A few weeks ago news reports emerged in Argentina and Uruguay on possible irregularities in the extension of a concession to the maintenance of the Martin Garcia Channel. In this context, the two foreign ministries asked their federal watchdogs to audit the new agreement signed in February of this year by the Administrative Commission of the Río de la Plata (CARP, the binational entity formed by the two Countries), and the company Riovia SA. And, while Buenos Aires delegated this analysis to the Office of the Comptroller General (SIGEN, for its acronym in Spanish) Montevideo elected its Court of Auditors. The Auditor.info will show the most important matters in the report -approved in July of last year- developed by the technicians of the neighboring country.

"Dilating the Discussion of Important Issues"

The Uruguayan Court of Auditors begins their report clarifying that the extensions in the link that ties CARP since 1996 with the Riovia Company for the maintenance of the Martín García Canal were already covered by the concession contract. So even this last extension, made on February 2012, which aroused suspicions about possible irregularities "was permitted by law."

Nevertheless, and according to the Uruguayan technicians, even though the delegation of their country shoed "unremitting efforts" to expedite a call for new bids, with the idea of getting more competitive offers, it was the Argentine delegation’s attitude who was "dilating the discussion of important issues," which caused "unfavorable CARP interests, facilitating Riovia’s Company position both in terms of maintaining the link, and the intended price (to continue providing service).”

The Road to the Extension

The watchdog of the neighboring country noted that both delegations had already been warned about "the imminent expiration of the contractual term" in February 2011, i.e. exactly one year before the expiration of the relationship with the dealership.

In this context, three months after the announcement, a group was organized, within the Administrative Commission of Río de la Plata, to start "conversations" with Riovia, in order to study the possible extension of the tender or other alternatives.

However, the report also has a written memorandum for the Uruguayan delegation to the President of CARP in the middle of the negotiations. The memo says: "The successive delays by the Delegation of Argentina to resume the bidding processes, mainly because they have prevented to resolve in a timely manner the situation posed by the expiration of the contract", which happened on January 19th 2012.

With these elements, the Court notes that "there was a slowdown in the treatment of essential issues within CARP, that attitude had a direct impact on how issues were reached at the end of the contractual term of the Riovia Company. For example, they did not adjust quickly to the precautions necessary to proceed to the International Competitive Bidding (that would enable) a new concession and, in parallel, would allow the necessary procedures to better negotiate with (the company) the impending contract extension, abandoning the possibility of to count on -through the Price Competition procedures- with other deals eventually better to the interests of the Commission. "

Thus, the Uruguayan agency concludes: "The dilatory attitude in the performance of CARP, coupled with the strict time limits, influenced the fact that there were poor negotiation conditions with the current concessionaire".

According to the Uruguayan Court, "The delegation of each State handled very different time limits, all of which inevitably created a negotiation with very little time that generated more beneficial conditions for Riovia.”

Waiting For Instructions from Buenos Aires 

Why did Argentina dilate the processes? According to the report, it was the president of the Argentine delegation who invoked the "lack of instructions from his government to negotiate" a new contract, and broadens by saying that our representatives had "a number of legal and political constraints to proceed." In that sense, the investigation shows that those sent to represent Argentina "did not have full authority" unlike their Uruguayan counterparts.

The Price

In this framework, the contract CARP had with Riovia was agreed to in February of this year for a value of $ 1,262,500 plus a monthly fee. On this, the Court of Auditors of Uruguay argues that "while bearing in mind the specialty of each channel and ancillary services on maintaining that in this case is the concessionaire’s, one can say that taking into account the cost of cubic meter dredging as the most important component of the price, there is a reasonable equivalence between the agreed extension with those bidders working in the region who also participated in international calls made public by the National Ports Authority, for performed services very similar to those performed by Riovia".

But how did they get to that number? The Uruguayan Court explains that "the final price was negotiated outside the scope of CARP and did not result in any technical document handled by officials." They expand the subject's report stating that "the only study on the percentage increase that existed was provided by the delegation of Uruguay and regarding the same, there is no evidence that Argentina has made formal opposition, neither (did they provide) other documents showing a different position. "

"Because of a lack of consensus, the internal discussions among the delegations, the negotiation of the price for this extension resulted in a predominantly political treatment," says the watchdog. How was it? Auditors say that the Uruguayan Vice Chancellor ended up evaluating three different elements: the technical report of its own delegation, the "numbers verbally run by Argentine officials and the company's claim, concluding in an amount to which the parties arrived to by becoming reciprocal concessions.”