MDM Amendment on Renegotiating Contracts Defeated

19 May 2011

Maputo — The Mozambican parliament, the Assembly of the Republic, on Thursday rejected a call by the opposition Mozambique Democratic Movement (MDM) that the government should unilaterally renegotiate contracts signed with mega-projects.

The MDM moved its amendment during the second and final reading of a government bill on public-private partnerships, large scale projects and business concessions.

The amendment the MDM wished to insert read “if the macro-economic and social context is unfavourable to the treasury, the government shall take the initiative to renegotiate the contracts”.

The government, backed by the majority Frelimo Party, argues that any renegotiation should be a matter of consensus between the government and the company concern, and should never be a unilateral imposition.

The government text read “through mutual agreement between the contracting parties, renegotiation of contractual clauses is permitted, in order to ensure the prevention and mitigation of risks, and the equitable sharing of the benefits from the undertaking”.

The MDM, however, insisted that the government had the sovereign prerogative to renegotiate contracts in a hostile economic environment. “The initiative must always come from the government”, declared MDM deputy Jose de Sousa.

The MDM amendment went down to defeat, since all 172 Frelimo deputies in the chamber voted against, and only the seven MDM deputies were in favour. The largest opposition parliamentary group, that of the former rebel movement Renamo, boycotted the debate on this law, walking out of the chamber, just as it had done on the two previous days.

Frelimo said it was rejecting the MDM amendment because it believed the question of renegotiation was adequately covered in the government’s text.

Frelimo deputy Danilu Ragu said that the government was a partner of the mega-projects. It could not decide to renegotiate contracts unilaterally “because this will scare off investments”.

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