Site Meter
Send Us An Email
Panama Guide

Welcome to Panama Guide
Thursday, April 24 2014 @ 01:48 AM EDT

View Printable Version

Is There A Conspiracy To Topple Quijano?

Canal ExpansionThe political analyst Jose Blandon (father) argues there is a conspiracy to remove the administrator of the Panama Canal Authority (ACP), engineer Jorge Luis Quijano, from office.

"They never thought Quijano was going to take a strong stand ... and now they are betting on removing Quijano" said Blandon, who explained at first the Spanish company and leader of the GUPC consortium Sacyr Vallehermoso blamed the administrator (for the current crisis).

This thesis is reinforced by a "mysterious" recent protest by former employees of the Panama Canal Administration against Quijano, and a "fuss" on the Board of the ACP.

He pointed to the countries involved in the issue such as Italy and Spain, the companies and their internal and external partners.

The former Foreign Minister and internationalist Marcel Salamin advised Quijano on TVN to "be careful" of the members of the Board of Directors of the Panama Canal, who are conditioning their support and who are involved in "conspiracies" to put him in difficulty.

"There are people fishing in troubled waters .... a little technical coup d'etat to remove the administrator can not be admissible," he says. (Estrella)

Editor's Comment: Rumors and gossip. Ricardo Martinelli now has enough of his appointees on the Board of Directors of the Panama Canal that he controls what goes on there. Quijano was elected in 2012, with Martinelli's support. Martinelli has been behind Quijano's actions and decisions in this little crisis with the GUPC all the way through. I'm absolutely certain Martinelli and Quijano are comparing notes and jointly deciding on their strategy to navigate their way through this problem.

The guys on the outside who were appointed by the PRD would love (love) to see Quijano go away, and that explains why they are sitting around at night and dreaming up these sorts of scenarios. And of course the (PRD's) GUPC was, in fact, surprised by the hard nose stance adopted by Quijano - so they too would love to see him go away. But that's not likely to happen.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal, consortium discuss new financing proposal

Canal ExpansionBy Lomi Kriel (Reuters) The Panama Canal on Tuesday held talks over a new financing proposal with the Spanish-led consortium in charge of expanding the waterway and its insurer aimed at ensuring work continues on the project, which faces huge cost overruns.

Panama Canal Administrator Jorge Quijano said the consortium, led by Spanish builder Sacyr and which had threatened to halt work on the project this week, had pushed back its deadline to the end of January.

Earlier this month, the consortium had vowed to stop work by January 20 unless the Panama Canal Authority (PCA) agreed to foot the bill for some $1.6 billion in unforeseen additional costs.

The canal is one of the world's most important shipping routes and halting construction on the project would be a setback for companies eager to move larger ships through the waterway such as producers of liquefied natural gas (LNG), who want to ship exports from the U.S. Gulf Coast to Asian markets.

"There is a proposal on the table which the parties have put forward," Quijano told reporters. "It could offer a pretty long-term solution so work can continue."

Following the meeting, Quijano said no deal had been reached but noted that insurer Zurich in North America was now seeking to play a role in helping resolve the dispute.

"Zurich is right now checking the numbers proposed by the (consortium), but they're looking at the options that they too could participate in this," he said.

The PCA stressed earlier this month Zurich had $600 million in surety bonds for the project that canal officials say could be used to help finish the expansion if necessary.

Quijano said no further talks were planned on Wednesday but that the two sides would stay in touch, with another meeting possible on January 27 or even sooner.

He added the consortium had sent a letter advising the canal authority it would not halt work before at least January 31.

A PCA official said that work at the construction site was running at about 25 percent to 30 percent of capacity.

The PCA said this week it had turned down an offer by the European Commission to mediate the multibillion-dollar dispute. The entire project was due to cost about $5.25 billion, but the overruns could bump that up to nearly $7 billion.

The canal authority said last week it might take over a key part of the waterway's expansion if the consortium in charge of the project makes good on a threat to suspend work.

