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GUATEMALA: Controversy Dogs New Highway

Danilo Valladares

GUATEMALA CITY, Nov 3 2009 (IPS) - Construction is expected to begin soon on a new highway across north-central Guatemala, the largest infrastructure project tackled so far by the government of Álvaro Colom.

But the bidding process for the contract has drawn criticism, and there are questions as to what extent the highway will benefit poor rural villagers.

The 362-km multi-lane Franja Transversal del Norte (FTN) highway will cut across the country, from Mexico to the west through the provinces of Huehuetenango and Quiché in the northwest and Alta Verapaz and Izabal in the northeast, to neighbouring Honduras and the Caribbean Sea to the east.

The highway is part of the Plan-Puebla-Panama, a mega-project that is to create a “development corridor” running from Puebla, Mexico to Panama, opening up nine states in southern Mexico and the Central American countries of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama to private foreign investment to attract industry and agribusiness and expand natural resource extraction.

The PPP project, which has the support of multilateral lenders like the Inter-American Development Bank, the International Monetary Fund and the World Bank, involves the construction of roads and hydroelectric dams, the joint management of natural resources, harmonisation of trade policies, electrical interconnection, and the installation of maquila or export-oriented assembly plants, among other aspects.

The road will facilitate trade flows in the four Guatemalan provinces that it will cross, and will give the national economy a boost by opening up tourist and trade flows with Mexico, said social democratic President Colom, who took office in January 2008.

“We are going to publicise the tourist areas in this region,” the president told journalists during a recent tour of the future route. “The FTN is not just a highway; it is a corridor of rural, municipal and urban development.”

There is an urgent need for road infrastructure in this Central American country of 13 million people, which is one of the poorest countries in Latin America, with 50 percent of the population living in poverty according to the government – poverty that is aggravated by serious shortcomings in transport and communications.

But the project has run into controversy. While neither social organisations nor opposition lawmakers have focused their criticism on the construction of the FTN itself, they have questioned the process by which the contract was awarded.

The process began in 2007, when the government of then right-wing President Oscar Berger granted the contract for the construction of the highway to the only company that placed a bid: Solel Boneh Building & Infrastructure Ltd., Israel’s leading building contractor.

Then in June, Congress passed reforms to the law that regulates the construction of the FTN, effectively changing the rules of the game.

Whereas the law originally required the company that won the contract to drum up financing for the project, under the amended legislation, the Guatemalan state is responsible for raising the funds.

Congress thus also gave the government the go-ahead to take out a 203 million dollar loan from the Central American Bank for Economic Integration (BCIE).

The modifications to the law also confirmed the outcome of the bidding process, so that even though the rules of the game were changed, Solel Boneh still had the contract.

This drew questions from opposition legislators and social organisations, who pointed out that the company was evidently favoured. Guatemalan Vice President Rafael Espada even suggested that the bidding process be reopened.

Jorge Santos, an analyst with the International Centre for Human Rights Research (CIIDH), clarified to IPS that “social, popular and human rights organisations are not opposed to the construction of the FTN, but to the spurious mechanisms used to approve the contracting of the BCIE loan, as well as the developments to which that approval will give rise.”

One of the aspects that drew the most criticism was the fact that in the new law on the FTN, no limit is set on costs, which means the cost of the construction work could skyrocket, according to NGOs.

“The estimated cost of the project is 273 million dollars (203 million dollars from the loan and 70 million in government funds), but around three-quarters of the highway has not been designed yet, which means they are not sure about the actual costs that the company is going to incur – and the precedents are extremely negative,” said Santos.

The 1978-1983 construction of the Chixoy hydroelectric dam, which was originally supposed to cost 240 million dollars, soared to more than 1.2 billion dollars, which had a heavy impact on public finances, the Colectivo de Organizaciones Sociales (an umbrella of social organisations) and the Convergencia por los Derechos Humanos (a coalition of human rights groups) pointed out in an ad in the press.

Independent lawmaker Aníbal García told IPS that the most worrisome aspect of the FTN contract was that it included no cost limits, which means the costs could soar, as they did in the case of Chixoy, the country’s biggest hydroelectric complex.

García, who voted against the amendments to the FTN law, said the Finance Ministry even recommended a 10 percent price ceiling for the contract. But that suggestion was rejected.

“This business deal smells fishy, because the issue of price fluctuations should have been resolved as the Finance Ministry recommended,” said the legislator.

García also acknowledged that there are powerful economic sectors interested in the construction of the highway, because they have oil palm plantations and mines in the area it will run through.

Eduardo Velásquez, director of the Centre of Urban and Rural Studies at the public University of San Carlos, told IPS that the lack of transparency surrounding the project was disturbing.

“We still do not know what the total cost of the highway will be. In any case, if there was only one bidder, the bidding process should have been reopened, so that other companies would participate,” he said.

The idea of a highway cutting across north-central Guatemala dates back to the de facto government of General Romeo Lucas (1978-1982).

“At that time it was known that military and civilian officials and corporate interests with ties to the government had purchased land along the route, whose value would rise (as a result of the construction of the highway). It rests to be seen whether poor, remote communities will benefit from the project,” said Velásquez.

Gregorio Nolasco, mayor of Santa Cruz Barillas, one of the Huehuetenango municipalities that the FTN will run through, told IPS that as it is currently mapped out, the highway will be located so far away from the town that it will hardly benefit local residents.

“Maybe a few people will benefit, but the town will remain isolated, because we don’t have an asphalt road to connect to the future highway,” he complained.

Nolasco said he would form a committee to talk to President Colom, to try to bring the highway closer to the town, although he added that there is pressure from large landowners to stick to the current route.