independent

Friday 25 April 2014

Panama Canal row: 'Italy-Spain must help'

President Ricardo Martinelli says he will seek international help to resolve the Panama Canal funding row. (AP)

President Ricardo Martinelli says he will seek the help of Italy and Spain to resolve a 1.6 billion-dollar (£975m) dispute which could halt the Panama Canal's historic expansion.

The consortium responsible for most of the expansion issued an ultimatum on Wednesday giving the Panama Canal Authority 21 days to pay for a cost overrun that is roughly half of Grupo Unidos por el Canal's original 3.2 billion-dollar (£1.9bn) bid to build a third set of locks.

The consortium is formed by Spain's Sacyr Vallehermoso, Impregilo of Italy, Jan De Nul of Belgium and Constructora Urbana of Panama. The canal authority says the companies are responsible for the extra costs.

Mr Martinelli said Italy and Spain "have a moral responsibility" to help resolve the dispute between the companies and Panama.

"It's not possible for a company to just announce an enormous amount of cost overruns, when they had already fixed a price," he said. "And now they're coming forward saying that the price has risen."

The canal authority says the business consortium is unjustly trying to force it to pay for the cost overruns with the threat to halt work. Each side says the other is responsible for the added costs.

Panama Canal administrator Jorge Quijano said the dispute would not delay the completion of the canal expansion and Panama was ready to finish it if necessary. "We are committed to finish the work," he said. He said Panama could obtain the funds to finish the canal's expansion from insurance money and bonds.

Mr Quijano said Grupo Unidos por el Canal claims part of the increase in costs has to do with a hike in concrete prices but he added that the contract clearly established "price escalation clauses".

"We know concrete has additives that can increase in price but they can decrease in price," he said.

Calls to Sacyr's headquarters in Madrid went unanswered but company spokesman Pedro Alonso, speaking on Spain's Cadena SER radio, defended the company's record in Panama.

"The truth is it's a job being carried out to maximum technical and quality standards that is going to last 100 years and everything that has been done has been necessary, nothing has been done on a whim," he said.

The consortium's bid won the contract to design and build a third set of locks in 2009.

Panama has estimated the full expansion programme will cost 5.2 billion dollars (£3.1bn), with the new, wider locks allowing the 50-mile 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 and the overall expansion work is 72%, with the locks themselves at 65%.

Wikileaks cables from the US embassy said a confidential analysis by the American firm Bechtel, which lost the bid for the canal project , had claimed that Sacyr's winning tender was unrealistic and would barely pay for the concrete, leading Spanish newspaper El Pais reported.

AP

Press Association

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