Panama says canal work suspended, company denies

PANAMA CITY, Panama – A dispute over a $1.6-billion cost overrun in the Panama Canal’s expansion took a new twist Wednesday, February 5, after a Spanish company leading the project denied it halted work over the spat.

The Panama Canal Authority said the consortium led by Spanish builder Sacyr stopped work after negotiations broke down, but the company later announced that it made a “final offer” to prevent a shutdown.

The two sides have locked horns since December over overruns on widening the canal to accommodate massive cargo ships in the century-old waterway, which handles five percent of global seaborne trade.

Panama Canal Authority administrator Jorge Quijano said the “inflexible position” of the consortium known as Grupos Unidos por el Canal (GUPC) had derailed the negotiations.

“They put a threat on the table, and today (Wednesday) they carried it out,” he said.

“We demand the work be restarted immediately,” Quijano said, adding that a proposal to cancel the GUPC contract is still on the table.

President Ricardo Martinelli tried to rally his countrymen’s support for their signature global brand.

“We are going to finish the canal expansion rain or shine,” the president stressed. “Let’s close ranks with the Panama Canal Authority.

“I don’t know who these people think they are,” Martinelli went on. “They signed a contract, won the bidding, and then don’t do the job…It is unheard of.”

In a statement, Sacyr said the Panama Canal Authority had decided to “break off negotiations” but company president Manuel Manrique later said that the company would keep the talks alive.

“What happened is that the ACP (canal authority) rejected our last proposal without proposing a viable alternative, and this is why we released the statement,” Manrique told Spain’s Cadena Ser radio.

“But later we sent a letter proposing to continue and so we will see what happens… We have made a final offer to the canal (authority),” he said, adding that there was “no concrete date” to suspend the work.

“This depends on the response” from the canal authority, Manrique added.

The project to widen the canal, one of the biggest civil engineering operations in the world, is due to be completed next year but GUPC has said that the dispute threatens to delay completion by up to five years.

In its earlier statement, Sacyr said the collapse of the talks “puts in danger the widening of the canal and up to 10,000 jobs.”

Sacyr said that if a solution were not found immediately, Panama would face years of litigation before national and international courts “on the events which have brought this project to the edge of failure.”

‘Bad’ for world economy

The European Union’s industry commissioner, Antonio Tajani, who has mediated the dispute, warned that “the interruption of the works would be bad news for employment, for the worldwide economy, for the expansion works of the canal.”

Spain’s Public Works Minister Ana Pastor called for an agreement be found quickly “because what is at stake is infrastructure that has an impact not only on the economy (of Panama) but also the world economy.”

The canal facilities are being widened to permit the passage of ships carrying up to 12,000 containers, twice the current limit.

But the disputed contract to build locks, due initially to be completed this year, was already running nine months late and since the beginning of this year work has slowed down further.

GUPC says that unforeseen costs total $1.6 billion (1.2 billion euros) beyond the initial $3.2 billion value of the contract.

GUPC is in dispute with the Panama Canal Authority mainly over who was responsible for the quality of geological information and who should bear the cost of problems and delays arising from unexpected geological difficulties.

The consortium is proposing that the two sides each pay half of the extra costs until the project is completed.

They would then go before an international arbitration court for a decision on who is responsible for the unforeseen costs and who should pay.

The canal, completed in 1914 to offer a short cut and safer journey for maritime traffic traveling between the Pacific and Atlantic oceans, is about 80 kilometers (50 miles) long and is used by 13,000-14,000 ships each year. – Rappler.com