Hundreds of millions in play on the ACP road show

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Video, by an ACP contractor, of the new Atlantic side bridge.

Fundraising in London and the USA to finance a huge bridges and road project that’s being done by the builder and banker-dominated Panama Canal Authority rather than the Ministry of Public Works

The ACP road show

by Eric Jackson

With the member of its board of directors who is most in the news lately, construction executive and alleged bribe coordinator and taker Nicolás Corcione, a fugitive from justice whose whereabouts are generally unknown, four top Panama Canal Authority (ACP) executives are out of the country making a series of pitches to potential investors, looking to sell hundreds of millions of dollars worth of bonds. Canal administrator Jorge Luis Quijano, CFO (the description used when the ACP is in the guise of private business corporation rather than a public entity) Francisco Miguez, vice president for engineering and programs Ilya Marotta and treasury and finance manager Eida Gabriela Saiz are visiting London, Los Angeles, Chicago, Boston and New York for a series of investor meetings organized on its behalf by Bank of America Merrill Lynch. According to the announcement sent to would-be investors, “A USD-denominated 144A/Reg S transaction MAY follow, subject to market conditions.” It is widely reported that the ACP is looking to raise $450 million for the Atlantic Side bridge over the canal, a project that is about one-third done and whose price has usually been reported as about $366 million.

Commentator Kevin Harrington-Shelton, whose columns often appear in The Panama News and who among other things he has done in his life was the chief interpreter and translator for the Ministry of Canal Affairs when Ricardo Martinelli was minister, notes that this set of meetings is pursuant to US and British security regulators’ disclosure rules but that notwithstanding the organic law that created the ACP, the authority has never complied with the basic reporting requirement of a semi-annual personal report by the canal administrator to Panama’s National Assembly.  He adds that “it is not clear why they ‘forgot’ to include this almost $400 million in the $ 5.2 billion budget shown in 2006 to the people, about what they said the canal expansion would cost. And in this context certain things look a bit incongruous at first blush, even if they might be readily explained.

For starters, why is the ACP raising $450 million to finance a $366 million bridge, a project that’s already well underway and is projected to be done sometime in 2017?

The expected answer from the priesthood of cognoscenti in the Administration Building would be along the lines of “You don’t have your numbers right, Jackson!” But let us see.

On the afternoon of January 8, 2013 — a great information management moment, as January 9, a Wednesday that year, is The Day of the Martyrs, a national holiday and both the crowd heading out to the beach and those already taking a five-day weekend would be paying scant attention to any news — the ACP announced that it had given the go-ahead to the Paris-based multinational Vinci Construction Grands Projets the order to start work on the Atlantic Side bridge project. The cost cited by the ACP at that time was $365.979 million.

Fast-forward two and a half years and the bridge costs $570 million. Might one say that this difference is the cost of the access roads to the bridge itself? At the time Vinci got the order, the ACP was representing that this was included in the price. Now we are told — with no definitive price tag attached — that the project will include at least one more bridge, over the Chagres River to Colon’s Costa Abajo, and road connections at the very least with that western region of Colon Province’s existing road system. So is this all part of the extra $200 million that has been added to the Atlantic Side bridge cost?

The contracts for the second bridge have not been reported as having gone out for bids. The public hearings about the environmental impact of a bridge over the Chagres River and connections with the Costa Abajo road network have not taken place. If location of the western end of the new bridge is any useful suggestion, the road will contiue through where soldiers at the old US Army Jungle Operations Training Center used to play war games in the woods and cross the Chagres onto the old Piña firing range, which is highly contaminated by unexploded ordnance that over the years has killed several people and is still hazardous. Panama’s birders and other environmentalists might also have something to say about a road cutting through that forested area. There are many variables, but at first glance it does not look like an inexpensive job.

But not to worry. We are assured by Fitch, S&P and Moodys that the Panama Canal Authority has an excellent bond rating, a much better one than the Panamanian government has. Might this explain why a road and bridge project that would ordinarily be in the bailiwick of the Ministry of Public Works is being built and financed under the aegis of the ACP instead?

So, if the bond sale road show is going to the United States and Britain, should we presume that the paper will be sold on foreign exchanges? Actually, no. That quintessential rabiblanco institution, Panama’s “newspaper of record” La Prensa, informs us that Panama Bolsa de Valores is ready to handle the bond issue. It quotes Bolsa director Roberto Brenes, who is leaving that job next month amidst a huge Financial Pacific brokerage house scandal that has yet to spread very far beyond Panama’s entire stock and bond regulatory system into other private entities, but begs an awful lot of questions. It quotes former ACP board member Eloy Alfaro, politely failing to mention that until a recent government takeover Alfaro was a director and spokesman for Banco Universal, which played the role of clearinghouse for many of the corrupt financial transactions of the Martinelli administration. (Of course not. To mention that would be gauche, not only in the adopted English sense of bad etiquette, but in the French political sense as well.)

The bottom line is it appears that foreign millionaires and billionaires are being given better access to financial information about a Panamanian public institution than are the Panamanian people.

Boquete Jazz

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