MercoPress. South Atlantic News Agency

Uruguay must pay some US$ 80 million for the 2012 closing of Pluna

Mujica argued that these things happen because litigations of this nature are always held in New York or Paris

After a ruling issued Tuesday by a World Bank arbitration tribunal, the Uruguayan State will have to pay some US$ 30 million over the closing of the former flag carrier Pluna, which has triggered reciprocal accusations between the country's main political forces ahead of this year's presidential elections.

The international lawsuit before the US-based International Center for Settlement of Investment Disputes (ICSID) was brought forward by Latin American Regional Aviation Holdings (Larah), a Panamanian company holding shares in the airline. It was ruled that Uruguay must pay the company some US$ 80 million (US$ 30 million plus interest) with a fine of US$ 500,000 for each month that the Uruguayan government fails to comply. Larah had requested in its 2019 filing a total of US$ 860 million.

Larah, owner of the legal rights of Leadgate, majority partner of Pluna at the time of the airline's closure in 2012 under then-President José Mujica (2010-2015), based its claim on an alleged breach of the 1998 investment protection treaty between Uruguay and Panama.

The Panamanian company accused the Uruguayan government of creating unnecessary liquidity problems, as well as arbitrarily rejecting additional credit lines that could have prevented the airline's bankruptcy.

National Party presidential hopeful Álvaro Delgado said he was “outraged” by the ruling because the matter was inherited from the Broad Front (Frente Amplio)administration. He also praised the current government's efforts to bring down the amount from over US$ 800 million. However, it must still be paid, Delgado stressed while insisting that this outcome was a consequence of “a bad business done by the FA governments.”

Defense Minister Javier García said the ICSID ruling was “terrible news” because “we Uruguayans are going to have to pay more than 30 million dollars out of our own pockets for a ruinous business.” He also foresaw it would be obvious that no FA candidate would be willing to discuss the issue at this point in the electoral race.

However, Canelones' FA Mayor (Governor) and presidential frontrunner in the primaries according to most surveys said “This is all cooked up in the north, they solve it for you there. Let's not forget what happened with the tobacco companies. It is something that no government can escape.”

Montevideo Mayor Carolina Cosse, also an FA contender pointed out that “you can't take out one point and have that explain the whole movie.” She insisted that the closing of Pluna was “a complex phenomenon” that started “long before the FA governments.”

The octogenarian Mujica explained that “Pluna was dead a decade ago” and that closing it was the only solution. Regarding the ruling, he argued that it is the price Latin Americans pay for not having a court on commercial law.

“It is the price we pay for dependence, Latin Americans have managed to make a court on human rights, but in matters of commercial law we depend on the rulings in the Justice of the rich world,” he told VTV Noticias. He also wondered if “we should not demand” that foreign investments “have to adapt to Uruguayan law”, given that since there is no court in matters of commercial law in Latin America “everything goes to New York or Paris.”

Mujica also recalled that everything that had been done by previous governments to save Pluna, such as an association with Brazil's Varig, “the only thing that did was to aggravate the matter.”

“Someday it may be that the generations to come will come to their senses” and “a court of law can be created to force multinational companies and foreign investment to litigate here,” Mujica underlined.