Panama canal project cost overruns dispute stops work

The panama canal expansion project has been halted amid a cost overrun dispute, says the Spanish-led consortium Grupo Unidos por el Canal (GUPC).

According to the consortium, it is owed $1.6 billion, but the Panama Canal Authority accuses it of blackmail.

The Panama Canal Expansion Project aims to create a new lane of traffic by 2015, at a cost of $5.2 billion, and allow more and larger ships to cross the American continent. It is also called the Third Set of Locks Project.

The aim of the project is to:

  • Build a new lock on the Pacific side and one on the Atlantic side.
  • Excavate new channels into which the locks will be set.
  • Raise the maximum operating level of Gatun Lake.
  • Deepen and widen the present channels.

The Panama Canal, which links the Atlantic and Pacific Oceans and is used by more than 13,000 ships annually, celebrates its 100th birthday in August 2014.

Panama canal project

When completed, the Panama canal’s capacity will more than double. (Photo: Globalsecurity.org)

Halting Panama canal project threatens thousands of jobs

On Wednesday, GUPC denied that construction work had been halted and emphasized that if did 10,000 jobs would be at risk.

However, on Friday the consortium accused the Panama Canal Authority of failing to extend the negotiation protocol.

The protocol stipulates that the companies involved in the project continue negotiations without threatening to stop work, while at the same time Panamanian authorities pledge not to cancel the contract, which both parties have signed.

Panama Canal Authority has $50m outstanding debt

GUPC wrote in a press release on Friday:

“With no founding support for the project, GUPC issued an initial notice of suspension on December 30, 2013 and chose voluntarily to defer the suspension of the works as a sign of good faith in an effort to facilitate negotiations.”

“GUPC proposed and agreed to a Negotiation Protocol with ACP (Autoridad del Canal de Panama – Panama Canal Authority) to protect the project from suspension and from ACP’s threats of termination. GUPC proposed to extend the Protocol in a continued effort to reach a solution. ACP refused, and the Protocol expired. Moreover, ACP has failed to pay a pending $50 million invoice despite all impediments being removed, or otherwise assist in funding the costs of the project needed to pay subcontractors and workers.”

“Despite these circumstances, GUPC continues to seek a co-financing agreement, in conformity with applicable contracts and laws as always, with the aim of a collaborative and immediate resolution. An agreement is the only solution that the immediate continuation of the works and the earliest and most efficient completion of the project for the benefit of ACP and Panama.”

“The project will be completed with or without GUPC”

The dispute started off last month when GUPC threatened to stop work over a $1.6 billion cost over-run. However, it backed down and the two parties worked on negotiating a compromise.

They had agreed on a Tuesday deadline, by which time they had planned to have a new agreement. The deadline passed with nothing settled and the contractors accusing the ACP of breaking of talks and being “unreasonably rigid”.

ACP head, Jorge Quijano, described GUPC’s position as “inflexible” and pledged on Wednesday that the project will be completed “with or without GUPC.” He said the ACP, if it has to, will take over the project.

Quijano said a deal is still possible, but warned that the window is closing “by the minute”. He insists ACP did not break off the talks.

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