Monday, July 28, 2014

Panamá: Update--Third Set of Locks to Proceed, Despite Dispute Over Cost Overruns

According to The Latin American Tribune, the Panama Canal Authority (PCA) and the GUPC consortium tasked with expanding the third set of locks to ensure that the project can be completed by the end of 2015, both issued communiqués that the effort will forward despite disagreements.

Both parties insist that they are putting every effort into ensuring that the project to build a third set of locks is finished by the end of 2015 and the Canal begins operating with them in the first quarter of 2016, yet the GUPC needs liquidity and PCA administrator Jorge Luis Quijano says that his group will not provide additional funding.

The firms making up the GUPC are Spain’s Sacyr, Italy’s Impregilo, Belgium’s Jan de Nul-- a dredging company--and Panamá’s CUSA.

COMMENT: It seems illogical for both parties to agree on the project moving forward, although there remains a huge cost overrun of US$1.6 billion.

Meanwhile, the GUPC consortium said Saturday (July 26) that the waterway’s management “has not resolved the majority of the points” in the accord that still has not been signed regarding completion of the project, despite the fact that the deadline for doing so was set as July 31.

Work on the Canal was suspended for almost a month at the beginning of this year because the GUPC alleged that it had been left without any liquidity after experiencing cost overruns amounting to some $1.6 billion.

Those overruns were said to be the result of the fact that the materials the contractors were using to make the concrete for the job turned out not to be of the required quality and its processing has substantially upped the costs of the project.

Work resumed after all the parties promised to inject $100 million each into the project as well as agree to international financing of $400 million.

That agreement to resume work on the project, however, has not yet been signed.

The GUPC says that it has “committed itself to ... the quick resolution of all the problems,” although it is still not certain how the project will be paid for.