Costa Rican Construction Company Suing El Salvador

News

Once again, the government of El Salvador is facing an international law suit by a foreign corporation: the Costa Rican construction company MECO recently filed two claims totaling $14.5 million against El Salvador with the Arbitration and Mediation Center of the Mexican National Chamber of Commerce, whose jurisdiction is being contested by the Salvadoran government.

MECO’s suit targets the Millennium Fund (FOMILENIO), a government office that administers funds donated to El Salvador by the Millennium Challenge Corporation (MCC), a US development aid agency. MECO had won two contracts to design and construct portions of the Northern Longitudinal Highway mega-project from FOMILENIO. But in both instances, their resultant expenses proved higher than those initially stipulated in the contract, prompting MECO to sue FOMILENIO for the difference. If the suit is successful, El Salvador could be forced to bow further to the private sector and reach into the national budget to pay off the Costa Rican corporation.

Following an Italian corporation's recent victory over the Salvadoran state in international courts, the MECO case is made even more troubling in the shadow of a Public-Private Partnership (P3) Law currently being debated by the Salvadoran legislature. The P3 Law would open all state companies and infrastructure up to foreign capital, and includes clauses that force the government to reimburse private companies in the event of economic losses.

The US government has been relentlessly pressuring for the P3 Law’s approval, even threatening to not approve a second FOMILENIO project if the legislature blocks its passage. If the US has its way, future FOMILENIO funds awarded to foreign companies will be regulated by the P3 law, and companies whose “investment” didn’t prove profitable could skip the lawsuit and simply demand payment.

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