Home' Trinidad and Tobago Guardian : February 13th 2014 Contents BG12 | REGIONAL
BUSINESS GUARDIAN www.guardian.co.tt FEBRUARY 2014 • WEEK TWO
On February 4, 1889, the French Compagnie
Universelle du Canal Interoceanique de Pana-
ma was declared bankrupt, marking the first
catastrophic failure to build the Panama Canal.
On the same date this year, the centenary
year of its completion in 1914, talks on how
to finish the canal s expansion collapsed.
Seafarers, a superstitious bunch, will not
interpret this as a good omen.
After weeks of negotiations between the
Panama Canal Authority and a consortium
led by Sacyr, a Spanish builder, and its Italian
counterpart, Salini Impregilo, the two sides
have failed to reach agreement on who will
pay for US$1.6 billion of cost overruns on
their US$3.2 billion portion of the project to
widen the waterway. The consortium, GUPC,
said that the endeavour was on "the brink of
The authority s head, Jorge Quijano, said
that the consortium had downed tools the
morning after the talks dissolved with the
project only 70 per cent completed. His team
will decide whether to hire new builders to
complete the work, which may cost another
"We will finish this job in 2015 with or
without GUPC," he said, though he acknowl-
edged there might be tough legal battles ahead.
The kernel of the dispute is a $785 million
advance payment that the authority made to
the consortium. Quijano said that GUPC had
asked for a moratorium on repayment until
2018. The authority, which already has granted
a year s extra time, was prepared to extend
it only until 2015.
The row has pitted two forceful personalities
against each other. Though coverage of the
consortium has focused on Sacyr of Spain,
it is Pietro Salini, the Italian businessman
whose company last year bought control of
Impregilo, who is said to be calling the shots.
Last month he accused Quijano of inex-
perience on such big projects. He also implied
that an Italian subcontractor, Cimolai, would
not deliver a set of massive lock gates if GUPC
loses the contract, setting the expansion back
by three years. Quijano told The Economist
that Salini s statement sounded like "extor-
The dispute already has cost precious
time. It started in the early part of Panama s
dry season, the only four months when
conditions are right for mixing concrete.
During a visit on January 31 to a canyon-
like expansion site on the Pacific coast, the
concrete mixers already were inactive. There
were few workers. It was a forlorn sight
compared with a mural at the authority s
headquarters that shows the original canal
swarming with laborers 100 years ago.
On the same day Quijano hosted the
American ambassador to Panama at the
expansion site, which he said underscored
the importance of its completion to the
United States, the canal s biggest user. The
head of Miami s port was in Panama the
same week. Miami has US$2 billion in port
improvements under way that originally
were timed to coincide with the opening
of the expanded canal this year or next.
As far north as New York and New Jersey,
authorities are deepening ports to cater to
the "new Panamax" ships that will be able
to carry almost triple the cargo that currently
can fit through the canal on a single vessel,
albeit at three times the toll, or about US$1
million. Caribbean ports, too, are expanding.
Shipping firms hope that a larger canal will
cut the time needed to take liquefied natural
gas from America to Asia and containers
in the other direction.
However, the dispute has drawn attention
to the alternative routes for big ships, such
as that to America from Asia through Suez,
or using trains and trucks between America s
coasts, or even relocating manufacturing
to Mexico instead of Asia, experts say. Aaron
Ellis of the American Association of Port
Authorities says that there is a common
misconception that bigger ships depend on
the canal s expansion.
"It s a big, big event in world trade," Ellis
says, "but it isn t the only game in town."
@2014 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
The Spanish building company leading the ex-
pansion project on the Panama Canal has denied
that work at the waterway has been halted.
The president of Sacyr, Manuel Manrique, said
no date had been set for construction work to
The Panama Canal Authority and the building
companies involved are engaged in a dispute over
who should foot $1.6bn (£1bn) in extra costs.
The Panama Canal is one of the world's most
important shipping routes.
The consortium says 10,000 jobs are at risk,
but the canal's authority says it will not "yield to
Earlier today, the Panama Canal Authority
(ACP) announced that talks with the Spanish-led
consortium behind the project had broken down.
The Canal Authority also said that work had
been halted at the site.
Manrique admitted that work may eventually
stop, if the building companies run out of cash,
but said no such decision had been taken by the
"There is still room for negotiation with the
ACP," Manrique told the Spanish radio network
"This project, like many big projects, has unfore-
seen costs. We want an arbitration court to de-
cide who will pay for that," he added.
The consortium is made up of Spain's Sacyr,
Impregilo of Italy, Belgian firm Jan De Nul and
Constructora Urbana, a Panamanian firm.
Canal Administrator Jorge Quijano accused the
consortium of being "inflexible" in its negotia-
He did not rule out that a deal could still be
reached, but said the window of opportunity was
getting narrower "by the minute".
The Panama Canal Authority had earlier broken
off talks, accusing the consortium of breaching its
The contract involves building a new larger set
of locks to accommodate ships carrying up to
12,000 containers. At the moment the biggest
ships that can navigate the canal carry 5,000
Sacyr blames the Panama Canal Authority for
the breakdown in talks, saying it had failed to re-
spond to the consortium's latest proposal to set-
tle the dispute.
"Without an immediate solution, we face years
of disputes in national and international tri-
bunals," Sacyr said in a statement.
A view of the construction site of the Panama
Canal Expansion project on 15 January 15, 2014
Construction work on the expansion started in
2009 and is due to be finished in June 2015
The secretary general of the International
Chamber of Shipping told the BBC that "any
delay will have an impact on the industry".
Peter Hinchliffe said: "Even at this stage, plans
to look at the capacity dimensions of ships and
routing are already going ahead, so we are very
Work began on the expansion in 2009.
Construction was due to be completed in June
2015, nine months behind schedule, with the
overall cost of the project estimated at US$5.2
Any delay might be expected to cost Panama
millions of dollars in lost revenue from toll
The canal, inaugurated in 1914, links the At-
lantic Ocean to the Pacific. BBCNews
Trouble at the Panama Canal
Spanish firm Sacyr
denies halting work
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