May 22, 2017 / 5:36 PM / 3 months ago

UPDATE 1-Peru cancels $525 mln contract to build Chinchero airport

(Adds resignation of transportation minister)

LIMA, May 22 (Reuters) - Peru has canceled a $525 million contract with a Peruvian-Argentine consortium to build an airport near the city of Cusco because of financing concerns, the transportation minister said late on Sunday just hours before resigning.

The consortium Kuntur Wasi, including Argentina's Corporacion America and Peru's Andino Investment Holding , signed a 40-year contract to build and operate the airport in the town of Chinchero near Cusco with former President Ollanta Humala in 2014.

The airport is intended help get tourists to and from the ruins of Machu Pichu, near the city of Cusco in southeastern Peru.

"The doubts have not dissipated despite the efforts we have put in...we have made the decision to cancel the contract," Transportation Minister Martin Vizcarra said in an interview with the television program Cuarto Poder late on Sunday.

On Monday Vizcarra, who is also vice president of Peru, announced that he had resigned as minister. Vizcarra's statement did not mention his reason for quitting.

"It is the right time, after serving as minister from July 28 of last year, to turn this responsibility over to someone else who has the confidence of the president," the statement said.

Earlier, Vizcarra said Peru would seek a new contract. He had previously expressed concerns the contract would leave Peru on the hook for paying high interest rates from the consortium's portion of the project's financing.

Kuntur Wasi said in a statement it regretted the government's decision and would evaluate legal action once it was formally notified.

Public work contracts have faced increased scrutiny in Peru since Brazilian builder Odebrecht revealed in late December that it distributed $29 million in bribes in the Andean country between about 2005 and 2014. (Reporting by Ursula Scollo and Teresa; Cespedes; Editing by Grant McCool)

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