You are here: Home > Transportation > Peru: The saga of a car deal gone bad

Peru: The saga of a car deal gone bad

Most of us have bought a new or used car at least once in our lives. If you haven’t, maybe you have at least tried and experienced the nature of a negotiation with a car dealership. Many have adopted the common stereotypical perception that a car salesman can be unscrupulous and dishonest at times in their pursuit to collect the highest possible profit margin. And it doesn’t really matter if you try to buy a VW bug or a government tries to buy 469 Hyundai police cars with the exception that there is probably more wiggle room and you are spending taxpayers money instead of your own.

Since this saga has filled the daily headlines in Peru on a daily basis for almost a month now, and several heads have rolled on both sides of the deal, including the one of the Interior minister, I refrain from bothering you about the details again which in all possibility are known even Peru’s remotest areas. Instead I will give you a brief summary of the events:

1. News transpires about an overpriced purchase of 469 Hyundai police patrol cars by Peru’s government from the Gildemeister car dealership. First reassurances were that everything was correct and went its normal way.

2. All smoke and mirrors. The contract was signed for over market price value for each car instead of negotiating a huge discount considering the huge number of cars.

3. Interior Minister Pilar Mazzetti assures she has no intention of stepping down. There were some bad apples in her ministry who negotiated the deal and they would be fired. Prime Minister announces that a special commission (now referred to as the Webb commission) would renegotiate the deal.

4. Current health minister Vallejos reveals that there was also a strange looking deal for 96 Hyundai ambulances during the previous Toledo administration in which Mazzetti was the health minister. The pressure mounts.

5. Mazzetti relents to the pressure and resigns. Luis Alva Castro is appointed Interior Minister, a party friend of president Garcia.

6. Gildemeister admits there were irregularities with a third party. Two executives are fired.

7. The government announces that the renegotiation has been completed and the State would save 10 million soles (US$ 3.2 mln.). President Garcia praises the work of the commission and says that state has not paid one centimos as of yet.

8. In a surprising announcement, Garcia advances there are still contractual problems and the car delivery has been put on hold. He offers 3 alternatives: annulment of the deal, a new public bidding process, or he could renegotiate the contract himself. He also announced that all state purchases of the last 10 years would be reviewed and that from now on am external, independent expert group would oversee all state acquisitions.

9. The whole deal was canceled. The Peruvian Government and the car dealership Gildemeister decided to annul the contract.

10. Prime Minister Jorge del Castillo declares that Gildemeister will return an S/.11 million advanced payment made by the State.

In Peru you cannot openly accuse someone directly of corruption unless you have hard evidence or you are the president. Otherwise you can get in deep legal trouble. I don’t have them, I am not the president, and I don’t want to get into trouble, so I am not accusing anyone in particular. But I sure can smell the coffee and I can voice my opinion.

If the government of the third largest country in South America cannot even purchase a couple of cars without looking for the best deal available, how embarrassing is that. Ok, it could have been a one time mistake but that’s most definitely not the case. Even the president knows that or why else would he have the deals of the last 10 years reviewed. And I don’t care if the bad apples are high officials, nominal members or just a part of the apparatus.

Would you want to be involved with someone or trust someone who cannot even look for the best deal when buying a bag of beans in a supermarket? With your own money that is? It probably wouldn’t matter much if you have enough to spend but that is not the case in a poor country like Peru.

No wonder Peruvians are fed up with (any) government, the state apparatus, the justice system, the police force, any state form, and politics in general. Too many of them have been betrayed numerous times and left alone when they needed help or support.

And that is why they give their vote to the “lesser evil” come election time. It will take years, maybe decades, to restore their trust in public institutions.

Editorial by Wolfy Becker

?>