Rising Costs and Funding Disputes Keep Quito Metro Project At Standstill

Rising Costs and Funding Disputes Keep Quito Metro Project At Standstill

The Quito Metro project has been on hold for the past three months, as local government, state government and the Odebrecht-Acciona consortium have been locked in discussions to reduce the rising project costs for phase two of the project and decide who will be responsible for subsidizing the projected 500 million USD shortfall.

The initial cost of the project was 1,500 million USD, but current estimates have risen to around 2,000 million USD. The Municipality of Quito have been in ongoing discussions with the Odebrecht consortium in regards to the increased costs.

Much regarding the discussions surrounding a reduction in costs remain unknown, as a Confidentiality clause means both the Odebrecht consortium and the Municipality are prohibited from releasing details of the ongoing negotiations. This week Quito Mayor Mauricio Rodas insisted that an agreement has been reached, although details have yet to be released.

The Ecuadorian General Controller has been asked to adjudicate upon the validity contractual processes, including an examination of the bidding process for the construction of phase two and the funding agreements for this phase.

A further hurdle preventing the continuation of works is discussions surrounding the national government contribution to the completion of the project. There has been some resistance from the national government to subsidizing the shortfall; while they committed to providing a percentage of the overall costs, there is some resentment that they are not culpable for the increased costs.

In the last two weeks the Ministry of Finance and the Municipality of Quito have exchanged communications, but relations remain strained as both sides look to minimize their contribution to the shortfall.

The Ministry of Finance released a statement explaining: “At the insistence of the Sub-Secretariat, the GAD Municipality of Quito, communication 1594, documents were sent, but again they did not specify the amount for which the sovereign is expected to guarantee”.

The statement continued: “observations persist in reference to the documentation regarding the flow of income and expenses, that would further analysis of the capacity to pay”.

The Metro de Quito company responded to this point in El Comercio newspaper, stating that in letter No. 215 sent on July 24 2015, they provided this information to the Ministry of Finance”.

“In the document the required amount to which the sovereign guarantees is specified. This figure is not public, since it is subject to the confidentiality clause of this process. A detail that is also known to the Ministry of Finance”.

This is not the first time that discussions regarding clarity of owed amounts has been disputed. On 23 June, the Municipality sent the ministry the official documentation required for analysis of the viability of paying their proposed contribution. It has since been claimed that the specific additional amount required from the sovereign government was unspecified, hence the continued back-and-forth between the two administrative bodies.

A further problem is that the 2015-2019 multi-year investment plan has not yet been approved by the city council and at present it doesn’t include public works costs. Questions have also been raised as to the viability of the existing plan, which when combined with additional public works obligations and existing debts may force amendments to short term financial commitments.

Councilman Marco Ponce said this week that is impossible to start the second phase of the project without the required funding secured.

For international lenders to provide the additional needed, there will need to be a sovereign guarantee from the Ministry of Finance, which, with disputes continuing, remains elusive.

SUM-Vive councilman, Antonio Ricaurate has claimed that the second stage of the project is not viable if Odebrecht are the contractor, while Patricio Ubidia, Quito city councilman, this week raised the questions of further costs resulting from the continued delays.

Amidst the growing voices of descent and pessimism, the Mayor of Quito, Mauricio Rodas has affirmed that phase two of the project will be complete this year.

“I want to confirm something that has not been in doubt; the metro will go. The Metro will be a reality, I do not know why there is speculation to the contrary. This administration has rescued this project and will assume the cost difference to make it a reality”, he explained, adding “we are optimistic and soon we will have good news for the Quiteños“.