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It's official --- Odeberecht takes over autopista project

by Eric Jackson

The Brazilian construction giant Norberto Odebrecht SA has received the Torrijos administration's formal blessing to take over the long-delayed Colon to Panama toll road project from Máximo Haddad's insolvent PYCSA consortium. PYCSA was the concessionaire for both the Corredor Norte and its connecting road to Colon, and had arranged things so that this contract was legally four separate concessions with related but distinct companies under Haddad's control. The PYCSA contract allowed a concession's transfer to a third party if the government approves, and that's what the cabinet recently did. Construction on the new road is set to begin later this month and take two years to finish.

Odebrecht will get financing from both the National Bank of Panama and the Brazilian government, and by establishing a greater presence here may obtain a better position to win canal expansion contracts. The company, which operates on several continents and has several mega-projects on its resume, had its first involvement in Panama when it won the contract for a relatively small irrigation project in Chiriqui last year.

The Panamanian government will pay the company a subsidy to keep tolls below $3, which otherwise would have been more than double that amount. Various critics don't like the idea of public financing and subsidies, but as to any loans there is a big difference between the undercapitalized and badly run PYCSA and Odebrecht, which as Latin America's biggest construction company is able to pay its debts. The arguments over subsides are more fundamentally philosophical, as are some critics' objections that contracting laws passed during the dictatorship give the executive branch too much power to make major highway contracting decisions without much input or review by the legislative and judicial branches.

PYCSA, whose other three concessions are all encumbered by unpaid debts and in one case is in receivership, was paid an undisclosed amount by Odebrecht. This apparently happened sometime last year, with PYCSA's creditors being kept in the dark about the details, which effectively prefented them from garnishing the payment.

As this is a takeover of an existing concession, it will run for but 15 years, PYCSA having frittered away a decade of the concession that it originally had by construction delays. Odebrecht will own and operate the toll road for those 15 years, after which it will be transferred to the government.

By some published accounts Haddad is dissatisfied that the Brazilian company didn't pay for PYCSA's  engineering work, which it might have done but for the fact that Odebrecht made its own cheaper plans. The PYCSA design ended in Cativa, while Odebrecht plans the northern terminus of its project a few kilometers in Panama City's direction at Quebrada Lopez. Odebrecht also chose a route that allows for a shorter bridge across the Chagres River. The agreement between PYCSA and Odebrecht made the latter's purchase of the former's plans discretionary.

While one can never be sure what grievances might arise, at this point there is no criticism of the concession transfer from the Colon Free Zone and hardly any from Colon in general. For years the Free Zone merchants have demanded a better road connection with the rest of the country, which PYCSA promised but couldn't deliver. Now they seem satisfied enough that an experienced multinational company is finally going to build the road they want. The present Trans-Isthmian Highway, built during World War II as a US military road and improved or repaired here or there but basically dating back to 1943, is Colon's only practical road connection with the rest of Panama. It's in a state of serious disrepair and has gained notoriety as one of Latin America's most dangerous roads from the point of view of traffic accidents.