Panama president warns Spain and Italy over canal row

Panama’s President Ricardo Martinelli said Thursday he would go to Europe to demand a consortium fulfill its contract to expand the Panama Canal, amid a row over $1.6 billion in cost overruns.

“I will go to Spain and Italy to demand these governments take moral responsibility for what happened, because it is not possible that a company put huge extra charges on expansion work,” he said.

Spanish builder Sacyr, leader of Grupo Unidos por el Canal (GUPC), said work will stop unless the canal pays $1.6 billion in cost overruns for work on the 80-kilometre (50-mile) waterway connecting the Atlantic and Pacific Oceans.

The consortium said it had given the canal authorities a 21-day deadline before suspending its $3.2 billion (2.3 billion euro) contact to expand the canal, notably by installing a third set of locks.

The overall cost of the Panama Canal expansion project has been estimated at $5.2 billion.

A year ago, GUPC demanded an extra payment of $1.6 billion from the Panama Canal Authority due to construction delays.

The group also includes Impregilo of Italy, Belgian firm Jan De Nul and Panama’s Constructora Urbana.

It began work on a third set of locks for the canal in 2009 and expects to complete construction in June 2015, already a nine-month delay over the date set in the contract.

The new locks will accommodate larger ships with a capacity of 12,000 containers — instead of those with 5,000 containers that are now able to navigate the canal.

Some 13,000 to 14,000 ships navigate the canal each year, representing five percent of world maritime trade.