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Article Excerpt
Guatemala's one and only railroad has shut down operations in what appears to be an attempt by powerful local sectors to take back the system from a US company. The railroad officially shut down in September, as Pittsburgh-based Railroad Development Corporation (RDC) announced it would do in July. Henry Posner III, the company's owner, said then the company would operate until Sept. 30 to fulfill certain legal obligations.
Ferrovias, as the RDC company in Guatemala is called, operates a single line between Puerto Barrios and Guatemala City. The railroad moves 15% of the cargo from the Caribbean port bound for the capital and 90% of the iron imported to the country. The business began in 1998, when the government entered into a 50-year contract with the company (see EcoCentral, 1997-06-17). In 2005, the company sued the government, alleging failure to comply with the state's obligation to remove squatters from the right-of-way and pay US$3 million to maintain the line.
The government responded by announcing that continuation of the concession was no longer in the interest of the country. With its legal basis under a cloud, the company lost clients, access to credit, and police protection.
The company sued, asking US$65 million in the US courts. The company, through its lawyer Juan Pablo Carrasco, said this amount was the total of US$15 million it had invested in restoring 200 km of track and US$50 million it would lose in revenues and fines for canceling its contracts.
Government spokesperson Julio Corado called the company decision "an internal decision that the Guatemalan government respects."
The company gains international legal support from the provisions of the Central America Free Trade Agreement (CAFTA) in the lawsuit. It has filed the claim against the government with the International Center for the Settlement of Investment Disputes (ICSID) for three separate violations of CAFTA investor-protection clauses.
Carrasco said under the...
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More articles from NotiCen: Central American & Caribbean Affairs
NICARAGUA AND COLOMBIA IN NEW ROUND OF FIGHTING OVER ARCHIPELAGO--COUL..., September 20, 2007
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