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New proposal made to break Panama Canal expansion deadlock

April 24, 2014

PANAMA CITY – An international consortium at loggerheads with Panama over work to expand the Panama Canal has presented a proposal to end a dispute over a $1.6 billion cost overrun, the group said late Thursday.

GUPC, the consortium, “is continuing its efforts to find a solution and reach an agreement with the Panama Canal Authority (ACP) and has submitted a new proposal,” it said in a statement.

It “addresses the concerns of the ACP while providing the funds necessary to finish the project,” the consortium said without giving details.

The group halted work on the expansion two days ago after talks with the canal authority collapsed.

It is led by Spanish construction company Sacyr and Italy’s Salini-Impregilo, and is demanding that Panama acknowledge the cost overrun, which Panama refuses to do.

The consortium wants the initial contract price of $3.2 billion upped by one half to design and build a new set of locks, which is the main part of the expansion project.

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

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

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

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