Petrobras Uruguay appoints new President

The Brazilian oil and gas company Petrobras announced that starting in August 2013 Carlos Alberto de Costa will replace Iraní Verella as president of Petrobras Uruguay.

Carlos Alberto da Costa, the new president of Petrobras Uruguay. He replaced Iraní Varella.

In his first declarations da Costa said that “Petrobras’s challenge is continuing the way we started in Uruguay, where we are making important investments” and “working with a focus on modernizing the companies within the group”.

Da Costa is a geologist, who started working for Petrobras in 1978 and has held a wide range of positions with company in Brazil and other countries, among them: head of geophysics for Petrobras Brazil, business coordinator for Petrobras Venezuela, and head of exploration for Petrobras International.

Petrobras Uruguay controls 89 service stations as well as a network of lubricant and fertilizer distributers, an airplane fuel installation at Montevideo’s Aeropuerto Internacional de Carrasco, and 50% of Conecta y MontevideoGas [which Petrobras owns jointly with Uruguayan state oil company Ancap]. Additionally, Petrobas Uruguay, together with the Argentinean company YPF and the Portuguese company Galp, signed a contract  with the Uruguayan government that enables the exploration and production of oil and gas in the sedimentary basins of Pelotas and Punta del Este.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

UTE prevents Techint from leaving contract to construct Uruguay Brazil electricty connection

UTE, Uruguay’s public power utility is embroiled in negotiations with contractor Techint over cost overruns on UTE’s project to connect Uruguay and Brazil’s power grids

UTE, Uruguay’s public electricity provider, responded on August 7 to contractor Techint’s request for $30 million USD in additional funding to construct high tension power lines connecting Uruguay’s and Brazil’s power grids. UTE acknowledged the request to avoid allowing Techint to withdraw from the contract without paying a penalty.

Techint requested $30 million USD on top of the $130 million budgeted for the project during the final week of July. They requested the additional funds to cover costs related to an inaccurate terrain analysis by UTE.

In UTE’s response they maintained that the additional costs would be between $10 million USD and $12 million USD. “[UTE] is willing to continue talking but only under these parameters, not with the amount submitted in [Techint’s] request” explained sources at UTE. They explained that if Techint decides to halt construction, UTE will initiate legal action to collect compensation. For every month work is delayed Techint is supposed to pay $ 6 million USD. The contract requires that the connection be completed by the end of 2013. UTE hopes that Techint will continue the work and try to collect the additional amount through the Uruguay’s court system. UTE had to respond to Techint’s request urgently because otherwise the Argentinean firm would be allowed to withdraw from the contract without any penalty

El Observador’s sources indicate that there are now two possible ways for UTE and Techint to try and resolve the issue. Techint can either take the dispute to court or resume “a reasonable discussion” to find a consensus.

The Uruguay Brazil electricity connection will be 350 kilometers running from Melo to San Carlos and then another 50 kilometers to Brazil. Techint maintains that UTE incorrectly analyzed the route’s terrain and as a result Techint will have to replace 300 of the connection’s 900 power line towers.

This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

UTE rejects Electroingeniería’s bid for new power plant; Hyundai’s bid new preliminary selection

Electroingeniería lacks the experience for the project

UTE, Uruguay’s state power company, has decided to reject Electoingeniería’s bid to construct a combined cycle power plant in San José because it did not meet the state requirements. The news was an “absolute surprise” to Electroingeniería. Hyundi HDEC’s bid is UTE’s new preliminary selection.

After a month of analysis, UTE’s technical commission decided to reject the Argentinean firm’s bid to construct the combined cycle power plant in Punta del Tigre, San José. Electroingeniería’s bid was UTE’s preliminary selection because it was the lowest cost bid entered.

UTE’s board of directors voted unanimously to reject Electroingeniería’s bid. The technical comission’s report had advised, “electroingeniería has not met the capacity and experience requirements of this tender, since they were never the principal contractor in the background history they presented”. The board of directors concluded “we reserve the exclusive right to judgment [on the contract] and definitively rescind acceptance of this offer”.

The Partido National’s UTE board member, Enrique Antía, told El País that the technical commission’s criticism of the company’s background “was overwhelming” . He stressed that the board’s issue “was not technical problems”.

