CETACor other government officials in weeks,Rodríguez said.CETAC is in the process of forming anadministrative group to find and fix errors inthe user-fee model, and recommend a newsystem, according to the daily La República.This group, made up of at least two financialexperts and specialists in public law, willtake about a month to write a report.During the three years Alterra has managedthe airport, the State’s coffers have received$100 million, according to Alterra.Out of each $26 that passengers pay in exittaxes, $21 go to the government and $5 arereinvested in the operation and maintenanceof the airport.

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