Meco S.A., the favorite construction company in the reign of Varela

Political connections and personal friendships with the government's close entourage of power are the key to business success.

This is certainly the case for Meco S.A., a Costa Rican company that has managed to become the number one contractor for the Panamanian state under the administration of Juan Carlos Varela.

Since the beginning of the current government, Meco S.A. has clocked up more than 20 infrastructure contracts, including road works, bridges and aqueducts.

According to documents from the Public Works ministry, Idaan and Conades that this newspaper has had access to, the contracts have an aggregate value in excess of one billion dollars.

This amount is comfortably in excess of that which traditional contractors to the state have managed

o achieve.

This remarkable success stands in contrast with the difficult beginnings that Meco S.A. have had with the Varela administration, for the simple reason of being awarded contracts under the earlier administration of Ricardo Martinelli.

Upon taking power in July 2014, President Varela contacted Meco S.A., as well as other contractors, and tried to have them build and donate a school.

For that purpose, the programme “My School First” was conjured up and assigned to Miguel Angel Esbri, who was named Secretary of Economic and Competition Matters at the presidency, a position that earned him a salary of $6,000 per month. An opus De contact of President Varela, he took it upon himself to put pressure and threaten a number of businessmen linked with the Martinelli administration in order to have them build a school for free.

However, the project came to nothing and, as a result, the public ministry launched a legal investigation against those very companies that Mr. Esbri had unsuccessfully attempted to force into a donation.

Meco SA was one of the few contractors from the previous administration who actually agreed to build the school. Yet the goal of the Costa Rican company was always to open a breach within the Varela administration for greater things.

For that purpose its president, Carlos Cerdas, established a connection with the key person and someone in a position to open doors within the Varela Administration: Pedro 'Peter' Vallarino, owner of Airco S.A.

Having established a link with Mr. Vallarino, all changed for Meco S.A: contracts began to materialize, reaching a grand total of $1,088 million in the two and a half years of the Varela government. Road works, bridges, aqueducts and schools are part of the infrastructure works that Meco has been contracted for by the Varela administration.

Mr. Cerdas has duly attended all official inauguration acts in which President Varela participated, showing a close relationship with the president and his executive team. The latest public work to be officially awarded to Meco S.A. was the construction of the Eastern Superior Technical Institute, for a price tag of $200 million.

Meco S.A. originally specialized in the construction and the operations of road infrastructure, but has lately changed its strategy and opted for different public works such as water treatment and sewage systems.

Its objective is to gain a share of the $700 million worth of contracts that Idaan is planning to award for the aqueducts and sewage works in Chepo, Santiago, Chilibre, David, Gamboa and West Panama.

The company’s strategy has yielded results: Idaan adjudicated the first project of this infrastructure programme to Meco S.A. The project contemplates the construction of a system of waste water collection and treatment facilities in the city of Santiago, and has a value of $95.5 million.

Other large awarded to Meco S.A. by the Varela administration are: the construction of the road between Vigui and San Felix, for $226 million; the road between Pedregal and Gonzanillo, known as the highway of the poor, for $96.9 million.

Thanks to this substantial portfolio of infrastructure works in Panama, Meco S.A. has diversified successfully from being the primary public tender contractor in Costa Rica.

Local lawyer Ernesto Cedeño highlighted that while there is no law prohibiting the accumulation of public contracts, such practice does increase the risk of successful completion. 'Logically, if the firm failed to complete, or comply with, a specific contract, that could have a ripple effect on other contracts', he explained. He added that there exist a risk of contract hoarding on the part of these companies, which in turn raises the possibility that they may not have sufficient staff to comply with contract requirements, leaving them to resort to subcontracting.

“The other issue with so many contract being won is whether they were awarded by open tenders or directly, a distinction which has a very important bearing on transparency”, Mr. Cedeño pointed out.