The consortium, which includes Italy's Salini Impregilo, Belgium's Jan De Nul and Panama's Constructora Urbana, won a contract in 2009 to build a third set of locks, the main part of the project to double capacity of the near 50-mile transoceanic cargo route.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Jose Domingo Arias Trying To Decide On A Running Mate

PoliticsThe First Lady of the Republic, Marta Linares de Martinelli, is one of the figures being considered as a possible running mate for the presidential candidate of the ruling Cambio Democratico political party, José Domingo Arias.

This was stated by Arias himself, who added he is also considering other women who have a "letter of presentation in the society" and who would "help us to built and give continuity to the projects."

Arias said he would announce his selection for a running mate on January 29.

"The most important thing is that that person shares with me the vision we have for the country," he added.

He said he will select the person based on their strengths and personal qualities. (Panama America)

Editor's Comment: Err, no. Vice Presidential candidates in Panama are always (always) selected based on how many additional votes they will bring to the election. Selecting Marta Linares de Martinelli for the position doesn't really make all that much sense in terms of political calculus, because all of the die hard CD and Martinelli fans are already going to be voting for Arias, anyway. Naming her as his running mate will only open up a debate about how he's actually just a Martinelli puppet (which he is) so it's all negative, and not much positive.

In this article Arias is pretty much saying his running mate will be a woman - mostly because that will help them to bring in some additional women voters. Anyway, no need to spend all that much time speculating. I'll just wait another week to see who he picks. Hey, but what's the fun in that? My dark horse prediction - Roxana Mendez - great choice. Lucy Molina would be a great (and really fun) choice. She has a vagina. She's black. She's respected by everyone (except those whose ass she's kicking - namely the teacher's unions). So I'd be happy with either one of those. But at this point I don't think it's going to be Marta Linares de Martinelli. This article basically says as much. "We were thinking about her, and now we've changed our minds."

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Zurich American Insurance Company Enters Conflict Between ACP and GUPC

Canal ExpansionThe Panama Canal Authority (ACP) and Grupo Unidos por el Canal (GUPC) did not reach an agreement after a new round of negotiations, in which the insurance company Zurich American participated for the first time.

At noon, at the end of the first session, the Administrator of the ACP Jorge Luis Quijano said a proposal had been put forward that would "provide for a long term solution" to the conflict.

Sources close to the negotiations said the solution would involve the ACP cashing in on the performance bond held by the insurance company, together with a commitment by the ACP to keep the GUPC leading the project.

The Spanish newspaper El Pais reported Zurich would have proposed the idea of converting the bond into a credit to be paid to the GUPC consortium.

In the afternoon, the positions assumed by the client (ACP) and the contractor (GUPC) returned to their previous distance - with the GUPC again demanding recognition of the $1.6 billion dollars in cost overruns.

Despite the session having closed without any agreement, Quijano considered the participation of the insurer to be a positive development. (Prensa)

Editor's Comment: Quijano is negotiating from a position of power, so therefore he's being a hard-ass. The GUPC is basically broke and cash poor, thanks to having under bid the contract. They have been acting and negotiating in bad faith from day one. This new proposal from the insurance company - to basically convert the performance bond worth about $600 million into a payment to GUPC - still would leave the consortium about $1 billion dollars short of what they need to complete the project. It's a great idea from the ACP's point of view, because they are going to be cashing in that bond one way or the other. And of course they will be demanding controls over how the $600 million of the bond is dispersed, to make sure it gets spent in a responsible manner, to pay for outstanding bills and contracts, labor, etc.

