It “could be” a good deal for taxpayers….
By Don Quijones
Spain’s government continues to raise the bar when it comes to the ubiquitous practice of kicking the can down the road: in Spain, the roads in question, snaking around or sprouting from the nation’s capital, Madrid, are very real. They’re also largely empty. And broke.
These toll roads have been bleeding funds at such a rate that their owners — a consortium of concessionary companies, including six of Spain’s biggest hitters in the construction industry (Sacyr, Ferrovial, FCC, Acciona, Abertis and OHL) — have ended up liquidating their assets and are now handing over full ownership rights to Spain’s long-suffering taxpayers, as is common practice these days for many failed large enterprises.
Thanks to the timely intervention of Spain’s government and a friendly judge or two in Madrid’s mercantile courts, the companies will get much of their money back. And that money will go straight back to the banks that helped fund the ill-conceived projects.
All of this was agreed to well over a decade ago when the Aznar government decided, against all advice, to open to public tender nine privately built and managed toll roads to cover routes around Madrid that were already amply covered by “free” public roads. The government also quietly inserted in the fine print a provision that the state would serve as ultimate guarantor for each project.
When the crisis hit with full effect in 2009, Madrid’s already quiet toll roads became virtually empty, save for the occasional luxury car shuttling a senior politician, business executive or banker. Now, seven years later, the bill has come due after a previous agreement that would have unleashed a 50% haircut for all parties involved fell through. The outstanding bill could now reach as high as €5 billion.
Two of the roads in question, the R-3 and R-5, were due to be closed indefinitely on Saturday Oct 1. But then a judge in Madrid intervened at the last minute demanding that the state take full control of them while compensating the concessionaires for their losses. On Monday Spain’s Minister of Industry Rafael Catalá, said that the state’s purchase of the toll roads “could be” a good deal for taxpayers, adding that [comments in brackets my own]:
We would have preferred for the concession to have been sustainable [as many experts said was impossible from its very inception], we have worked to that end and we even proposed a renegotiation of the debt, but today the (roads) are bankrupt and the State will have to take over responsibility for them as stipulated in the contracts [which the government, under Catalá’s own party, helped draw up 12 years ago, with a little help from the concessionaire’s lawyers].
This is not the first time Spain’s government has lent a very large helping hand to some of the country’s biggest construction companies, many of whom have been accused of contributing generously to the governing Popular Party’s decades-long kickbacks scheme. The pattern is always the same: a project gets built, often at the construction company’s behest. Then when it fails, the government’s state guarantees kick in.