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Saturday, May 25 2019 @ 03:24 AM UTC

Panama wins $2.3 bln for major canal expansion

Canal ExpansionBy Andrew Beatty PANAMA CITY, Oct 14 (Reuters) - Panama has won $2.3 billion in loans from five government-backed lenders to finance its ambitious canal modernization project following nearly 18 months of talks, the government said on Tuesday. Despite a global financial crisis and a credit freeze, Canal Minister Dani Kuzniecky said the canal authority had received loan offers worth $2.9 billion and would tap financing from Japan, Europe and the Americas. Kuzniecky said Panama, which aims to spend $5.25 billion on a third set of locks for its interoceanic canal to allow for bigger ships, had decided against issuing bonds or seeking commercial bank loans to fund the project. "The most convenient option was in effect bilateral and multilateral public agencies," he told a news conference. (more) Panama, a key transit route in world trade between Asia and the United States' Atlantic coast, intends to borrow a total of $2.3 billion as shipping volumes have nearly doubled since 2006 on increasing Chinese demand for raw materials and its growing exports of finished goods.

Kuzniecky said Panama had received offers from commercial banks worth $400 million, but they would not be taken up.

The loan represents around 40 percent of the total cost of the project and will pay for the design and construction of the new locks that will double the canal's capacity by 2014.

The remainder will be paid though the canal's tolls and other revenues, which in the financial year 2007 totaled around $2 billion.

The United States opened the canal in 1914 and handed over control to Panama on Dec. 31, 1999.

The breakdown of the loan is as follows: $800 million from the Japanese Bank for International Cooperation, $500 million from the European Investment Bank, $400 million from the Inter-American Development Bank, and $300 million each from the Andean Development Corporation (CAF) and World Bank's International Finance Corporation. (Editing by Jim Marshall)

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