The Luis Muñoz Marin International Airport Privatization: A Bad Deal For The U.S. And For Puerto Rico

RE: FAA-2009-1144

On September 28, 2012, the Federal Aviation Administration (“FAA”) will hold ONE day of hearings in Puerto Rico in order to receive comments on the proposed privatization of the Luis Muñoz Marín International Airport in Carolina, Puerto Rico (“LMM”). That privatization, if approved, will take the form of a 40-year lease to Aerostar Airport Holdings (“Aerostar”), a consortium formed on a 50%-50% basis between Aeropuertos del Sureste (“ASUR”), the Mexican operator of various airports in the Southern part of Mexico, and Highstar Capital (“Highstar”), a U.S. investment fund. This privatization project has been sponsored by the Puerto Rico Ports Authority (“PRPA”) and the Puerto Rico Public-Private Partnerships Authority (“P3A”).

From its beginning, this privatization process has been plagued by questionable practices on the part of the P3A, such as contracting as advisors entities that would later become bidders in the privatization process, and contracting as a legal advisor a firm that previously had bidders as its clients. Despite having received several complaints regarding these actual or potential conflicts, the P3A, the PRPA and other governmental entities (such as the Attorney General,  Office of the Comptroller, the Auditor General and the Governmental Ethics Office) chose to take no action, and allowed the bidding procedure to continue, until Aerostar was chosen as the winning bidder. On its merits, it is clear that this privatization transaction has been undertaken on the basis of a “Study of Desirability and Convenience” containing many erroneous premises, and drafted with the sole purpose of justifying the conclusion to which the P3A wanted to reach. Once the Aerostar choice was made and the details of the transaction finally came to light, it has become clear that privatizing LMM would come at a great loss to the people of Puerto Rico and the U.S. taxpayer, and would create great economic and security risks for both nations.

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