Progress on Panama Canal stalemate

By Helen Wright20 February 2014

Work is expected to restart on the expansion of the Panama Canal after tentative agreements were rea

Work is expected to restart on the expansion of the Panama Canal after tentative agreements were reached on funding and delivery schedules.

Work is expected to restart on the expansion of the Panama Canal after tentative agreements were reached on funding and delivery schedules, according to the Panama Canal Authority (PCA) and the GUPC contracting consortium.

Both parties outlined steps taken towards resolving a dispute that began in January when GUPC – which consists of Sacyr, Impregilo, Jan De Nul and CUSA Urban Construction – threatened to suspend work unless it received a further US$ 1.6 billion in funding to cover cost overruns.

Weeks of negotiations followed, during which the PCA said almost all activity on site ground to a halt. However, in a 19 February statement, the PCA said the parties had reached agreement to restart work on the third set of locks from 20 February.

It said as soon as work resumed it would pay GUPC US$ 36.8 million for December invoices, while the next 72 hours would see the both sides discuss other points such as the dates for the delivery of the gates, a schedule for the remainder of the work and a timetable of payments.

Unresolved issues

The decision was made during telephone conversations between the PCA and the CEOs of the companies in the consortium, but the PCA said there were still some issues on which an agreement had not been reached. It did not provide further details.

For its part, GUPC confirmed that the parties had made progress on key issues that would allow funding, resumption of work and payment of subcontractors and workers for the project.

However, it added that negotiations would continue over a comprehensive agreement that was in line with the contracts and applicable laws, and provided funding aimed at completion of the project.

Earlier in February, Sacyr, the lead contractor for the consortium, warned that 10,000 jobs were at risk on the project.

“The third set of locks is one of the biggest civil works project in the world and requires adequate funding to complete under the difficult circumstances encountered,” Sacyr said at the time.

The PCA awarded the contract to design and build a third set of locks to the GUPC’s US$ 3.2 billion bid in 2009.

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