Could the Samana toll road become a Pandora Box or a can of worms, or both? Or will the government contract just become another government deal too convoluted to be aired in public or prosecuted by independent justice?
Past governments signed a 30-year concession contract for the so-called Autopista del Nordeste (Juan Pablo II Highway), the shortened route from Santo Domingo to Samana in operation since 2008. The negotiations for the road, its contracting and its construction spanned over the governments of Leonel Fernandez (1996-2000, 2004-2012) and Hipólito Mejía (2000-2004). Hipólito Mejía is today a high-ranking and very vocal member of the ruling Modern Revolutionary Party (PRM).
Despite protests of the Samaná community, all Dominican governments, including the Danilo Medina administration (2012-2020), have honored the onerous terms of the contract since 2008. The contract still has 13 years to go.
Now with the change of government there is hope the tolls will be reduced. Media reports and a recent interview with lawyer Emmanuel Esquea, contracted by the Abinader administration to make recommendations on the contract, indicate legal flaws prevail in the contract. The Dominican state could use the irregularities to annul the contract and free the country from the payment of the so-called shadow payments, a clause for guaranteed minimum revenues that sets a high bar for number of vehicles paying tolls or else the government needs to pay an additional fee.
Sigmund Freund, director of the Public Private Alliance Agency has told the media that the government is negotiating to lower the tolls. The Abinader administration hired former deputy Emmanuel Esquea to study the contract and make recommendations.
As reported in El Dia in July 2021, Freund is part of a high-ranking committee with Hacienda Minister Jochy Vicente. The Samaná concession is signaled out as a strong reason public-private alliances for public infrastructure should not be signed again, affecting the proposals advocated for by the Public Private Alliance Agency. The toll road has given public-private concessions a bad rap.
Freund has told the media that the talks for an agreement are well advanced. Freund understands that any agreement with the Samana toll road company is better than what exists today. He said this 2021 the Abinader administration is obligated to pay US$80 million in shadow payments on the road.
In a recent interview with “El Gobierno de la Tarde,” the radio talk show, Esquea said the violations were major in the contracting of the road. Contrary to what has always been said that the onerous Samana toll road contract is legally binding and irreversible, Esquea said on the radio program the onerous contract can be annulled.
Lawyer Emmanuel Esquea said his review of the contracts signed for the 106.5 km Autopista del Nordeste (Santo Domingo to Cruce Rincon de Molinillo in María Trinidad Sanchez) and the 17 km Boulevard Turistico del Caribe (Las Terrenas to Cruce Rincón reveals serious violations of Dominican laws.
Since its signing in 2001, the Dominican state has paid the highway’s originally US$125 million contracted cost several times over. President Luis Abinader himself has stated the government has paid RD$26.7 billion, or more than three times the cost of the highway. The high cost of tolls to Samana has been a deterrent to development of the northeastern province.
In the interview for El Gobierno de la Tarde, Esquea explained that the first tender for the road was published in 1998 and then a second tender was published in 1999 with the road expanded to Cruce de Rincón de Molinillo and 6% financing is offered. When those negotiations were carried out, Leonel Fernandez was President.
Eventually, the shorter south-north road through Los Haitises National Park would be allocated in 2001 to the Consorcio del Nordeste. This was when Miguel Vargas Maldonado was Minister of Public Relations during the President Hipólito Mejía government of the Dominican Revolutionary Party (PRD). Miguel Vargas would become the president of the PRD and a strong ally to former President Danilo Medina throughout his two terms.
Esquea said that the letter awarding the contract to Consorcio del Nordeste established US$125 million to build the 105 km road from Santo Domingo to Cruce de Rincón de Molinillo in Maria Trinidad Sanchez province. The company committed to finance 80% of the road, with the Dominican state contributing 20% of the cost.
Esquea said that the Mejia government’s contract with the Consorcio del Nordeste was totally different from the guidelines set for the tender and the letter awarding the contract. He said the contract signed established that the US$125 million price tag was but a base price and that the price would be set as the work advanced. Esquea called this “absurd.”