This deal would put some cash on the table the GUPC could use to keep going and to keep working on the project, if they had any intention whatsoever of actually completing the project. But, they don't. The GUPC will be needing the whole $1.6 billion - not just the .6 part - in order to finish this thing off and walk away whole. Anything short of that leaves them with a negative balance sheet. And, no one works in order to lose money. So no, the GUPC won't be accepting this deal. But it does serve to further highlight the true position and intentions of the GUPC. My prediction stands. I think the ACP will boot the GUPC, cash out the bond, then hire someone else to finish this thing off. In reality the GUPC has been about as screwed up as chocolate cheese since day one - so good riddance. The ACP was just waiting for the inevitable to happen. And now it's happened. And they are dealing with it. But none of that means the GUPC has to stay on the job site.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

USCG: Container Ship "Rich Forest" Remains Afloat, West of Guam, Salvage Effort Underway

Panama Flagged VesselsGuam - U.S. Coast Guard Sector Guam continues response for a container ship taking on water 420 nautical miles west of Guam.

During the morning of January 20, 2014, Coast Guard Sector Guam received a report from the owner of the vessel RICH FOREST that it was taking on water approximately 420 nautical miles west of Guam.

The RICH FOREST is a 500-foot, Panama flagged, container ship with 24 Chinese nationals aboard. The vessel was loaded with timber en route China from Solomon Islands. The vessel reportedly was taking on water in the engine room and pumps were not able to keep up with the rate of flooding. The RICH FOREST experienced 13 foot seas and 20 to 30 knot winds.

Sector Guam contacted Automated Mutual-Assistance Vessel Rescue System (AMVER) vessels, diverted Coast Guard Cutters (CGC), and requested a Department of Defense aircraft to assist the distressed vessel. Four AMVER vessels (C. S. SUNSHINE, ANDROMEDA VOYAGER, CORONA JOYFUL, and ANTONIS I) agreed to divert with arrival times ranging from one to 14 hours.

CGC ASSATEAGUE launched from Guam with a 27 hour transit time and CGC SEQUOIA diverted from Saipan with 40 hours until arrival. A fixed wing aircraft from Kadena Air Base in Okinawa, Japan was identified to support the search and rescue mission.

During the afternoon of January 20, C.S. SUNSHINE (685-foot, Panama flagged, bulk carrier) arrived on-scene with the RICH FOREST. Shortly after the C.S. SUNSHINE’s arrival, the master of the RICH FOREST made the decision to abandon ship into the vessel’s two 24-man life rafts. C.S. SUNSHINE was able to safely keep station and embark all 24 crewmembers from the RICH FOREST life rafts. Onscene conditions were reported to be 13 foot seas with 20 to 30 knot winds, during the rescue. C.S. SUNSHINE planned to keep the rescued crew aboard until the ASSATEAGUE arrived in the area. Safety Broadcasts were made advising mariners of the adrift vessel.

On the afternoon of January 21, ASSATEAGUE joined the C.S. SUNSHINE and RICH FOREST. ASSATEAGUE was able to provide Sector Guam with an on-scene assessment of the current situation. ASSATEAGUE reported that the RICH FOREST remained afloat, despite the appearance of the stern riding lower than normal. Weather conditions subsided to five foot seas with an occasional eight to 10 foot and 15 knot winds.

Sector Guam discussed potential courses of action with the vessel owner, both the Masters of the C.S. SUNSHINE and RICH FOREST, and responding CGCs. The vessel owner is working to establish plans for the vessel’s salvage.

ASSATEAGUE will remain on-scene with the C.S. SUNSHINE until the SEQUOIA’s projected arrival on tomorrow morning. If weather conditions are conconducive for the safe transfer of personnel, the 24 survivors will be transported to the SEQUOIA.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Work To Expand Panama Canal Almost Totally Shut Down

Canal ExpansionLabor unions and the Panamanian news media today reported the almost complete cessation of work on the project to expand the Panama Canal, affected by the lack of liquidity on the part of the consortium responsible for the project, led by the Spanish company Sacyr and the Italian company Salini Impregilo.

Aerial images of the job sites taken on both the Atlantic and Pacific sides broadcast live on local television this morning showed that almost all machinery has come to a complete stop, with the exception of one backhoe, and the almost total absence of workers.

