Panama Canal players have dug themselves a deep hole
Panama Canal players have dug themselves a deep hole
Fiona Maharg-Bravo
MADRID — Reuters
Published Thursday, Feb. 06 2014, 4:26 PM EST
Last updated Thursday, Feb. 06 2014, 4:26 PM EST
One of the world’s biggest construction projects, the $5.2-billion (U.S.) expansion of the Panama Canal, is turning out to be a monumental nightmare. The 70-per-cent-completed project is an estimated $1.6-billion over budget. Talks about how to finance cost overruns while arbitration decides who should pay what have all but broken down. Tempers are frayed at both the Panama Canal Authority, the government-backed agency that is paying, and the Spanish-led construction consortium. Work is grinding to a halt.
The builders, led by Spain’s Sacyr, say they are doing all they can. They have sunk $280-million of their own money into the project and are willing to take out loans to pump in another $500-million. Under their proposal, the canal authority would contribute another $100-million and extend the deadline for repayment of a $784-million cash advance until as late as 2018.
The authority is reportedly balking at the last request. If the contract is broken, the conflict might spill over into the courts. The authority says the project will be finished next year – even without the consortium – but that is improbable. It will not be easy to find alternative competent contractors.
It’s ludicrous that the future of a major world trade artery hinges on what is pocket change in the global economy. The economic costs from delaying the expansion of a canal that currently accounts for 5 per cent of world trade would be far larger than the disputed amount. Ports along the U.S. East and Gulf coasts have been racing to upgrade infrastructure to deal with the larger ships that will be able to pass through the wider canal.
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http://www.theglobeandmail.com/report-on-business/international-business/panama-canal-players-have-dug-themselves-a-deep-hole/article16730273/
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