He explained the contract would eventually be approved by the National Congress in 2002 (during the Hipolito Mejía presidency) but what was published by the Presidency included amendments that did not pass in the Congress. At the time, Andres Bautista García of the then ruling PRD was president of the Senate. Rafaela Alburquerque, of the Social Christian Reformist Party (PRSC) was president of the Chamber of Deputies. The today president of the Chamber of Deputies, Alfredo Pacheco, was president of the Chamber of Deputies from 2003 to 2006.
Moreover, Esquea says that in 2006, the base cost of the project is increased to US$151 million and the interest is increased to 10.5%. A yield for shareholders is also added, in violation to the original terms. The clause for guaranteed minimum revenues is also added. Esquea explained that this turned the original US$125 million contracted into a guaranteed US$1.32 billion to be paid over the 30-year concession period. In the irregular amendments, the state signs to commit to pay a difference if a pre-established minimum number of vehicles don’t transit on the road and pay tolls.
Esquea also explained other irregularities that he understands can be reason to annul the contract.
He said the guidelines for the tender established that no one who did not participate in the tender could be part of the winning consortium. But when the contract was awarded to Consorcio del Nordeste, the Ministry of Public Works allowed the entry of two Colombian companies arguing these would provide the financing and for this would receive 50% of the company shares of the company that owned the concession. Esquea said the entry of these two companies violated the tender law and the guidelines for the tender. He says these companies did not provide the financing after all.
Esquea explains that one of the obligatory seven shareholders of Consorcio del Nordeste was Consorcio Remix. His in-depth review uncovered that Remix was not legally incorporated in 2001, thus invalidating the legal standing of Consorcio del Nordeste. “It is a null contract for fault on behalf of the parties,” he states. The company was irregularly incorporated, and thus did not have the legal capacity to sign the contract.
Esquea also said the contract violated Law 322 that dates back to 1981. That law says that the companies or foreigners that participate in concessions with the Dominican government need to do so in association with a Dominican company. Law 322 establishes that the participation needs to be 50% Dominicans, 50% foreign capital. It also obliges that 50% of the directors be Dominicans. Esquea says this law was violated when the two Colombian companies are incorporated after the contract was awarded. He explains that then the Colombian companies purchase 50% of Autopistas del Nordeste company. He says then only 25% of the capital remained in the hands of Dominicans in flagrant violation of Law 322. Law 322 establishes that the contract will be invalidated in the cases where the law is violated.
Esquea explains that today 99.9% the shares for the company are held by an offshore company registered in Grand Cayman – Autopistas del Nordeste Cayman. The names of the shareholders are not public.
Esquea believes that the state has paid money it was not obliged to pay. He disputes the argument that the government was obliged to do so because Congress legitimized the contract in 2002.
But Esquea, a two-time deputy for the PRD, says that Congress cannot approve by resolution an illegal initiative as established by Art. 93 of the Constitution. He said Congress could not issue a resolution that would modify Law 322 on the participation of foreign persons or companies in public contracting, Public Procurement Law 105-67 or Public Procurement Law 340-06. He said all these were violated in the contract that was signed.
The document was sent to Congress where it was only partially approved. The amendments were not approved, he says.
Esquea says instead there was “a gacetazo,” that is an irregular formal publishing of the contract for its enactment. He said the Presidency’s Gaceta Oficial published amendments that were never approved in Congress. He said he has the certificates that prove this irregularity.
Esquea is a former legislator for the Dominican Revolutionary Party (PRD) from 1986-1990 and1994-1998. He also served as legal advisor to late President Salvador Jorge Blanco (1982-1986).
At present, a Colombian construction consortium, Odinsa (Cementos Argos) features on its website having the ownership of two road concessions in the Dominican Republic – Autopista del Nordeste and Boulevard Turístico del Caribe.
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El Gobierno de la Tarde
El Dia
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Odinsa
Diario Libre
El Dia
24 August 2021