Cusco Protests as Chinchero Airport Financing Adjusted

President Kuczynski explains the advantages of the addenda in the Chinchero airport project concession with the Kuntur Wasi consortium.

Cusco authorities are calling for a regional strike, giving the government 72 hours to come up with a solution to the sudden postponement of the groundbreaking ceremony for the new airport at Chinchero. People from Urubamba, Paucartambo, Anta and La Convención marched with banners to the Chinchero site to protest.

President Pedro Pablo Kuczynski was scheduled to fly to Cusco Tuesday to lay the first stone for the project, but cancelled his trip when Congress questioned the changes in the concession contract’s financial details.

The concession contract was signed during President Ollanta Humala’s administration with the Kuntur Wasi consortium, but financing details were changed and included in the addenda under the new administration.   Namely, to save more than $590 mn in interest payments, the government agreed to put up the initial $265 mn to get the project moving instead of Kuntur Wasi borrowing that amount from the banks.  That would mean that the project would be a state-financed project rather than a public-private partnership, but Kuntur Wasi would continue to have the operating concession for 30 years.

“We have a lack of liquidity, but that is not the problem,” said Carlos Vargas, president of Kuntur Wasi, who blames ProInversion for the poor terms set up in the contract.

The Chinchero airport has its detractors for many reasons (see Chinchero —Lost in the Clouds), but the project has been on the drawing board for close to 40 years and its political significance among Cusco authorities and local real estate investorss is great.

“We’re going ahead with this project,” President Kuczynski said on Monday, once the addenda are rewritten.

 

2 Comments

  1. A quick search about the Kuntar Wasi Consortium partners shows they are having some cash flow problems, as many companies had in 2016. For them to obtain the financing for the new airport would be expensive, with a B- financial rating. If the global economy slows more, then the companies borrowing rates will rise.

    The government can borrow the money at a much better rate. The wild card in the whole project is the corruption factor. The original land deal for the airport, had a very bad smell to it. Some people locally i know, who have been involved in the project, worry about the lack of engineering work on the site for soil conditions. This could raise the cost construction project. Who will pay for the cost overruns ? Another question, has the project managers consulted with the airline companies, if they will move to the new airport. They may not agree with the terminal fees , without a substantial increase in the cost of the airplane ticket. The Airbus 320 is rated for about a 3000 meter elevation runway. Chinchero new airport at 3800 meters will force weight restrictions, especially on takeoff. Rain, freezing temperatures and cross winds mandate an even a longer runway. Many questions , i hope the project managers have consulted with a competent engineering firm, before deciding on a cost and design for the project.

    Being an engineer in construction for over 40 years, i have the empty feeling this airport project, has had a very intense level of political and financial input, and very little engineering skills applied to the site. If this airport project does go ahead, then the land for existing airport airport in Cusco be sold to a developer. 100% of the money from the sale used to pay down the debt of the new airport. The old airport must not be left to the local politicians , as most of the proceeds from the sale will vanish.

    http:// www. businesswire. com/news/home/20161014005799/en/Fitch-Downgrades-Andino-Investment-Holding-S.A.A.-B-

  2. CHINCHEROS AIRPORT LOGISTIC ISSUES
    This is a no winner situation; the Peruvian government is going through a dilemma because of the ongoing Odebrecht scandal and it’s not getting any better as the time is approaching for Marcelo Odebrecht to be sentenced in a Federal Court in New York. By saying this president Pedro Pablo Kuczynski is under pressure by the people and press; at some point he wanted to postpone the beginning of the project with the known -by now- demand of Cuzco’s authorities and local people who even threatened him with an strike in this important touristic destiny.
    I’m not an expert in Aviation Logistics but the analysis done by the previous commentator Mr Roy with www. businesswire. com; who employs a common-sense language give us a clear picture of the project, lack of engineering skills, political and financial issues, etc. Roy, goes on to tell us about the former deal that he didn’t particularly like and finally suggest a sale of the old airport land and it’s subsequent proceeds to be used to reduce the principal loan. And as a reminder of the political turmoil mentions not to leave the old airport up for sale by local authorities, Why? Because the money eventually -if not used to pay for the project- will disappear “anyway”.
    In the middle of this, bad decisions don’t bring good results!

    Moreno Bravo
    The Administrator

    Moreno Bravo; is a Peruvian writer who resides in Washington, DC, he administrates a Blog regarding political issues in Peru.
    No Corruption, No Impunity in Peru!

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