The UTE lawyers closely investigating Electroingenería’s work history warned the technical commission that the Argentinean company had no experience as a contractor and therefore could not be put in charge of a project requiring a $500 million USD investment and which would eventually produce 580MW, close to half of all Uruguay’s electrical usage.

Mr. Antía, speaking on the board’s decision said “it was not a surprise. There was always a strong belief that technically Electroingeniería was not the best [company] to award UTE’s contract to”.

The Argentinean firm said that the decision was received “absolute surprise, given that our offer is the best technically and economically [it was the lowest bid at $531 million USD], it saves the country $78 million USD”.
Although Electroingeniería admitted that the tender “is a process regulated by Uruguay’s public law”, the business confirmed that they did not know the reasons they were rejected and they “hope to learn the details of the decision so [they] can evaluate the next steps”.

The other firms which participated in the tender speculated the reason Electroingeniería’s bid was rejected was the lower capacity of their proposed turbines. However, the UTE’s board of directors dismissed these claims.

Hyundai HDEC’s bid is now UTE’s preliminary selection

With Electroingenería’s bid rejected, the Korean company Hyundai HDEC is now the preliminary winner. Hyundai HEDC should not be confused with Hyundai HEC, who was barred from the tender after they falsified the work history they presented to UTE.

Hyundai HDEC must present all the technical documentation on their proposed turbines and their previous experience with this type of contract by Wednesday, October 3rd. Once Hyundai HDEC has presented all the documentation, the technical commission has 20 days to study it and evaluate the company’s ability to construct the first combined cycle power plant in Uruguay.

Mr. Antía declared that Hyundai HDEC “has a solid history of constructing power plants with similar characteristics”. However he also stressed that “[the board] is going to review all the information to learn if the company will comply with everything before we sign the contract.”

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper El País. The original Spanish language article is available here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s government unveils new incentives for foreign tourists

On Wednesday September 26th, Uruguay’s Economy and Tourism ministers, Fernando Lorenzo and Liliam Kechichián, and the director of the DGI (Uruguay’s tax agency) Pablo Ferreri, announced the Uruguayan government’s new incentives for foreign tourists. Argentina’s currency controls are expected to severely hurt tourism in Uruguay, so the government is creating several incentives to lure Argentinians and other foreign tourists into Uruguay. There are new five incentives designed to encourage foreign tourists:

22% discount on VAT taxes

Foreign tourists will pay 22% less in VAT taxes when they spend money on dining, catering, shopping, events and car rentals. To receive the discount they must pay with credit or debit cards issued outside the country.

10% VAT discount on real estate rentals

Tourists must pay with foreign credit or debit cards and the rental must be registered.

More areas will be “tax free”

Salto, Pausandú and Fray Bentos will be tax-free for foreign tourists in addition to the usual tax-free zones. There will be no IVA tax on leather goods, clothing, food, drinks and artisanal products in the three cities. The discount applies to products produced in Uruguay and abroad.

Fuel vouchers

Vehicles with foreign license plates will receive one voucher for $25 dollars worth of fuel.

Phones and communication

Foreign tourists will be eligible to receive special benefits on phone and broad band service from Uruguay’s state telecom Antel.
The first two incentives will be in effect from between November 15, 2012 to March 30, 2013. The fuel voucher will be available between the 15th of December, 2012 and will also last until March 30, 2013.

This Uruguay Business Reports news article is a translation of a new story that appeared in the Uruguayan newspaper El Observador. The original article is available here in Spanish. Uruguay Business Reports translation by Donovan Carberry.

SUPRAMAR inaugurates a new warehouse in the Port of Montevideo

Supramar, a company specialized in storage, regional distribution of goods, and logistics consulting services continues to grow and in the next few days will outfit its second warehouse in the port of Montevideo. Since 1994, Supramar has developed its activities in international trade across South America, from storage to delivery, always maintaining strict security up to international standards. This warehouse, located in one of the oldest buildings in the port, it dates from 1880 and is a historic landmark, has been restored and put back into service by Supramar. The inauguration ceremony is scheduled for September.  The inauguration ceremony will include the heads of the National Administration of Ports, special guests, and business leaders from within the sector.

This Uruguay Business Reports news article is a translation of an news story that appeared in TodoLogistica. The orgininal article, in Spanish, is available here. Uruguay Business Reports translation by Donovan Carberry.