The free shuttle buses used to transport workers came into the zones of work empty and left empty, according to images broadcast by the channel 2 TVN Panamanian news station.

The situation comes amid a warning issued by the consortium Grupo Unidos por el Canal (GUPC), now saying they might stop working on the project "at any time" because "cost overruns" in excess of $1.6 billion have left them without liquidity, claims the Panama Canal Authority has rejected and branded as a violation of the contract.

The construction of the third set of locks for the waterway has an advance of at least 65 %, according to the Panama Canal Authority (ACP).

The ACP reported Sunday "a reduction of labor" in the areas of of the expansion. Four days before the Administrator of the Canal Jorge Quijano said the level of work has been reduced by 70% compared to last November (2013).

For today, Tuesday, it is expected the Panama Canal Authority (ACP) and the GUPC will hold a meeting with Zurich International, the insurance company holding a bond worth $600 million backing the project.

It is not clear what decision might emerge after this meeting, but Quijano has said the ACP is preparing to face any eventuality "and to resume work as soon as possible."

García Olmedo , the Director of the Institute of Canal Affairs of the state owned University of Panama, told local media the ACP must give the insurer Zurich a document claiming the GUPC consortium "has technically suspended work" on the project, which is a "violation of the contract" signed by the parties.

Abelardo Herrera, the head of the Autonomous General Central of Panamanian Workers (CGTP) (union), said today at least 2,600 workers have been laid off since last November by the contractor, most of them last month.

Herrera explained as workers have reached the "completion phase" or the expiration of their temporary work contracts, in many cases these have not been renewed, so in practice he says the workers "have been laid off."

The number of construction workers on the new third set of locks of the Panama Canal, being built by the GUPC consortium, reached almost 6,000 people in 2012, according to data from the consortium.

Herrera said it was "blackmail" for the contractor to paralyze work on the project as part of their "intention to claim something to the ACP that is not established in the contract," and he said in this situation "those who are paying the price are the workers."

In an interview with local television, the union leader added that "the CGTP requires that the workers be guaranteed their jobs" and that the ACP is the guarantor of it.

The GUPC won the contract for the design and construction of the third set of locks in 2009 for its tender offer of $3.118 billion, below the $3.481 billion dollars established by the ACP as the maximum price.

The new structures should be completed in October this year, but have been delayed until at least June 2015, warned the contractor last year, and a further postponement of the start of operations due to the current conflict is feared. (Critica)

Editor's Comment: Who cares if the GUPC is threatening to stop working today, or if they supposedly pushed that date back to 31 January, if they have already stopped working? That is a violation of the contract. They are trying to put the ACP's nuts in a vice and squeeze to see if 1.6 billion dollars comes out. Blackmail. Extortion.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Raisa Banfield Joins Jose Isabel Blandon - Now Running For Deputy Mayor of Panama City

PoliticsAfter repeated proposals and consultations, the architect and environmentalist Raisa Banfield agreed on Tuesday to be the Vice Mayoral candidate for the Panameñista and candidate for Mayor of Panama City, Jose Isabel Blandon.

Banfield was emphatic when she said she accepted the nomination to work for a city and not for a political party.

Both Banfield and Blandon went to the offices of the Electoral Tribunal to present the candidacy. (Estrella)

Editor's Comment: The CD is holding a stick of dynamite with Jose Isabel Blandon's name on it. They only have to decide when to light the wick. They've been holding off for well more than a year, waiting for the right moment as we get closer to the elections in May 2014. In politics (and especially underhanded manipulation of information designed to sink an opposition candidate) timing is everything. But it's a pretty safe bet to say he's not going to be the next Mayor of Panama City. I've been waiting for that particular "boom" to go off for a very long time. Any minute now ... they're probably just waiting for him to spend some real serious money on his campaign effort. You know, bleed him dry a little first.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Announces Proposed possible solution to crises

Canal ExpansionThe Panama Canal Authority (ACP) said there is a "proposal that can provide a long-term solution" to the conflict that threatens to paralyze the work to expand the waterway at any time.

