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Torrijos administration sought legal opinion after acting

Contract transfer prompts criticism, likely bound for court

by Eric Jackson, in part from other media

Last fall The Panama News was told by the Boyd Barcenas y Marcos PR firm that its client, Brazilian-based multinational contruction firm Norberto Odebrecht SA, had bought part of the concession that Máximo Haddad's insolvent PYCSA obtained from the Pérez Balladares administration.

As Rafael Bárcenas explained it, the toll road concession was actually four separate packages, two for parts of the exisiting Corredor Norte and another for a projected part of that road that's unlikely to ever be built, plus one for the Colon to Panama toll road. According to the publicist, that latter part was the only one unencumbered by debts and Odebrecht bought it and not the rest with the Torrijos administration's approval.

Said approval was made official in a January 12 cabinet resolution.

But hold on, there --- the characterization of the concession as four separate entities was a work schedule that was turned into a corporate reorganization by PYCSA for the purpose of avoiding creditors, like the Parque Natural Metropolitano and small landowners whose properties it took without paying, the families of three little boys buried and killed when an elevated roadway collapsed near where they were playing, the state-owned Banco Nacional de Panama that provided financing that the disreputable Haddad and his company couldn't get from private lenders and the Panamanian government, which has rights arising from PYCSA's constant failures to meet contractually imposed deadlines.

One of those creditors, the Parque Natural, has been the most prompt and energetic litigant and got a court to appoint Kevin Harrington as the receiver of PYCSA's assets. Harrington then ran into Haddad's corporate shell game and challenged that in court as well. Given that the 1994 contract between the Panamanian government and PYCSA is a unitary whole and mentions none of Haddad's latter-day spinoff companies, the courts are so far siding with the receiver and treating the purported devolutions of PYCSA's assets as mere frauds against creditors with no legal effect.

Ahh, but what's a little fraud matter to the Torrijos administration? The cabinet approved the partial transfer of assets (but not, of course, debts) to Odebrecht and moreover sweetened the deal with a $201 million subsidy for the Panama - Colon road that some estimate to cost $215.9 to build.

(The subsidy that Odebrecht stands to receive, however, is understated if it's left at that. Why? First, because the road will only go to Quebrada Lopez, north of Colon, rather than Cativa as had been PYCSA's previous plan or Four Corners as any sensible highway plan would have it, so the connection between the end of the toll road and Colon city will be at government expense and hence a hidden subsidy. Second, because the biggest and most expensive item in the project, a bridge across the Chagres River, is going to be made largely of steel pieces manufactured in Brazil and subsidized by the Brazilian government. Thus on its face it appears that Odebrecht will have nearly all of its expenses picked up by various governments and take its more or less risk-free profits on the tolls it collects.)

Because the national government's dealings with PYCSA have been a long-running scandal over three administrations, the attempt to transfer one of its assets behind the backs of its creditors and the generous public subsidy for the successor company become natural targets for opposition critics. The opportunity has not been missed.

Attorney and independent political activist Miguel Antonio Bernal warned in El Panama America that the substitution of Odebrecht is likely illegal because the government allowed the change to take place on terms differing from those provided for in the original concession contract with PYCSA, without going through the formalities of forming a new contract required by the Law of Public Contracts.

Consulted by Capital Financiero, Cambio Democratico leader and supermarket baron Ricardo Martinelli criticized the deal not so much for the amount of the subsidy but because Odebrecht would be placed in a position of having no risks, the taxpayers having assumed them.

The Panameñista Action Movement (MAPA), which is trying to pick up the pieces of the Arnulfista Party in particular and the opposition in general that were shattered by the Moscoso administration's scandals and the 2004 election results in order to present a united opposition to the PRD, issued a statement calling the arrangement with Odebrecht "a fiasco."

The Torrijos administration didn't argue with its critics. However, given the prima facie case of fraud against PYCSA's creditors, on January 18 it asked the nation's Administrative Prosecutor for an opinion on the propriety of what it did four days earlier. That opinion, which would have certain legal implications but wouldn't bind the courts, had at the time this story was written not been published.