Bank of China contributes $218.3 million to $311.9 million syndicated loan for 10 highway projects (Linked to Record ID#58983)

Project narrative

On November 24, 2014, the Government of Ecuador signed a $311,964,433.63 syndicated facility (loan) agreement with the Panama Branch of Bank of China Limited ($218,375,103.63 commitment) and Deutsche Bank AG, Hong Kong Branch ($93,589,330 commitment). The loan carried the following borrowing terms: an annual interest rate of 6-month LIBOR plus a 3.5% margin, a maturity of 13 years (final maturity date: November 24, 2027), a 3-year grace period, a 1% management fee ($3,119,644.34), a 0.75% commitment fee, a 2% default (penalty) interest rate, and a Sinosure insurance premium worth 7.01% of total principal and interest due to the lender. The borrower was responsible for making 20, equal, semiannual principal payments to the lender. The proceeds of the loan were to be used by the borrower to finance up to 85% of the total cost of a $367,016,980.74 commercial contract [RE-01-VO-MTOP-2014] between the Government of Ecuador’s Ministry of Transportation and Public Works (MTOP) and Sinohydro Corporation Limited, which was signed on July 2, 2014 and modified on July 14, 2015, September 11, 2015, and January 30, 2017. The loan’s (principal) outstanding amount was $186,812,583.33 as of December 31, 2021 and $155,677,152.79 as of November 30, 2022. The purpose of this project was to construct or rehabilitate 10 highways across six of Ecuador’s provinces: (1) reconstruction of the 54 km Tonchigüe-Galera-Bunche highway in Esmeraldas Province [Reconstrucción de la carretera Tonchigüe — Galera — Bunche con una longitud de 54 Km, incluye el inventario y evaluación de los puentes existentes, ubicada en la provincia de Esmeraldas]; (2) expansion and upgrading of the La Y—Km 20—La Margarita highway in Manabí province [Ampliación, rectificación y mejoramiento de la carretera Km 8 (Bahia) — La Y — Km 20— La Margarita, ubicada en la provincia de Manabí]; (3) rehabilitation and maintenance of the Chone—Canut —Calceta—Junin—Pimpiguasi highway, including the Junin bypass and bridges, located in Manabi province [Rehabilitación y mantenimiento de la carretera Chone — Canuto — Calceta — Junin — Pimpiguasi, incluye paso lateral de Junin y puentes, ubicada en la provincia de Manabi]; (4) construction of the Gastronomic Plaza in Guayas province [Construcción de la Plaza Gastronómica y servicios en Progreso y la corrección geométrica del distribuidor de tráfico y aumento del gálibo del intercambiador de Progreso, ubicada en la provincia del Guayas]; (5) rehabilitation and expansion of the 8 km San Vicente-Macul road, includes bridges, in the province of Guayas [Rehabilitación y ampliación de la vía San Vicente — Macul, longitud 8 Km, incluye puentes, ubicada en la provincia del Guayas]; (6) construction of the San Carlos-La Joya-Abdón Calderón road in the province of Guayas [Construcción de la vía San Carlos — La Joya — Abdón Calderón, ubicada en la provjncia del Guayas]; (7) maintenance and improvement of the El Salado-Lentag section, Lentag-San Francisco section, and San Francisco-Pasaja section of the Cuenca-Girón-Pasaje highway in the province of Azuay [Mantenimiento y mejoramiento de la carretera Cuenca - Girón — Pasaje, tramos: El Salado — Lentag, Lentag — San Francisco y San Francisco - Pasaje, ubicada en la provincia del Azuay]; (8) construction of the Sigsig-Matanga-Chiguinda-Gualaquiza highway (including the lateral pass) in the provinces of Azuay and Morona Santiago [Construcción de la carretera Sigsig — Matanga — Chiguinda — Gualaquiza (incluido el paso lateral), ubicada en las provincias del Azuay y Morona Santiago]; (9) reconstruction and maintenance of the Catamayo-Gonzanamá-Cariamanga-Sozoranga-Macará highway in the province of Loja [Reconstrucción y mantenimiento de la carretera Catamayo — Gonzanamá — Cariamanga — Sozoranga — Macará, ubicada en la provincia de Loja]; and (10) reconstruction of the Celica-Cruzpamba-del Muerto highway in the province of Loja [Reconstrucción de la carretera Celica —Cruzpamba — del Muerto, ubicada en la provincia de Loja]. Sinohydro Corporation Limited was the contractor responsible for project implementation. According to a list of internal and external credit contracts published by Ecuador's Ministry of Economy and Finance no disbursements had been made through this loan as of December 2016 and November 2017. As of March 2022, AidData still could not identify any evidence of project implementation. This project has also become a source of local controversy. Ecuador’s Office of the State Comptroller General's Office has criticized the Ministry of Finance and Economy (in a report with the following ID number: DADSySS-036-2015) for paying the Sinosure insurance premium before Bank of China and Deutsche Bank AG ever made a loan disbursement. In a separate report (DNA8-0002-2019) issued on February 4, 2019, the State Comptroller General's Office identified several other irregularities, including the fact that (a) Ecuador’s MTOP made an additional payment of $29,255,590.12 to Sinohydro Corporation Limited (due to an increase in the unit prices that were first specified in the July 2, 2014 commercial contract between MTOP and Sinohydro Corporation Limited), (b) subcontract amounts exceeded the values identified in the July 2, 2014 commercial contract between MTOP and Sinohydro Corporation Limited, (c) MTOP paid Sinohydro Corporation Limited $652,830.36 items that were never executed or did not meet technical specifications; and (d) MTOP failed to fine Sinohydro Corporation Limited for breaches of contractual clauses.