Controversial property lease signed by Rail Development SA (Ferrovías) for Mexican company Remed Photo La Hora / Ferrovías Guatemala
The controversial cargo charter contract signed by the Rail Development Corporation, SA (Ferrovías) for the Mexican company Remed, SA, to build the first phase of the Bicentennial Railway, elicited various reactions from various actors in Guatemalan society. civil.
In particular, since they consider it a public-private concession where 81.1% of Ferrovías shares belong to the State of Guatemala, the letter C of Article 1 of the Contract Law must be applied, i.e. it must be publicly known. Negotiation details.
Article 1. Purpose of the law and scope of application.
The purpose of this Act is to regulate purchases, sales, contracts, leases, or any other form of public acquisition, carried out by:
a) state organizations;
b) decentralized and autonomous entities, including municipalities;
c) Entities or companies, whatever their organizational form, whose capital consists mostly of state contributions *
In connection with the contract signed on Friday, January 14, by the sole director of Ferrovias, José Fernando Ulloa Rosenberg, and the legal representative of Remed, Carlos Álvarez de Alba; Three analysts shared their position with La Hora.
Medina: People have the right to know negotiation
“We have every right to know what the internal aspects of the negotiations were with this entity for the purpose of franchising,” demanded Abelardo Medina, a macroeconomist at the Central American Institute of Financial Studies (ISFI).
According to Al-Madinah Al-Munawwarah, although in some cases the use of public assets can be granted as a state, this does not mean that people are exempt from knowing the status of said asset management.
In addition, he emphasized that individuals in that capacity do not have to disclose the internal management of the private company in the strict sense of the word; However, the individual has the right to know the details of the above negotiations.
According to the analyst, the real problem is that officials, as in the case of Economy Minister Antonio Maalouf, limit themselves to saying that they do not have to give information about the concession because it is a private company, a situation that the city considers wrong because it is related to the public interest.
“We cannot waive any kind of use, management or maintenance, what we want, of any kind in the public interest unless the terms are properly recognized,” he stressed.
In addition, he noted that this type of situation has already occurred in the country, such as television channels and public frequencies, the Palín-Escuintla track and mining, events in which the government “abandons the use, exploitation and requirements of companies” and the Guatemalan people get nothing in return for giving up land use.
“If the TV channels and frequencies are a public good, then the ownership does not belong to the Minister of Economy or the Minister of Communications, it belongs to the people and therefore, the ministers and within them, of course, the President of the Arab Republic of Egypt. The Republic, they are simply leaders who manage the assets of the state,” Al-Madina Al-Munawwarah reported.
Morocco: Companies that dislike the country
Transparency analyst and founder of Acción Ciudadana, Manfredo Marroquin, is amazed that at the height of the twenty-first century, such obvious actions are still being carried out for the “benefits of groups linked to government with state resources”.
He added that this type of business does not favor the state in any way because it is a virtually unrivaled privilege “given to whoever asked for it; it is something unrepresentable in any country in the world.”
The state is at the service of officials
At the same time, he stressed that situations that should intervene do not stop this type of business, so it can be said that Guatemala has a “corrupt country that works only in the service of duty officials.”
It was announced that other actors would likely join the legal proceedings brought by the Human Rights Ombudsman.
Like a city, Marroquín also recalled the state of the port of Santo Tomas where, according to him, they tried to do something similar “without giving”, thus condemning the country to poverty and backwardness.
Consequences of GT . Economic Development
From his point of view, Medina believes that if this type of situation continues and remains in a state of complete impunity, it will lead to serious consequences for the economic development of the country, directly affecting the population.
The above, because according to the city, since 2013 the Corruption Perceptions Index in Guatemala began to decline in the international rating, which immediately caused, especially in this last government, the possibility of honest foreign businessmen investing in the country.
“Unfortunately, there is a great opportunity for foreign investment, but with the way it is being followed, practically no investor will come to the country,” Marroquin commented.
Medina explained that “businessmen who are looking to compete and not get advantages from anyone, will not come because they know that the only way is to deal with public entities and this puts us at a competitive disadvantage.”
Medina, as a financial macroeconomist, worries that these cases will also affect “tax sentiment,” because if taxpayers realize that resources are being treated with opacity, “they don’t want to pay taxes, which is sad.” He emphasized that it was necessary to finance public programmes.
Ortiz: These are historical problems in GT
On this topic, Edgar Ortiz, a consultant on legal issues for the Libertad y Desarrollo Foundation, noted as a first point that these kinds of problems are historical in Guatemala, starting with the government of Álvaro Arzu with “famous funds”.
“Common commercial law numbers started to be used in private businesses for government things, like usufructs and trusts and now that kind of thing,” he added.
According to Ortiz, these measures have been used with the argument that recourse to these legal figures is more effective than using a complex contract law.
Uncertain legal framework
The second main problem that the lawyer notes is the uncertainty in the legal framework, because it is not clear when determining certain cases, so it can be presented as an option for the state to grant usufructs, as in the case of Puerto Quetzal.
“The Procurement Act does not prefer to explain to us much because it states that commercial entities, the majority of whose contributions come from the state, are subject to the Procurement Act.”
However, the most interesting point of uncertainty for Ortiz is that in the historical context of Ferrovías SA, the State of Guatemala did not make contributions, but rather ended up as a partner of Ferrovías due to an “arbitration award”.
According to Ortiz, a US company owned a portion of Ferrovías shares and when President Oscar Berger declared that the contract for the usufruct of some goods given to the said company was harmful, the company sued the state.
This lawsuit was issued in favor of the American company, for which Guatemala had to pay compensation, and once the payment was made, the company gave the shares to the state, which is why the state of Guatemala ended up as a partner in the railways, he explained.
“Technically, Guatemala is not a partner because of contributions, but it became a partner because of an arbitrary case, and it is clearly not entirely clear that it should be governed by procurement law, when the law is not clear, many interpretations can be made and we run into problems.”
Ortiz: There is no law
Although Ortiz asserts that there is no jurisprudence in the case of Ferrovías, he maintains that since it deals with the management of public resources, it is under the control of the Comptroller General (CGC).
He noted that if it was recognized that the contract between Ferrovías SA and Remed, SA could be concluded without being subject to contract law, it did not mean that they were not subject to CGC scrutiny.
The analyst in legal affairs stressed that “what is very clear, and if there is jurisprudence in this regard, is that this public limited company deals with public funds, because the Office of the Comptroller can supervise it.”
He added that if it turns out to be an inappropriate tender for the state, the authority can compile a file and open it. In fact, he noted, the Comptroller’s Office has in the past fined Ferrovías representatives for expense discrepancies.
Another focus of the work consists of legal notices of release of the right to rail. pic.twitter.com/JGvM6WmQY4
– La Hora newspaper (lahoragt) January 14, 2022
About the project
The bicentennial railway project is being promoted by President Alejandro Giamatti, who in his campaign promised to revitalize the railways.
The first section will leave Puerto Quetzal, Escuintla to the border with Mexico, to connect with that country, the United States and Canada, in order to support the country’s economic development, according to Malouf.
Remed’s investment for this business is estimated at US$700 million over 26 years, which casts doubt on the feasibility of the project and complies with the nation’s Pacific division to build 235 kilometers of rail.
During the contract signing event, Oloa Rosenberg, the legal representative of Ferrovías SA, confirmed that the project will facilitate the exchange of goods and increase imports and exports through safe and economical transportation.