Uruguay to cancel $92M patrol ship deal with Spain’s Cardama over suspected fraud

Uruguay will terminate its 2023 contract with Spanish shipyard Cardama for the construction of two vessels after authorities uncovered alleged irregularities in the guarantees supporting the deal, the government said on Wednesday.

President Yamandú Orsi, speaking at a press conference, said there were indications of a scam or fraud against the Uruguayan State.

He announced that both civil and criminal proceedings would be initiated and signed a resolution to enforce the project’s performance bond before its expiry.

Orsi had directed Uruguay’s ambassador to the United Kingdom to visit the offices of the company that issued the guarantee.

Following that mission, the government filed a formal complaint with the Civil and Criminal Courts based on the findings, he said.

Repeated delays and rejected guarantees

Deputy Secretary of the Presidency Jorge Díaz said the contract between the Uruguayan government and Cardama required the Spanish shipbuilder to provide a performance guarantee within 45 days of signing.

The clause was intended to ensure compliance with the company’s contractual obligations, Díaz noted.

"Cardama failed to meet the deadline and kept requesting extensions," she said.

"Those 45 days lasted eleven months. During that period, Cardama launched seven separate processes to certify guarantees, all of which were denied."

When the deadline had already passed, the company produced a performance guarantee, issued by Eurocommerce Ltd., a UK-based firm.

The Uruguayan government approved this paper, although it did not entirely match the contractual criteria.

Questionable guarantee and phantom company

As the September 22 deadline approached, Cardama was obliged to offer a new and valid guarantee.

President Orsi opted to begin the process of carrying out the current one, instructing the ambassador in London to formally notify Eurocomerce Ltd. to deposit the guaranteed monies in a Uruguayan government account.

However, when the ambassador arrived at the provided address, he discovered that no such company existed there.

A law firm later alerted Uruguayan officials that Eurocomerce Ltd. was "under liquidation" and would soon be deleted from the official record.

There are strong indications that this company is a shell entity and that we may be facing a fraud against the Uruguayan State, since this guarantee may not actually exist, Díaz emphasised.

Contract termination and legal actions

Following these conclusions, President Orsi decided to initiate the procedure for terminating the contract, as a result of Cardama's failure to comply with the obligation to furnish a valid performance guarantee.

It marks a major escalation in what the government is now treating as a possible fraud case.

On December 15, 2023, the Uruguayan Ministry of Defence signed a USD 92 million contract with Cardama for two offshore patrol vessels to be used to enhance the country's maritime security and surveillance capabilities.

As irregularities have been found, and the guarantees seem to be insufficient, Uruguay is trying to recover funds and go against the responsible parties through legal actions.

Beyond that, there are questions about how international defence contracts can operate without effective oversight, and about the mechanisms that exist to ensure compliance with taxpayer mandates.