MercoPress. South Atlantic News Agency

Cancelled Machu Picchu airport triggers international dispute between Peru and contractors

The proposed Chinchero airport was aimed at helping tourists get to and from the Incan ruins of Machu Picchu, near the city of Cusco in southeastern Peru.

The Peruvian-Argentine consortium Kuntur Wasi said that it plans to sue Peru in an international arbitration court after failing to reach a deal with the government over the cancellation of its US$525 million Chinchero airport project.

  The government of President Pedro Pablo Kuczynski announced the cancellation of the project last May amid an escalating political crisis regarding a contract modification it had proposed, which critics said sought to help Kuntur Wasi at the expense of the state.
Kuntur Wasi, which is owned 50-50 by Peru’s Andino Investment Holding and Argentina’s Corporacion America, said it had fulfilled all of its obligations and that Peru had no basis for unilaterally rescinding the contract.

“This unfortunate circumstance was generated because the government faced (and faces today) an internal political situation,” Kuntur Wasi said in a statement. “However, in a state of law, it’s not a valid reason to terminate a contract.”

Kuczynski told journalists that the consortium has the right to pursue arbitration, and declined further comment on the sidelines of a public event. The controversy over Chinchero, which erupted amid heightened scrutiny of construction contracts due to a graft scandal involving Brazilian builder Odebrecht, cost Kuczynski two key Cabinet members in the first major political crisis of his five-year term.

The government previously defended its proposed modification as necessary to fix what it described as flaws related to financing in the original contract, which had been awarded in 2014 under former president Ollanta Humala.

The comptroller’s office and opposition lawmakers accused the government of trying to shift company risks and financing to the state. The government ended direct talks aimed at resolving the dispute with Kuntur Wasi in January.