The real beneficiaries of Madrid’s disastrous toll roads

Franco family among those who profited from billions paid out to expropriate land

The R-2 toll road as it reaches Madrid.
The R-2 toll road as it reaches Madrid.Cristobal Manuel

On December 22, the day Spain’s Christmas lottery is held, Pedro Guadalupe Rivas and his family enjoyed a very different kind of win. The Supreme Court notified them that it had just confirmed the ruling increasing the value of a 860-square-meter patch of land they owned, which had been expropriated to build part of a toll road in the eastern suburbs of Madrid, from €26,456 to €2.768 million.

That’s to say the price, initially set at €28 a square meter, had risen more than a hundredfold to €3,161 a square meter. The land, which had been zoned for construction, was subjected to a forced sale in order to build a roundabout in the working-class neighborhood of San Blas to provide access to the R3, a new radial toll road designed to offer a short cut out of the capital, joining the A3 motorway – which runs to Valencia – after 35 kilometers.

The Rivas family is not alone in benefiting from a poorly thought-out scheme of six radial toll roads supposed to provide speedy access into and out of the capital. The government has paid out around €2 billion in expropriations alone, much of it to people who had inherited terrain they had no idea they owned, along with landowners, construction companies, and some big-name families, including the Francos.

The number of vehicles using the AP41 between Madrid and Toledo is 82 percent lower than calculated

The roads are chronically underused, and all are either the subject of insolvency proceedings or close to bankruptcy: the R2, for example, which runs in two stretches for 62 kilometers to link the M-40 and M-50 outer ring roads and the city of Guadalajara, northeast of Madrid. The main beneficiary seems to have been the De Jove family, landowners from Seville who were paid €40 million for a 600,000-square-meter patch of land used to build 2.5 kilometers of road, along with an access and exit ramp on land that was not originally zoned for construction. But the courts decided differently, ruling that as the M-50 was designed to ease congestion in Madrid, land within it should be zoned for construction.

When the radial routes were planned 15 years ago, it was estimated that the state would have to pay out €387 million to expropriate the necessary land. The total cost for the eight companies running them will be €2.190 billion. The remaining €1.199 billion will come from the taxpayer.

The R-2 alone has cost €470 million, of which €350 million has been paid out. Financier Juan Abelló is due to receive €40 million, plus interest, for 20 hectares of a 180-hectare piece of land his father bought 50 years ago.

Traffic estimates for the roads were wildly overestimated: in the case of the AP41 between Madrid and Toledo, which is now the subject of insolvency proceedings, the number of vehicles using it is 82 percent lower than calculated. The build-operate-transfer system means that the concession holders could take the risk knowing the state would bail them out.

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Costs have also been driven up by the practice of buying up twice as much land as required. This could have been a precautionary measure: to cover for the event that the roads might need widening in the future. But critics suspect that the construction companies bought up huge chunks of land around Madrid knowing they would be paid high prices when they were expropriated.

Furthermore, there was no transparency during the planning stage, and none of the routes were subjected to any public scrutiny. This speeded up the process, but also meant the courts were more generous in compensating landowners who had not been previously consulted.

Some landowners didn’t even bother to go to court, instead doing landswaps with the local authorities and the concession holders. In June of 2000, the local council in Arroyomolinos signed a deal with construction company Valdefuentes, which was building the R-5, which links up with the A-5 route to Portugal.

Valdefuentes owned 15.8 hectares of land not zoned for construction that was expropriated. The concession holder paid the local council €887,000 for the land owned by a number of families, including that of former dictator General Francisco Franco. In return for not taking the matter to court, the local council gave them another piece of land that had been zoned for construction. Francis Franco, the former dictator’s eldest grandson, owned half of Valdefuente.

One judge who oversaw several of the expropriations during the construction of the R-5 notes: “There are a great many more landowning families around Madrid than I imagined.” The Spanish taxpayer is about to find out how many.

Playing the system

José Manuel Serrano Alberca has worked as a lawyer for the Spanish Congress at the same time as pursuing cases against the state. He likes others to see him as responsible for a number of legal arguments that have forced the courts to compensate landowners generously.

“If you build an airport close to an urban area, why should the owner of land where the airport is to go take the entire burden? The courts set prices high because they compare profits and costs between those who have had their land expropriated and those who have not,” he explains.

Serrano Alberca retired from his post in Congress in January, but sees no conflict of interest in having been a civil servant for decades and having designed a system that is bleeding the state dry to the benefit of a few individuals: “I can practice law as long as I don’t go after Congress.”

His law firm has cases pending worth €68 million, most of them related to land re-evaluations, a procedure that landowners can request to speed up compensation for expropriated land.

The system has created a profitable line of work for a small group of specialist law firms, the majority charge a percentage of what the landowner receives.

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