Wednesday 22 October 2014

Panama Canal expansion work halted

Published 05/02/2014 | 17:22

A ship sails into the Pedro Miguel locks on the Panama Canal near an area under construction as a part of its expansion project in Panama City (AP)

Work on the ambitious Panama Canal expansion project has been halted after talks broke down on how to settle a dispute over 1.6 billion dollars (£981 million) in cost overruns.

Panama Canal Authority Administrator Jorge Quijano told a news conference the stoppage will give authorities time to analyse how to proceed on the project to widen the canal.

"I don't even want to suggest that the next steps will be easy or risk-free," said Mr Quijano. "What I do want to make clear is that we will not yield to blackmail."

The Panama Canal Authority and the Spanish-led construction consortium leading the expansion blame each other for the overruns. They were negotiating how to pay for the unplanned extra costs when talks broke down, Mr Quijano said.

An agreement "is now no longer possible and the window is closing minute by minute", he said, adding that the consortium had ordered its employees to stop work.

Spanish firm Sacyr says 10,000 jobs are at risk. Italy's Impreglio construction firm is also in the consortium.

In Europe, the EU's Industry Commissioner Antonio Tajani said news of the work stoppage was "unexpected". The European members of the consortium had asked Mr Tajani, an Italian, to intervene in the dispute.

"Yesterday morning the president of the Republic, Mr (Ricardo) Martinelli, made a positive public statement indicating that the parties were very close to an agreement," said Mr Tajani.

"I trust and hope that the parties reconsider their positions in the coming days," he said, "because the interruption of the work would be bad news for employment, for the worldwide economy, for the expansion of the canal and for the parties themselves."

The project, now three-quarters complete, would double the capacity of the 50-mile (80-kilometre) canal, which carries 5% to 6% of world commerce.

The consortium blames the extra costs largely on problems with studies that the Panamanian authority conducted before work began. It says geological obstacles encountered while excavating have prevented it from getting the basalt needed to make the vast amounts of concrete required.

Mr Quijano said the consortium had maintained "an inflexible position".

He said "it is still possible at this moment to rescue the project for 2015", when it was supposed to be completed. "Here, they are leaving and we are staying, the project is going to be finished. It must go ahead with or without them."

Many experts say the roots of the dispute lie in the consortium's underestimation of project costs when it won the contract in 2009 by submitting by far the lowest bid: 3.1 billion dollars (£1.9 billion) for its portion of the job, one billion dollars (£613 million) less than a bid by US construction giant Bechtel.

In the United States, ports have invested billions of dollars in dredging, raising bridges and renovating docking infrastructure to accommodate the new generation of larger ships that could pass through an expanded Panama Canal.

Press Association

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