Deal reached to avert Panama Canal crisis

Spanish led consortium will complete work to widen waterway by December 2015 Agreement will see both sides inject $100 million, with insurer converting deposit into loan

An aerial view of work to widen the Panama Canal.
An aerial view of work to widen the Panama Canal.EFE

The Panama Canal Authority (PCA) and the international consortium that is expanding the waterway have announced a deal to resolve the crisis that put the project on hold for 15 days. Completion is now set for December 2015, the parties announced late on Thursday.

Under the agreement, the PCA and the GUPC consortium will each inject 100 million dollars, while insurer Zurich will convert a $400 million deposit into a loan.

This deal should overcome the financial stumbling block that brought work by GUPC (a consortium of Spanish, Italian, Belgian and Panamanian companies led by Spain's Sacyr group) to a halt on February 5.

The conglomerate stopped work citing cost overruns of around 1.2 billion euros over the original budget, and demanded that Panama cover the difference. But the PCA replied that it would not accept the additional costs unless they were properly justified or sanctioned by an arbitrator.

Since then, both parties have been negotiating in a bid to prevent further delays to the construction of a third set of locks for the canal, which will allow larger ships to pass through.

Early on Friday, Sacyr said in a filing with the markets watchdog CNMV that it had reached "a final conceptual agreement to overcome the financing problems affecting the project to build the third set of locks in the Canal."

But Jorge Quijano, the PCA administrator, noted that "the agreement is still pending review and signing. But because of our commitment to transparency, we have reported it as soon as it happened."

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