Uruguayan government sees another capitalization of public airline Pluna as inevitable

Economy Ministry says injection of money is vital; ANCAP gives Pluna until the end of the month to pay fees

The executive branch wants the public airline Pluna SA to take a “short-term” exit in order to repair is losses of $11 million USD and meet obligations to its creditors, such as the public fuel company ANCAP. The state (which owns 25% of Pluna SA shares) has insisted on this option for the past year, but it has been resisted by the private investment group who owns the majority of the company’s stock (75%).

As of yesterday, Pluna SA had not replied to ANCAP’s demand that they pay February’s $1 million USD cash payment which is part of a $5 million USD refinancing program. The director of ANCAP, Juan Gómez, told El Observador that organization intended to give Pluna “until the end of the month” to normalize its debt, otherwise it would opt to cut off its fuel supply.

The Economy and Transportation ministers have closely followed Pluna’s financial situation. The minister of Transportation, Enrique Pintado, chose guarded silence until his appearance before the Senate Transportation Committee on May 29th.

Economy ministry sources stated that if a business “has a deficit and can not make the payments, it has to raise capital. You don’t have to raise capital if you are capable of making the payments through growth, but when you can’t do that, you don’t have many alternatives. The government’s position is that the business has to raise capital”.

At the last Pluna shareholder’s meeting in February, they decided not to capitalize the airline despite the fact that the last balance sheet closed with $11 million USD in negative assets. The private investment group based its product position on a positive operating result of $4.2 million dollars which has not been achieved since 11 years ago.

Nevertheless, the Economy ministry warned that to not inject capital in the business would “compromise” the airlines ability to function. “If there are losses and it can’t pay its creditors (like ANCAP), it is perfectly possible to go bankrupt” alerted the ministry. “The state is capable of providing the necessary capital. This isn’t something out of this world; all airlines have problems”. If they inject new funds in Pluna and maintain the same balance, the state would have to provide $2.75 million USD and the private investors $8.25 million USD. The only capitalization since new management and the Canadian investment group Jazz came in 2010. In that instance, the private investors provided $15 million USD and the state provided $5 million USD.

Argument over fuel costs

Sources tied to the LeadGate group, the principal private investor in Pluna, argued that the company’s slowness in paying ANCAP was, besides the problems caused the global crisis and new costs, due to the fact that the price of ANCAP is 10% higher than the region’s and 40% more that what airlines in Argentina pay.

Pluna SA “is not considering” the possibility that ANCAP will cut of its fuel supply, “since what is being proposed is a renegotiation of the payment time frame” they explained. What’s more, last year the airline paid $34 million USD to ANCAP for fuel purchases.

The Economy ministry said that “the price of fuel has not increased here more that it did internationally”.

This Uruguay Business Reports news article is a translation of new story which appeared in El Observador . The original article, in Spanish, appeared is available here. Uruguay Business Reports translation by Donovan Carberry.

President Mujica announces bill to give ANTEL a monopoly on fiber optics; In the “next few days” he will send to Parliment a draft bill, announced presidential secretary Alberto Breccia

In the middle of the controversy concerning the use of home fiber optics (for internet service) by private telephone companies Claro and Movistar, the Uruguyan government has decided to send a new bill to parliament to give a monopoly in this area to state-owned ANTEL.

“An announcement by the President of the Republic, in the next few days he will have created, with the Minister of Industry, draft ledgislation to grant a monopoly on the use of public fiber optic cables to ANTEL”, said the Presidential secretary, Alberto Breccia, after a cabinet meeting.

The government’s idea, in principal, is to establish this monopoly by decree. Nevertheless they are restrained and limited by the earlier Telecommunications Law. The president created a surprise today with the news, since according to Breccia this bill will be a separate project.

The controversy surrounding private use of  fiber optic cables was generated at the end of 2011 when the Communication Services Regulatory Unit (Ursec) detected that the company Claro was selling home fiber optic services to private companies in tax free zones. After Ursec proved the allegations, Claro was forced to disconnect these services.

Claro defended selling data transmission by using this tool arguing that a legal vacuum existed.

ANTEL’s monopoly only applies to land based telecommunications.

Private telephone companies today sell internet services but by satellite not by cable.

This is a translation of an article that appeared in the Uruguayan newspaper El Observador. You can view the original article, in Spanish, here.