Paraguay construction sector faces problems due to debt mechanism

Paraguay’s public works ministry (MOPC) is owing around US$300mn to local banks that are financing infrastructure through a debt reassignment mechanism, while sector representatives warn the situation could paralyze key works.

“The situation here is very complicated, and the government isn’t reacting,” Daniel Díaz, head of construction chamber Capaco, told BNamericas.

At risk is the US$130mn Asunción-Chaco’I bridge (pictured), with contractor Consorcio Unión even requesting a schedule update. Currently, the bridge is planned to be finished next year. The consortium, which comprises CDD Construcciones and Heisecke, told daily ABC Color in November that the ministry owes US$34mn.

But the ministry claimed works could continue thanks to a mechanism created last year, allowing contractors to transfer the right to charge for work certificates to local banks, which in turn pay the construction firms. However, the mechanism requires the ministry to eventually pay banks as well. 

Authorities have used funds from multilateral loans to pay part of the debt, but Díaz said the payments were far from covering the total. 

A swift solution is not in sight, since “the coming year is very political. There are elections and change of government. Therefore, everything will get slower, if not stop altogether,” Díaz said.

Paraguay’s 2023 budget involves 5.6tn guaraníes (US$776mn) for the MOPC, of which 4.1tn guaraníes are for investments.