Timeline: Arbitration opens new chapter in Uruguay’s controversial US$1.5bn rail PPP

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Nearly a year after beginning operations, the US$1.5bn Central railroad PPP is once again causing headaches for the Uruguayan government, as consortium Vía Central has opened arbitration proceedings over alleged delayed payments.

This will be an issue to resolve for the government of president-elect Yamandú Orsi, who takes office on March 1.

December 6, 2017: Uruguay’s public works ministry (MTOP) officially launches a PPP tender for a new 273km freight rail line between capital Montevideo and the city of Paso de los Toros in Tacuarembó department.

The project is part of an agreement between the government, then led by the Frente Amplio coalition, and Finnish firm UPM, in which the latter would invest US$5bn to establish a second pulp mill in the country and use the new rail line for transport operations.

The line would also be available to transport other cargo such as ore, wood, grains and other goods.

June 22, 2018: Three bids are opened for the PPP contract, despite media reports claiming potential contractors are doubtful of the economic conditions.

A source from one of the bidders, local engineering and construction firm Saceem, says the company has decided to proceed but "with reservations."

August 2, 2018: MTOP suspends the tender following a complaint from Acciona regarding its disqualification over not presenting adequate documentation. The Spanish firm alleges the process was "non-transparent, arbitrary and unjustified."

Another bidder, a consortium compromising Chinese firms China Machinery Engineering Corporation (CMEC) and Shandong Hi-Speed Group (SDHS) is also disqualified due to a lack of documentation.

This leaves Grupo Via Central, formed by Uruguayan firms Saceem and Berkes, France's NGE and Spain's Sacyr, as the sole bidder. But they also present a complaint over the technical score it obtained during the process.

September 5, 2018: MTOP opens the economic bids, with Grupo Vía Central as the sole bidder.

May 13, 2019: The contract is officially signed following delays in environmental approvals caused by a conflict between the housing and environment ministries and their main unions.

May 23, 2019: Works officially begin.

February 28, 2020: Shortly before the Frente Amplio coalition leaves government, having lost the elections to a multi-party coalition comprising several centrist and right-wing parties, a member of the conservative Cabildo Abierto party claims to have enough signatures to call a referendum that would allow residents of seven municipalities to decide whether they wanted the 273km rail line to pass through their towns.

April 24, 2020: Uruguay’s electoral court rejects the push for a referendum on the line, saying the petition is inadmissible.

October 28, 2020: The project is behind schedule as conflict brews between UPM and the government over one of the studies used to draft the design, which ended up seriously underestimating the amount of land that would have to be acquired, among other errors.

The original survey outlined that around 250 lots of land would have to be purchased, when the actual number turned out to be more than 1000.

April 6, 2021: The completion deadline for the rail line is pushed back from September 2022 to May 2023 due to the delays linked to the botched land study and the COVID-19 pandemic.

January 10, 2024: Works are now expected to be finished by the first half of 2024.

April 2, 2024: The port of Montevideo receives the first shipment of pulp transported on the new rail line.

February 23, 2025: Grupo Vía Central releases a statement announcing it has started arbitration proceedings against MTOP, claiming it has not received payments since December 2023.

The consortium says that it had worked with authorities throughout 2024 and signed several agreements, including a new amendment to the original PPP contract in 2025.

“Despite these agreements and the project’s success, which has provided Uruguay with world-class rail infrastructure, the administration has not fulfilled its obligations,” the operator said in a release, claiming that the project is now in a “critical financial situation.”

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Timeline: Arbitration opens new chapter in Uruguay’s controversial US$1.5bn rail PPP

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