In fact, sources inside the Panama Canal Authority reported it has been decided to change the date of the threat imposed by the Grupo Unidos por el Canal (GUPC) consortium - led by the Spanish company Sacyr and the insurer Zurich International - to 31 January 2014.

On 30 December, the GUPC announced they would suspend work on the project to expand the Panama Canal on Monday, 20 January 2014.

"We are still discussing among ourselves, both together and separately," the details of the proposal "that brought the parties" to the negotiating table, said ACP Administrator Jorge Quijano. (Panama America)

Editor's Comment: So no hard decisions, just more discussions, and a hint there might be some hope thanks to a new proposal under consideration. Stay tuned...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Expansion Slows Sharply as Deal Remains Elusive

Canal ExpansionBy DAN MOLINSKI (Wall Street Journal) Panama's government on Monday said work to expand the Panama Canal fell by up to 75% due to its still-unresolved dispute with a consortium of European companies it hired to do the job.

The move puts further doubt to a scheduled completion date of June 2015.

Panama hired the consortium, Grupo Unidos por el Canal, in 2009 to build a third set of massive locks in the canal for $3.1 billion. The historic project will allow bigger ships to pass through the canal and is more than two-thirds complete. When finished, it would allow the Central American nation to quadruple its yearly income of $1 billion from toll fees it charges to shipping firms that use the maritime shortcut.

But the consortium, which is 96%-controlled by Spain's Sacyr SA and Italy's Salini Impregilo SpA, suddenly threatened in late December to halt construction by the end of Monday if not paid an extra $1.6 billion for cost overruns it says were unavoidable.

With little response from Panama over the past month, the consortium known as GUPC reduced its immediate demand to $400 million two weeks ago. On Monday, it offered another proposal which calls for the builders and Panama to "co-finance" the project, which it said currently sees monthly costs of more than $100 million and employs some 10,000 people.

Panama, through the Panama Canal Authority, again offered a chilly response.

"This solution is not contemplated within the contract," the canal authority said in an emailed statement Monday afternoon, adding it is preparing a more complete response.

GUPC also said in its latest proposal that it was suspending its threat to halt construction altogether. But that seemed rather moot given that earlier in the day the canal authority said GUPC has already reduced activity at the site by 70% to 75%.

The 50-mile Panama Canal was built 100 years ago to enable ships to pass between the Atlantic and Pacific oceans at the isthmus of Central America, rather than being forced to sail down and around Cape Horn at the bottom of South America.

The canal has undergone many expansion projects over the years as shipbuilders steadily produced larger vessels to handle rising global trade. But the current expansion effort is the most ambitious.

At a budgeted overall cost to Panama taxpayers of $5.3 billion, the Central American nation first hired building companies to expand navigation channels. That work is nearly done and has seen few delays or disputes.

But the most expensive and vital part of the expansion effort, the $3.1 billion building of a third set of locks, is proving the most problematic.

Shipping industry representatives say Panama's government may be partly to blame given it awarded GUPC with the contract despite concerns voiced at the time that their low-ball bid could never be completed without going way over budget.

Built by American engineers, the Panama Canal handles 5% of the world's maritime trade and much of the waterway's traffic either departs from or is bound for U.S. shores.

Editor's Comment: Remember, this contract was handed to the GUPC under the administration of the PRD's Martin Torrijos. They have since been replaced by Ricardo Martinelli of the Cambio Democratico political party. To their credit, they expressed their doubts regarding the GUPC's ability to complete this project, practically from their first day in office. So when this article says "Panama's government may be partly to blame" that's 100% right on - but it's also critically important to point out there's been a change in management since this contract was let. In short, it's now going to fall to the CD to clean up the mess the PRD made. Ah, bribery in the third world. Anyone know how much Martin Torrijos has in offshore accounts? Anyone care to hazard a guess?

