BACTSSA to take legal action over failure to extend Terminal 5 contract at Buenos Aires Port

Buenos Aires Container Services SA (BACTSSA) informed Argentina’s General Administration of Ports (AGP) that it will continue with the judicial process filed as a result of the rejection it received for its request to extend the concession contract of Terminal 5 of the Port of Buenos Aires for another year.

Currently, the company controlled by Hutchison Port Holdings (HPH) is in a one-year extension period provided for in its original contract bid in 2015 and awarded in 2016, which gave it the operation of Terminal 5 for a period of four years, with an option for an additional year.

The aforementioned contract – completely different from the bidding process that privatized the terminals in 1993 – ended on May 15, 2020. According to BACTSSA, in August 2019, auditor Gonzalo Mórtola called on the state to extend for another year until May 15, 2021.

But while BACTSSA had already guaranteed the continuity of its concession until May 2021, Terminal 4 (T4) and Terminales Río de la Plata (TRP) ended their operations on May 15, after  Guillermo Dietrich, the former Minister of Transport, decided to unify the maturities of the three operators until May 15, 2020 to proceed with unified bidding on one operator, as determined by the previous government.

Gonzalo Mórtola’s management extended the opening of the bid envelopes twice. Originally scheduled for October 2019, it extended until December 1st and then until March 20th of this year.

The current government came across a project rejected by the community, suspending the bidding. After ordering a comprehensive review of the situation and expressing their willingness to enter into a scheme with two operators (instead of one), the expiry of the contracts for the Río de la Plata and Terminal 4 terminals was resolved, resulting in a two-year extension until May of 2022.

BACTSSA did not receive an additional extension, as the 2015 bid [awarded in 2016] was for 4 years and the only extension provided for in the contract, was for one year and was already signed, extending the contract until May 15, 2021.

Result

In the past five months since then, a lot has happened. The entire community’s agreement with José Beni’s management to resolve the conflict lasted as long as possible in the face of Argentina’s reality, aggravated by the Covid-19 pandemic.

After this practically historic agreement, strikes, shootings, destruction, and invasions of the terminals by the Union of Portos Unidos Argentina (SUPA) have already occurred in the Port of Buenos Aires, awakening old ghosts for the union.

Even so, through politics, a new agreement pacified the waters, but it would not last long. In the extension signed with Mórtola in August 2019 to extend BACTSSA’s May 2020 contract for another year, BACTSSA granted not to end the term of validity on May 15, 2021, but also promised “to enforce the works inventory 180 days in advance (until expiration).”

Thus, in the last month of August, the AGP asked BACTSSA to indicate those responsible for the inventory, and this was done.

 

Extension request

Almost simultaneously, the company, in turn, requested that the concession term be extended beyond May 15, 2021.

This fact raised the need for AGP to unify its mandate with those of T4 and TRP as of May 15, 2022, according to the provisions of Mário Meoni, the Transportation Secretary, in resolution 120/2020.

BACTSSA reminded AGP of the need to guarantee the continuity of operations at the Port of Buenos Aires, and relied on Decree 870/2018 by Mauricio Macri, the ex-President, who was bidding on the external terminal of the Port of Buenos Aires and who empowered the Ministry of Transportation to extend the concessions of bids 6/93 (Terminals 1, 2, 3 and 4) and 24/15 (Terminal 5) to respect the necessary deadlines until the new bid grant.

In accordance with this decree, the administrations of Guillermo Dietrich (resolution 256/2019) and Gonzalo Mórtola (resolutions 61, 117, and 174/2019), respectively, approved the bidding documents and set the date for opening the offers on March 20, 2020.

Subsequently, Meoni would annul the project through resolution 65/2020.

 

Current Decree

BACTSSA, however, accepted in its request the validity of Decree 870/2018 (which was not revoked) and also supported it in the decision of the Ministry of Transport to extend the concessions of its competitors until May 2022, while its own would last until May 2021.

The company warned AGP about the risks of disrupting normal operations at the Port of Buenos Aires with the termination of its contract in 2021 while the other terminals continue until 2022, and rejected the two years granted to its competitors.

This argument may hide a slip in this case, since BACTSSA was subject to an extension of three years (36 months) in 2011 based on the “ius variandi” in its 18-year contract from 1993. The same argument was used for the two-year extension of T4 and TRP.

See the following graph for container movement at the Port of Buenos Aires by Terminal :

Handling of Containers at the Port of Buenos Aires by Terminal | Jan to Aug 2020 | TEU

Source: DataLiner (to request a DataLiner demo click here)

 

AGP Fundamentals

For AGP, however, guaranteeing the “operability” of the Port of Buenos Aires does not necessarily mean guaranteeing the continuity of an operator.

AGP rejected BACTSSA’s request, arguing that the Ministry of Transport canceled the project’s bidding documents ordered by Decree 870/2018.

For BACTSSA, the validity of Decree 870/2018 is based on the specific weight of its considerations (power of extension) in addition to the fact that the decree would have been left without content due to the cancellation of specifications and the project resulting from that decree.

AGP argued that BACTSSA accepted the validity of Decree 870/2018 (which was not revoked) in its request and also supported it in the Ministry of Transport’s decision to extend the concessions of its competitors until May 2022 during its validity until May 2021.

The auditor highlighted that the extension is its prerogative, and not a right acquired by BACTSSA, and corrects BACTSSA when it counts the term of its contract for five years (extension 4 + 1) to apply the additional 20% contemplated by the “ius variandi” on this basis.

The AGP stressed that the additional year – which runs until May 15, 2021 – is the only possible extension to which it would have access according to the signed statement.

 

Policy

With BACTSSA’s warning that it will go to court after the administrative process is exhausted,  AGP, in turn, will repeat the strategy that made it successful in its first major test, the consensus.

Last May, its largest concern was maintaining jobs. There is no evidence that this has now changed, and, in this sense, it informed the union entities that it will commit to this guarantee, in any way possible. That is, after May 2021.

Last week, while presentations and responses were circulating and legal departments were shaking off regulations, contracts, and specifications, BACTSSA union delegates took to the streets – led by Daniel Amarante, number two at the Guincheros union – to demand job stability.

This eased the climate because the AGP had already warned the union leadership that the extension of the BACTSSA contract until May 2021 was not viable.

Source: Emiliano Galli, Trade News

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