“Expansion will be completed even if I have to go out with a pick and shovel”

Panama Canal chief accuses Sacyr of bullying government with threats to stop project

Jorge Quijano, Panama Canal administrator during a news conference on January 2.
Jorge Quijano, Panama Canal administrator during a news conference on January 2.EFE

The head of the Panama Canal Authority (PCA) accused Spanish builder Sacyr and its Italian partner Impregilo of treating Panamanians as if they were Native Americans — “still wearing feathers on our heads” — by threatening to halt work on the canal expansion project if the government does not come up with more money.

“Panama has given Spaniards an opportunity to do business at a time when in their country there are no business opportunities […] And look how they pay us back!” said Jorge Quijano in an interview with EL PAÍS.

The PCA administrator said the consortium that is working on the canal’s expansion, Grupo Unidos por el Canal (GUPC), which has threatened to abandon the project if the Panamanian government doesn’t fork up an additional $1.6 billion (some 1.2 billion euros) for cost overruns, “isn’t looking to negotiate” a deal to resolve the dispute. The controversy centers on a $3.118-billion contract PCA and GUPC signed in 2009 for a third set of locks on the canal, which is part of a $5.250-billion project to widen the waterway that began two years earlier.

Quijano has a back-up strategy that will kick in should GUPC carry out its threat and halt work on January 20 if it isn’t paid. For now, the canal, which was built by the United States under President Theodore Roosevelt and opened in 1914, continues to operate normally.

On Tuesday, PCA offered the consortium $183 million as an advance payment if it guaranteed that work would be completed. As part of that proposal, GUPC would also have to contribute $100 million to cover the overrun costs.

Later that day, GUPC made a counteroffer, asking that PCA advance it $400 million and the consortium would put up the additional $100 million in exchange for completing the job. But by Wednesday, negotiations became even more complex when Impregilo CEO Pietro Salini suggested that PCA make an advance payment of $1 billion.

The Rome-based firm and Spanish-owned Sacyr are majority partners in GUPC, each holding a 48-percent share. Jan De Nul of Belgium and Constructora Urbana of Panama are the other partners in the consortium with respective stakes of three and one percent. Meanwhile, Sacyr chairman Manuel Manrique told Spanish state broadcaster TVE that he was confident that a deal could be worked out.

Question. Do you believe that GUPC’s proposal asking for $1 billion reflects its willingness to negotiate or the contrary?

Answer. They are taking a very aggressive stance, and it shows that they are really not willing to negotiate but instead laying down cards that prevent us from even approaching the poker table. With those figures, we are immediately left out of the contract. Our offer is based on what the authority can do at this time.

Q. And what happened to the advances made Monday by Spanish Public Works Minister Ana Pastor after she met with President Ricardo Martinelli?

We are not the bunch of feather-wearing people that many think we are”

A. This is what strikes me: after the minister spoke with President Martinelli, the consortium and I, and she assured us that GUPC was going to abide by the terms of the contract, they came up with an offer that is totally separate from the contract just hours after she left the country. We explained the terms of the contract and what our limitations are as a state-run company. We are not a private company and we cannot negotiate that type of business. And all [the GUPC] says is “well, this isn’t practical.” Then they tell me on Tuesday: “well, change the law. You have everyone’s support.” I told them I cannot change the law. I am not going to seek changes in the law just because they want to negotiate outside the contract.

Q. But time is running out and the threat is real.

A. I want to be clear. If I have to go out myself with a shovel and a pick to finish that project, I am going to have the support of all Panamanians who will go out there with me to complete the work. We are not the bunch of feather-wearing people that many think we are, and I say this with respect to all Native Americans. We are Panamanians who have studied in many countries, including Panama, and we have the technical and administrative know-how. With that said, we are going to finish this project on time in 2015. We have to act quickly. Yes, there are going to be a lot of hurdles, and it is going to be a difficult situation. But it isn’t the first time that we have encountered difficulties with a contractor. Of course this is a different level but only 35 percent of the work still remains.

Q. How are GUPC’s offers being communicated to you?

A. Frankly, we are astonished at the way the entire situation is being handled. We have been learning of their offers through the media — in other words, this is a very irregular and disrespectful manner of doing things because the media should not be used to convey these offers. We put our offer in front of them, which is the best thing we can do at this time to ensure that the work continues, and then we learned through the media what they wanted. We never received any official notification. It seems that there are decisions that are being taken by others who are not the appointed leaders of the group — which in this case is Sacyr. At least, Pietro Salini is making decisions for the group without the others knowing.

Q. The international community is bracing for the news that work on the canal will be stopped.

A. We informed our insurer Zurich America that the outlook isn’t good, but that it is important that we continue with this project. We know the law and are familiar with the contract, and we are not going to sit around and wait. We need to go forward with or without them.

Q. Do you think that the consortium’s position is overbearing, as if they think they are dealing with a banana republic?

A. Panama has given the Spaniards an opportunity to do business at a time when in their country there are no business opportunities. The same goes for the Italians and the Belgians, and look how they pay us back! How do you think the Panamanians feel? They really think that we still wear feathers on our heads; that they can twist our arms because they are big-time construction companies and instill fear by convincing us that we won’t be able to finish the project or that it is going to cost a lot more with another firm. Maybe it will cost a bit more with another partner — we don’t know that yet. We have a great plan of action under which, we hope we will complete this project without any additional expense.

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