Panama Canal Expansion Project May Come To A Halt

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PANAMA CANAL EXPANSION
RODRIGO ARANGUA via Getty Images

PANAMA CITY, Panama (AP) — The consortium at the heart of a historic Panama Canal expansion project threatened on Wednesday to suspend work due to financial problems caused by a $1.6 billion cost overrun.

The group issued a statement giving the Panama Canal Authority 21 days to settle the dispute, arguing that the Authority is responsible for covering the added costs, but said it will continue working in the meantime.

Canal Administrator Jorge L. Quijano responded with his own communique saying the Authority will continue to demand the companies "respect the contract that they themselves accept and signed." He said the purpose of the consortium's warning was "to force the organization to negotiate outside the terms established in the contract."

Grupo Unidos por el Canal is formed by Spain's Sacyr Vallehermoso, Impregilo of Italy, Jan De Nul of Belgium and Constructora Urbana SA of Panama. It won the contract to design and build a third set of locks with a $3.2 billion bid in 2009.

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 now say 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.

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