Spanish minister in Panama to end $1.6-bn canal row

6th January 2014, Comments 0 comments

A Spanish cabinet minister began mediation efforts in Panama on Monday to resolve a $1.6 billion dispute threatening to halt the expansion of the Central American nation's vital canal.

Public Works Minister Ana Pastor met for almost two hours with executives of the Spanish-led consortium that has threatened to stop the project this month unless Panama pays for the massive cost overruns.

After the private meeting in a Panama City hotel, Pastor headed to the office of President Ricardo Martinelli for talks before meetings with Panama Canal Authority officials.

Pastor met with 16 executives from the Grupo Unidos por el Canal (GUPC) consortium, including the head of Spanish builder Sacyr, Manuel Manriquez.

"The Spanish government will not support Sacyr with money. This is an issue between a company" and Panamanian authorities, Spain's ambassador Jesus Silva told reporters.

He said Pastor "came to Panama to facilitate dialogue and a solution."

The construction group, which includes Impreglio of Italy, Belgium's Jan de Nul of Belgium and Constructora Urbana of Panama, warned on December 30 that it would suspend work in 21 days if authorities failed to pay for extra "unforeseen" charges.

Martinelli has said that the governments of Spain and Italy have a "moral responsibility" to ensure that the canal work is not interrupted.

The expansion project aims to make the 80-kilometer (50-mile) waterway, which handles five percent of global maritime trade, big enough to handle new, giant cargo ships that can carry 12,000 containers.

Currently the canal can handle ships large enough to carry 5,000 containers.

The United States built the canal between 1904 and 1914 and had full control of the waterway until handing it over to Panama in late 1999.

The consortium began work on a third set of larger canal locks in 2009 and expects to complete construction in June 2015, already nine months over the contractual date. Work is about 70 percent complete.

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

A year ago, GUPC demanded that the Panama Canal Authority pay the extra $1.6 billion for the extra costs.

Sacyr says the extra charges are related to technical and geological matters, cement ingredients, weather conditions as well as tax, labor and financial issues.

Jose Pelaez, in charge of building the third set of locks, said Saturday that the rising price tag was partly due to problems in the regional geology that the Canal Authority had not detected.

On Sunday, the Panama Canal Authority said that the contractor's claims "have no legal standing and are not clear," and are not reason enough to halt the project.

"We're being cornered," canal administrator Jorge Quijano said, adding that Panama cannot become "hostage to a contractor."

Canal officials say there was already a four-month delay shortly after the project began caused by the reversal of a GUPC plan to use lower-quality cement.

Moreover, the consortium had "14 months before submitting their bid to closely study the components of the project" in order to submit a "solid" bid.

© 2014 AFP

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