The agency in charge of managing and operating the Panama Canal on Wednesday demanded that the consortium building a third set of locks to handle much larger cargo vessels resume work on the project after negotiations to resolve cost overruns ended.
The Panama Canal Authority (ACP) on Tuesday broke off talks
after more than a month of unsuccessful bargaining to resolve a contract dispute that centers on $1.6 billion in cost overruns, according to international consortium Grupo Unidos por el Canal. Work has slowed to a quarter of its normal pace in the past two months and almost completely stopped on Wednesday, the ACP said.
GUPC has run out of money to fund ongoing operations and has asked the ACP to help finance construction activity. Canal authorities have offered $100 million in advances and postponed repayment of previous advances, but the amount is much less than GUPC is seeking while it takes its case for reimbursement to international arbitration and courts.
The contractor says the extra costs were out of its control, including an initial batch of concrete that was rejected by the ACP. Canal officials say the cost overruns are the result of poor management by GUPC.
Canal Administrator Jorge Quijano said the ACP continues to try to find a solution, but stressed that the contractor must resume normal activity, which is especially crucial during the dry season in Panama.
"The ACP continues to keep the door open for a reasonable resolution within the contract," Quijano said in a statement.
The $5.2 billion expansion of the Panama Canal is one of the world's largest megaprojects and is being closely watched because of its anticipated impact on international trade. Cargo carriers are adding much larger vessels to their fleets for reasons having to do with economies of scale and are keen to deploy them on East-West and North-South routes through the Canal. The contract dispute puts in jeopardy the expansion's projected completion date and subsequent opening in late 2015.
Canal officials insist they will complete the project with or without GUPC. Carriers are not directly impacted at the moment because they won't initiate plans to consolidate routes until the availability of the new locks nears. And U.S. ports are using the extra time to catch up with dredging projects and other improvements to handle big ships that have dragged through the regulatory process.