Panama Canal talks run into trouble over money

AP News
Posted: Jan 08, 2014 11:47 PM
Panama Canal talks run into trouble over money

PANAMA CITY (AP) — Negotiations over massive cost overruns in the expansion of the Panama Canal appeared to run into trouble Wednesday when one of the companies involved demanded more than $1 billion to continue work on the project.

The Panama Canal Authority immediately rejected the proposal.

"There is no negotiation outside the contract," canal administrator Jorge Luis Quijano said.

On Tuesday, the canal authority proposed that it inject $183 million into the project to allow the consortium expanding the canal to continue work for several months while a permanent solution is sought to a dispute over the more than $1.5-billion in cost overruns. The authority wanted the consortium to put in $100 million.

Italy's Impregilo, one of the corporations in the consortium, countered with a demand for $1 billion from the canal authority.

Quijano said the authority was sticking by its proposal for a joint injection of $283 million, moving the conflict closer to the Jan. 20 deadline that the consortium has established for resolving the dispute or halting work.

"We hope they're reasonable and let the work finish," he said. "But we have no qualms about working with another contractor."

The Panama-based spokesman for the consortium did not comment Wednesday.

The consortium is comprised of Impreglio, Spain's Sacyr Vallehermoso, Jan De Nul of Belgium and Constructora Urbana SA of Panama. It has said that unexpected problems with the quality of material supposed to be used to make cement spawned massive overruns, and blamed the canal authority for carrying out insufficient geological studies before work began.

The claimed cost overrun is roughly half of Grupo Unidos por el Canal's original $3.2 billion bid to build a third set of locks. Each side has said the other is responsible for the added costs. The canal authority claimed the business consortium was unjustly trying to force it to pay by threatening to halt work.

Panama has estimated the full expansion program will cost $5.2 billion, with the new, wider locks allowing the 50-mile (80-kilometer) canal to handle ships far larger than those that can now navigate the century-old waterway.

Officials have most recently said the work should be finished by June 2015. Officials say the overall expansion work is 72 percent finished, with the locks themselves at 65 percent.