THE project to expand the Panama Canal was in doubt last week after talks between the canal administrator and a building consortium led by Spanish interests fell apart and work ground to a halt, according to the U.S. Grains Council.
Group United for the Canal (GUPC), a conglomerate led by Spanish builder Sacyr, is requesting that the Panama Canal Authority pay an additional $1.6 billion in cost overruns. Originally slated to cost roughly $5.25 billion, new projections place the actual cost of the project at nearly $7 billion.
Disputes over the expansion of the canal began soon after GUPC won the bid in 2009. Officials and diplomats expressed concerns over the consortium's ability to complete the project because its bid was $1 billion lower than the nearest competitor.
"The Panama Canal Authority has taken a firm stance that GUPC must honor its contract," said Kurt Shultz, Grains Council regional director of the Americas. "The U.S. grain industry has high expectations for an expanded Panama Canal; we urge both parties to quickly agree on a resolution and move forward."
The project is already six to nine months behind schedule, and further construction delays are expected if the dispute continues. Some analysts warn that there could be an additional two- to three-year interruption if GUPC is released from its contract and a new construction company is retained.
The next key deadline is Feb. 20, when Zurich American Insurance, which holds a $400 million performance bond, will decide if the Panama Canal Authority has just cause to void its contract with GUPC and if it will release the bond to the authority.