Posorja project under fire

port of Posorja Investigations have been initiated by Ecuador’s Attorney General into the award of the concession for the port of Posorja now under development. Credit: DP World
Industry Database

COMMENT: Following a Complaint filed by Dr Carlos Figueroa, a well-known political activist and medical doctor in Ecuador, the country’s Attorney General has initiated an investigation into the award of the 50-year concession for the Port of Posorja to DP World, the international terminal operator.

One of the main points in the Complaint filed by Dr Figueroa is the fact that the concession was awarded to DP World without any international tender, so a direct award without other parties being invited to bid. Such an award was said at the time to be permitted as it was a direct negotiation between one sovereign state and another. The point is made by objectors to the project, however, that DP World is not a wholly-owned state company as it has private sector investors in it and as such it should not have qualified for such an award. Thus the award contravenes the qualifying legislation.

It is also well known that other major players in Ecuador’s port sector are unhappy with the terms of the Posorja concession with these said to be very favourable and ‘out of sync’ with those of other terminal operators including those given to Yilport, the Turkish international operator, for its new multi-phase Puerto Bolivar project, which includes the construction of a new container terminal. Like the Port of Posorja project Puerto Bolivar is now under development and is based on a 50-year concession. Allegations are additionally made that clauses within the DP World proposal for Posorja sought to effectively constrain competition through a package of measures that in key respects limited the ability of competing terminals to compete on an even footing with the port of Posorja.

Another major issue raised widely in local media is the subject of returns to Ecuador. The DPW concession, it is said, provides for Ecuador receiving 1% of gross income from port operations for the first 10 years, 2% for the next 10 years, 3% for the following 10 years and 5% of gross income from year 31. It is alleged, these returns are much lower than those achieved from other port concessions in Ecuador and particularly those related to container handling activity.

In opening the investigation into the Posorja concession award, local media report that the  Prosecutor’s office has requested the Secretariat of the Presidency (the concession was awarded under the previous Presidency of Rafael Correra), the Port Authority of Guayaquil and the Ministry of Transportation to make available relevant copies of minutes of meetings, decrees, memoranda of understanding, the technical and economic proposals of DP World and other documents.

Violation of law and due process

The central contention of Dr Figueroa is that several state institutions and their officials violated the law and due process with DP World being the beneficiary of this. The question is also raised of the motivation behind the transfer of sums amounting to around $500,000 to a partner of Alexis Mera in the law firm Romero Menendez. Mera was the former legal secretary of the Presidency under Rafael Correa.

The preliminary investigation now underway of the Port of Posorja concession also has an environmental dimension to it. The Attorney General has asked the Office of the Comptroller of the State to assess if irregularities can be identified. It should be noted, however, that an initial legal action taken in this respect was not upheld.

All the allegations identified above, and others remain to be proven. It is nevertheless true to say that they have caused quite a stir in Ecuador and generally it promises to be an investigation followed with great interest.

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