Agreement Reached in Airport Contract Dispute

September 7, 2007

Knock on wood: The two sides in the long-running dispute over a contract to manage and expand the country’s main airport have come to yet another agreement that would have the expansion completed by December.

The Costa Rican government and the banks financing the project both gave ground in coming to the agreement.

The Costa Rican government will, as requested, add five years to Alterra Partners’ concession contract to operate the JuanSantamaríaInternationalAirport outside of San José, bringing that contract to 25 years.

Meanwhile, the banks financing Alterra’s expansion of the airport – headed up by the International Finance Corporation (IFC) – will drop a demand that the Costa Rican government put a $9-million cap on the fines that could be levied on Alterra for delays in the project.

The result, say Ministry of Public Works and Transport (MOPT) officials, is that the airport expansion that Alterra started in early 2001, and continued in fits and starts since then, must be finished by Dec. 3 of this year.

All that, of course, is pending approval of the agreement by the Comptroller General’s Office, which has to approve all government contracts. In 2006, the office rejected three revisions of an addendum designed to balance Alterra’s finances to the satisfaction of banks.

The planned expansion will finish blocks A and B and add seven new boarding gates to the airport’s existing six. Likewise, the immigration gates will be expanded to 18 from 12.

The dispute over the airport expansion and Alterra’s concession to operate the airport goes back to 2003, when the Comptroller General’s Office issued a report criticizing a contract addendum that allowed Alterra to charge airport users (namely airlines) higher fees (TT, March 8, 2003).

Alterra argued that it needed to charge the higher fees in order to pay for the airport expansion that was part of the contract.

As the dispute dragged on, so did the airport expansion, which was halted during the dispute.

The situation came to a head earlier this year when the banks lending the money to Alterra for the airport expansion rejected five conditions set by MOPT for Alterra to keep the concession (TT, June 22).

The sticking point was the amount of fines the government could levy for project delays. The banks wanted a cap, and MOPT said no. MOPT restarted the process to rescind Alterra’s contract.

Soon after, however, the banks and the government started talking again, with the banks giving way on the fee cap, and the government extending Alterra’s contract to 2026.

Adriana Gómez, a spokeswoman for the IFC, said the banks have no comment on the agreement.

So far Alterra has spent $140 million on the part of the expansion project involving the IFC, according to Alterra spokesman Fernando Lara.

Finishing the expansion is expected to cost a maximum of $48 million, money that Lara says will be put up by the Central American Bank for Economic Integration (BCIE).

 

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