Korea-led $597 million light rail project in Paraguay canceled over cost dispute

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Korea-led $597 million light rail project in Paraguay canceled over cost dispute

Published: 09 Sep. 2024, 17:02 Updated: 09 Sep. 2024, 18:38

An aerial view of a light rail transit station and train in Uijeongbu, Gyeonggi [U LINE]

Korea's bid to build a light rail system worth millions of dollars in Paraguay ultimately fell through despite years of combined efforts from its public and private sectors.

Paraguay’s state-owned rail operator, Fepasa, announced Sept. 6 that its proposed deal with Korea had fallen through and that it is now considering negotiating with domestic firms to pursue the project.

The proposed project to build a 45-kilometer (27.96-mile) route connecting the town of Ypacaraí to Paraguay's capital city of Asunción had an estimated value of approximately 800 billion won ($597 million).

A consortium of public and private Korean entities including Korea Overseas Infrastructure & Urban Development Corporation, Korea National Railway and Hyundai Engineering was set to oversee the project.

Korea's Ministry of Land, Infrastructure and Transport signed a memorandum of understanding with its Paraguayan counterpart to collaborate on the endeavor in 2021. The Ministry expressed optimism about the project at the time, viewing it as a pioneering venture to export a comprehensive railway system, including infrastructure, traffic management and operations.

The negotiation, however, reached an impasse when Paraguay rejected Korea's request to adjust the contract to account for increased costs.

Fepasa President Facundo Salinas said that while Korea had initially offered to handle construction, civil engineering, technical support, operation and maintenance for the project, the revised proposal only covered specific sections and required 50 percent financing for civil engineering.

Salinas added that the negotiations had been amicable and that the diplomatic ties between the two allied nations would remain unaffected.

BY KIM CHEOL-WOONG [yoon.seungjin@joongang.co.kr]