Friday, January 3, 2014

Panamá: Update--Some Progress Made in Work Stoppage on Third Set of PCA Locks

According to The Latin American Tribune, Panamanian President Ricardo Martinelli on Thursday (January 2) demanded that the consortium working on the $5.25 billion expansion of Panamá’s inter-oceanic waterway complete the project for the amount the parties originally agreed upon.

President Martinelli spoke out a day after Grupo Unidos por el Canal (GUPC), led by Spanish construction giant, Sacyr Vallehermoso, formally advised the Panama Canal Authority (PCA) that it would suspend work in three weeks if the authority does not agree to pay an additional $1.6 billion to cover cost-overruns.

GUPC, whose other members include Italian firm, Impregilo, Belgium-based Jan de Nul and Panamá’s CUSA, insists that under the terms of the contract, the canal authority is responsible for absorbing cost-overruns.

Martinelli said he will travel to Spain and Italy to urge the respective governments to prevail upon the companies to live up to the contract.

GUPC says the cost overruns are due to contractual breaches on the part of the PCA, which in turn accused the consortium of seeking to negotiate “outside the contract.”

COMMENT: The consortium resorted to the threat of suspension after the PCA rebuffed repeated requests for talks, Sacyr Vallehermoso said Thursday (January 2), stressing that GUPC wants to reach a “satisfactory accord” with the PSA.

The contract provides for independent arbitration of disputes that GUCP and the PSA can’t resolve through negotiations.

GUPC began work on the third set of locks in 2007 and expects to complete construction in June 2015, nine months later than the date set in the contract.

The canal, 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 essential.

Martinelli has been informed that Spain is prepared to act as a mediator between Sacyr and the Panamanian government, the Spanish envoy in Panama City said Thursday.

Officials in Madrid are studying “the possibility that the minister of development, Ana Pastor, or some government figure travel to Panamá in the coming days to try to support this mediation that is being carried out from the embassy as well as directly from Spain,” Ambassador Jesús Silva told EFE.

“We don’t expect a journey by President Martinelli (to Spain) in the short term, but we are working to try to have a member of the Spanish government be able to come here to talk with President Martinelli, with the government and with the Panama Canal Authority,” the diplomat said in an interview.

“We have offered to support the government of Panamá because it is a friendly government and so, everything that’s good for Panamá is good for Spain,” Silva said.

The conflict is not between the governments of Spain and Panama, he stressed.

“I believe there are possibilities for dialogue, and I hope that it materializes in the coming days,” Silva said.