Friday, January 10, 2014

Panama: Update-- Despite Spain's Intervention, Controversy Between PCA and Spanish Consortium Building 3rd Set of Locks Continues

According to The Latin American Tribune, and despite a visit last week by a Spanish Development minister Ana Pastor, the dispute between the Spanish consortium building a third set of locks said last week that it would suspend work on the locks on January 20 if the Panama Canal Authority (PCA) did not agree to pay an additional $1.6 billion to fund cost overruns.

Both the consortium building a third set of locks for the Panama Canal and the waterway’s administrators dug in their heels Thursday (January 9) in a dispute that threatens to delay completion of a $5.25 billion expansion project.

The GUPC, the Spanish construction giant Sacyr Vallehermoso, Italy’s Impregilo, Belgium-based Jan de Nul and Panamanian firm CUSA jointly said last week that it would suspend work on January 20 if the PCA did not agree to fund the overruns.

COMMENT: Canal administrator Jorge Quijano denounced the threatened suspension as illegal and urged GUPC to continue working. 
He also said that under the contract, the PCA could opt to identify “other contractors” to complete the locks, now 65% completed, if the GUCP won't complete the project.

The PCA said it would advance the GUPC $100 million and give the consortium a grace period of two months on a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

That proposal is the only “reasonable offer” on the table, Quijano told Panamanian lawmakers Wednesday (January 8).

The PCA's stance is “unacceptable and ridiculous,” Italy's Impregilo said in a statement released Thursday in Panama, adding that a decision by the PCA to turn to other contractors at this late date would delay completion of the project by at least three years.

Conversely, if the PCA agreed to pay GUPC an additional $1 billion, the third set of locks would be ready at some point during the first half of 2015, Impregilo said.

The contract for the locks, which is the centerpiece of the canal expansion, calls for the ACP to pay GUPC a total of $3.12 billion.

So far, the PCA has paid GUPC $2.83 billion, including repayable advances, plus an additional $180 million for cost overruns.

The parties are expected to meet again Friday (January 10), yet none of the principals has confirmed that talks will even take place.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks critical. 

Rather than permitting dissension to escalate, either the PCA and/or the Spanish consortium should have proposed months ago that a panel of three disinterested parties agreeable by the PCA and the Consortium be formed to meet and mediate the controversy.