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  HOME | Central America

Panama, Canal Contractors Reach Preliminary Accord

PANAMA CITY – The Panama Canal Authority and the Spanish-led consortium working on the $5.25 billion expansion of the Central American nation’s inter-oceanic waterway agreed Monday on a framework for talks to avert an interruption of the project.

“We’re talking about some additional funds that they (the consortium) would have to put up and we also would put up an additional (amount)” to avoid a halt to work on a third set of locks, canal administrator Jorge Quijano said.

The canal authority, or ACP, and the GUPC consortium on Tuesday will hold a technical meeting to discuss the sums that each party will have to contribute, he added.

Spanish construction giant Sacyr Vallehermoso and its partners in the GUPC consortium – Italy’s Impregilo, Belgium-based Jan de Nul and Panamanian firm CUSA – said last Wednesday that they would suspend work in three weeks if the ACP did not agree to pay an additional $1.6 billion to cover cost overruns.

But the extraordinary contribution now under discussion seeks to provide solvency for the consortium over the “next two or three months,” which is the time it will take the Dispute Arbitration Board to resolve the demand for $585 million presented by the GUPC in 2012, Quijano said Monday.

“The problem that they have at this time is that with no resolution on the part of the Board (DAB) and the fact that it can take two to three months, they would have a cash-flow problem,” he said.

The administrator acknowledged that Monday’s agreement “does not mean” the GUPC’s threat to suspend work Jan. 20 is off the table.

“At this time we’re not talking about that (the $1.6 billion); that has to flow through the process” set forth in the contract, Quijano said.

The administrator spoke to reporters after holding a meeting with Spanish Development Minister Ana Pastor, who traveled to Panama to mediate between GUPC and the canal authority.

“What Minister Ana Pastor has achieved is to bring them (the consortium) back where we want, which is to negotiate in keeping with the contract,” Quijano said.

Pastor announced earlier Monday the consortium’s commitment to have all economic demands it may have negotiated “by way of the contract.”

She made the announcement after a meeting with Panamanian President Ricardo Martinelli, who expressed his conviction that “as a product of the meetings that are taking place” between the ACP and the GUPC “they are going to resolve any conflict ... in accord with the contract.”

GUPC began work on the third set of locks in 2007 and expects to complete construction in June 2015, nine months later than the date set in the contract.

The canal, designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential.

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