Panama Canal stalemate continues

By Helen Wright09 January 2014

Panama canal

Panama canal

The Panama Canal Authority (PCA) has proposed a US$ 283 million funding package in an effort to end a stalemate with the Grupo Unidos por El Canal (GUC) consortium that has threatened to halt work on the Panama Canal expansion project.

The package proposes that each side contributes US$ 100 million, while the PCA would delay repayment of a US$ 83 million advance.

But the funds fall far short of the US$ 1.6 billion demanded by the GUC consortium – which consists of lead contractor Sacyr, Salini Impregilo, Jan De Nul and CUSA Urban Construction – to cover cost overruns on the project.

After initially rejecting the consortium’s demand and claiming it has no legal basis to halt construction, the PCA has now proposed the package that it said should be agreed “against milestones and deliverables”, including a promise that the consortium must rehire the workers needed and cancel its threat to suspend the works.

In response, the GUC has requested an advance of US$ 400 million in funding, instead of the amount being offered. It added that it was committed to completing the work, and that the two sides had entered arbitration proceedings to resolve the issue.

Other alternatives

But in another statement, contractor Salini Impregilo proposed two different alternatives – it called for either a US$ 1 billion contribution from PCA for the completion of the project, or PCA funding of US$ 500 million plus the consolidation of advances it had approved to date, pending the result of arbitration proceedings.

“Both proposals would enable the completion of work in the first half of 2015,” Salini-Impregilo said.

“PCA still has at its disposal hundreds of millions of dollars from the financial plan for contingencies and unforeseen events, which it has not yet used. Now is the time to do so,” it added.

Failure to progress

The PCA has accused the GUC of intentionally slowing down construction and a general failure to progress works in accordance with its contractual obligations.

Panamanian President Ricardo Martinelli met with Ana Pastor, Spain’s Public Works Minister, in the capital, Panama City earlier this month to try to help resolve the dispute.

The PCA awarded the contract to design and build a third set of locks to the GUC’s US$ 3.2 billion bid in 2009. The expansion of the Panama Canal to allow the transit of bigger ships with more capacity began in 2007, and the PCA has estimated that the full project will cost US$ 5.25 billion to complete.

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