Panama accuses Sacyr consortium of paralyzing waterway expansion project

Spanish builder insists problem is one of liquidity and offers to co-finance cost overruns

San José (Costa Rica) / Madrid - 05 Feb 2014 - 17:28 UTC

The chairman of the Panama Canal Authority (PCA), Jorge Quijano, on Wednesday accused the consortium led by Spanish builder Sacyr contracted to widen the waterway of having paralyzed work on the project.

Quijano was speaking after the deadline of midnight on Tuesday had passed without any agreement between the GUPC consortium and the PCA in their dispute over who should pay for the $1.6 billion in cost overruns incurred in the project to build a new set of locks on the waterway. Quijano said he would not allow work on the project to be halted indefinitely and insisted it should be completed in 2015.

For its part, the Sacyr-led consortium GUPC (Grupos Unidos por el Canal) accused the PCA of breaking the negotiations, putting the future of the expansion at “imminent risk,” according to a statement issued by the firm.

Sacyr’s chairman, Manuel Manrique, said Wednesday that the consortium “could do no more” to resolve the conflict, although he reaffirmed the group’s commitment to continuing to negotiate a solution. “In all truth, in a responsible and reasonable manner, the GUPC cannot do more,” Manrique told Spanish newswire Efe.

Waxing philosophical, Manrique said “life continues,” and highlighted the fact that the Panama Canal project represented only a “small part” of the builder's portfolio. “Sacyr will continue. It has shown the world that it knows how to resolve technical problems in what is perhaps the most difficult civil works project in the world.” Sacyr’s share price fell sharply on Wednesday.

Manrique said the PAC had rejected the latest proposal put forward by GUPC, which also includes Italy’s Impregilo, Belgium’s Jan de Nul and the Panamanian company CUSA, “without providing a reasonable alternative.” “We are not seeking to have the PCA bear the unforeseen costs, only those that are determined by arbitration [...] and which figure in the contract,” the Sacyr chief continued.

Without an immediate solution, Panama and PCA face years of legal disputes in the courts"

Manrique lamented the fact after four years work on the project, the lack of any solution to the consortium’s claims had led to a lack of liquidity, which he said was the reason work had ground to a halt. “GUPC is ready to make a big financial effort and co-finance these unseen costs,” Manrique said.

Earlier, PCA sources told the Panamanian press that they were confident that the deadlock would be broken in the coming days.

In a statement sent by the GUPC to the Spanish National Securities Commission (CNMV), the consortium demanded that PCA “abandon its unjustly rigid position” and immediately pay the consortium $50 million to cover this week’s salaries of construction workers and subcontractors. At the same time, the Spanish builder warned that the break in negotiations is putting 10,000 jobs at risk.

“Without an immediate solution, Panama and PCA face years of legal disputes before national and international courts concerning the steps that brought the project to a near failure,” the statement said.

On Monday, Panamanian President Ricardo Martinelli had told reporters that both parties “are close to reaching a happy ending” from their discussions.

Spanish Public Works Minister Ana Pastor called on both sides to be “responsible.” “The worst that could happen is that the project does not continue.”

European Commission vice president Antonio Tajani expressed his “surprise” at the breakdown in talks and urged both sides to “reconsider their positions.”

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