PANAMA CITY, January 22, 2014 (AFP) – A consortium working on widening the Panama Canal presented a proposal Tuesday that officials here said could provide a way out of a bitter financial dispute that threatens the project.
The consortium Grupo Unidos por el Canal (GUPC), led by Spanish builder Sacyr, made the proposal in a meeting with Panamanian officials and insurer Zurich America International.
GUPC also extended until January 31 its deadline for resolving the dispute over $1.6 billion in cost overruns.
The group had threatened to shut down the project by Monday unless the government agreed to pay the unforseen costs.
“There is a proposal that the parties have brought to the table which is seen as having possibilities,” canal administrator Jorge Quijano told reporters during a break in the talks.
“It could provide a fairly long-term solution enabling the project to go ahead, which is what we all want,” said Quijano.
“We hope that something good can come out of this,” he said.
On Monday, after its initial deadline passed, GUPC issued a statement saying the “co-financing of unforeseen costs” would enable continuation of work and completion of the project by 2015.
This, it added, would “allow for revenues totaling billions of dollars annually for Panama.”
GUPC includes Impreglio of Italy, Belgium’s Jan de Nul and Constructora Urbana of Panama.
The overall canal upgrade was supposed to cost $5.2 billion, including GUPC’s $3.2 billion contract to build a third set of locks for the century-old canal, which currently welcomes ships that carry up to 5,000 containers.
Already facing delays, the project aims to make the 80 kilometer (50 mile) waterway, which handles five percent of global maritime trade, big enough to handle new cargo ships that can carry 12,000 containers.
Work on the canal began in 2009 with the goal of being completed by 2014, which coincides with the waterway’s 100th birthday.
But completion was pushed back to 2015 after a first disagreement between the canal authority and GUPC over cement quality.
In the current dispute, GUPC says it ran into costly overruns because the canal authority gave the builders bad information regarding the area’s geology.
Meanwhile, work on the project was continuing at “low intensity,” much as it had over the past week, Quijano told AFP on Monday.
Union and government officials have said less than half the project’s workers were still on the job as of last week.
Quijano also has stressed that construction would go ahead with or without GUPC.
A construction delay could cost Panama an estimated $300 to $400 million in lost business from the huge container ships.
The ripple effects would be broader still, given the importance to East-West trade of a widened waterway, which would double the amount of cargo that could be moved between the Pacific and the Atlantic.