Panama Canal authority proposes end to dispute

January 7, 2014 - 9:04 PM
Panama Canal Dispute

People visit the Panama Canal in Gatun, north from Panama City, Panama, Friday, Jan. 3, 2014. The consortium responsible for most of the expansion of the canal issued an ultimatum giving the Panama Canal Authority under a month to pay for a cost overrun to build a third set of locks, threatening to halt the Panama Canal's expansion. (AP Photo/Arnulfo Franco)

PANAMA CITY (AP) — The Panama Canal Authority said Tuesday that it wants to end a standoff over the expansion of the canal by splitting construction costs with an international consortium that has threatened to halt work unless the authority comes up with $1.6 billion in extra funding.

The authority said Tuesday that it would pay $183 million and Grupo Unidos por el Canal would put in $100 million to continue work for at least two more months while a long-term solution is negotiated. The Spanish-led consortium would have to withdraw its threat to halt work on the canal by Jan. 20.

The consortium, which says it has run out of cash to fund construction, said in a statement that the Panama Canal Authority should put in $400 million in order to keep searching for a long-term solution.

The canal's authority rejected that offer.

"We reiterate our openness and willingness to come up with an amount based on the terms of the contract and considering what was discussed today (Tuesday)," the Panama Canal Authority said in a statement.

The consortium is comprised of Spain's Sacyr Vallehermoso, Impregilo of Italy, Jan De Nul of Belgium and Constructora Urbana SA of Panama. It says unexpected problems with the quality of material supposed to be used to make cement spawned massive overruns, and blamed the canal authority for carrying out insufficient geological studies before work began.

Tuesday's meeting was the first between the authority and the consortium. The authority met Monday with Spain's public works minister, who said the consortium wanted to resolve the dispute within the terms of its contract with the canal administrator.

Neither side said whether they plan to meet again soon.

The claimed cost overrun is roughly half of Grupo Unidos por el Canal's original $3.2 billion bid to build a third set of locks. Each side has said the other is responsible for the added costs. The canal authority claimed the business consortium was unjustly trying to force it to pay by threatening to halt work.

Panama has estimated the full expansion program will cost $5.2 billion, with the new, wider locks allowing the 50-mile (80-kilometer) canal to handle ships far larger than those that can now navigate the century-old waterway.

Officials have most recently said the work should be finished by June 2015. Officials say the overall expansion work is 72 percent finished, with the locks themselves at 65 percent.