Panama City: The Panama Canal Authority and a consortium expanding the major waterway will negotiate a solution to a USD 1.6-billion dispute threatening to disrupt the project, a Spanish mediator said on Monday.
Spain`s Public Works Minister Ana Pastor held separate meetings with Panama`s president and executives of the Spanish-led group that has threatened to suspend work this month unless local authorities pay for the massive cost overruns.
After the two meetings, Pastor said the Grupo Unidos por el Canal (GUPC) consortium wanted to negotiate a way out of the impasse.
"The commitment of GUPC is to resolve everything within the contract and for that reason they will sit down for dialogue," she said.
"We are trying to reach an agreement that will be good for everybody," Pastor said after talks with Panamanian President Ricardo Martinelli.
Martinelli said the consortium and canal authorities need to find a solution, even if it means going through international arbitration.
"Surely solutions will be found within the meeting. This is a project of global scope for Spain, Panama and the maritime community," he said.
Pastor met first with 16 GUPC executives, including the head of Spanish builder Sacyr, Manuel Manriquez. She will meet later with canal authority officials.
"The Spanish government will not support Sacyr with money. This is an issue between a company" and Panamanian authorities, Spain`s ambassador Jesus Silva told reporters.
The construction group, which includes Impreglio of Italy, Belgium`s Jan de Nul of Belgium and Constructora Urbana of Panama, warned on December 30 that it would suspend work in 21 days if authorities failed to pay for extra "unforeseen" charges.
The expansion project aims to make the 80-kilometer (50-mile) waterway, which handles five percent of global maritime trade, big enough to handle new, giant cargo ships that can carry 12,000 containers.
Currently the canal can handle ships large enough to carry 5,000 containers.
The United States built the canal between 1904 and 1914 and had full control of the waterway until handing it over to Panama in late 1999.
The consortium began work on a third set of larger canal locks in 2009 and expects to complete construction in June 2015, already nine months over the contractual date. Work is about 70 percent complete.
The overall cost of the project has been estimated at USD 5.2 billion. GUPC has a $3.2 billion contract to build the new locks.
But a year ago, GUPC demanded an extra USD 1.6 billion for the extra costs.
Sacyr says the extra charges are related to technical and geological matters, cement ingredients, weather conditions as well as tax, labor and financial issues.
Jose Pelaez, in charge of building the third set of locks, said Saturday that the rising price tag was partly due to problems in the regional geology that the Canal Authority had not detected.
On Sunday, the Panama Canal Authority said that the contractor`s claims "have no legal standing and are not clear," and are not reason enough to halt the project.
"We`re being cornered," canal administrator Jorge Quijano said, adding that Panama cannot become "hostage to a contractor."
Canal officials say there was already a four-month delay shortly after the project began caused by the reversal of a GUPC plan to use lower-quality cement.
Moreover, the consortium had "14 months before submitting their bid to closely study the components of the project" in order to submit a "solid" bid.