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Authority Has $1.148 Billion In The Bank

Canal ExpansionThe Panama Canal Authority (ACP) is holding guarantees worth $1.148 billion which it can cash in if the Grupo Unidos por el Canal (GUPC) consortium abandons the project.

Of that total, $450 million would come from securities issued by the Zurich American Insurance company.

The ACP will be meeting with the Zurich American Insurance company today, together with representatives from the GUPC consortium, to analyze different scenarios of continuity, although neither is willing to budge.

ACP Rejects Mediation Offer

Yesterday the Panama Canal Authority (ACP) rejected an offer made by the European Commission (EC) to mediate in their conflict with the consortium Grupo Unidos por el Canal, comprised of three European and one Panamanian companies.

EC Vice President Antonio Tajani agreed to intervene to find a solution acceptable to all, but the ACP said there are already mechanisms in the contract to achieve resolution for disputes, and there is no need for a third party. (Prensa)

Editor's Comment: Again, the money is not going to be a problem. In addition to the $1.148 billion the ACP can already access easily, don't forget their legal ability to sue the members of the GUPC consortium for failure to perform on the contract. These companies can't just walk off of the job while flipping the ACP the bird over their shoulder. What they are doing is incredibly irresponsible. I would expect eventually the ACP's lawyers will file lawsuits against the GUPC and sue, in order to recover the additional costs associated with completing the third set of locks.

Now, before you jump down my shorts - remember that the GUPC should have bid for the contract in good faith in the first place. If they are sued, they will argue there were unexpected cost overruns which were impossible for them to have anticipated. But remember, the GUPC's bid was like $1 billion dollars below the next closes bidder. Everyone knew (and knows) the GUPC simply low-balled the contract. You can hire a whole lot of lawyers when there's a billion dollars at steak. And no, that wasn't a typo...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

ACP Refuses Offer - Accuses GUPC Of Violating Contract

Canal ExpansionThere were changes in the postures in the conflict between the Grupo Unidos por el Canal (GUPC) and the Panama Canal Authority yesterday, but none of them helped to bring the parties closer to a settlement.

The GUPC's threat to stop working on the project is still in force, but the consortium announced yesterday it would not apply the action starting today, and they are still looking for a negotiated solution.

The GUPC is demanding the ACP pay them $1.6 billion dollars for supposed "cost overruns" above and beyond their initial offer of $3.118 billion, but the ACP is demanding that any claims be handled through the mechanisms provided by the contract.

The GUPC consortium presented a threat to suspend work on the project starting today if the ACP did not recognize the claim, which was rejected last Thursday.

But yesterday the GUPC issued another statement, changing their posture, and saying that at the moment they are not planning to actually stop work on the project. They proposed external mediation by the European Commission, and another financial formula to seek an end to the conflict.

"The GUPC not have a reason to make a change in the status of the work being done tomorrow (today), because the warning sent on 30 December 2013 entitles the consortium to suspend work at any time starting on 21 January 2014, but at this moment that scenario is not being contemplated," said the GUPC in the statement sent to EFE.

In any case, they warned although they have no plans to stop working on the project, now their "Board of Directors may assess the situation and take the appropriate decision at any time."

The GUPC has also asked the European Commission to mediate in the conflict, a request that was received yesterday, the newspaper El Pais reported.

The GUPC also filed another financial offer, in which they tell the ACP that "co-financing the unexpected costs while awaiting the decision of international arbitration" is the only option "that will allow" the project to be revived and for it to be finished in the shortest time.

However, the Panama Canal Authority rejected the mediation of the EC, because it involves a negotiation outside the original contract, and they even warned that the GUPC has already violated the contract.

"This is not a problem of negotiation, but rather the contractor should continue to work and present any claims before the instances already specified in the contract," said the ACP Administrator Jorge Quijano yesterday.

Quijano also said that as of yesterday, he still has not received any official proposal based on a co-financing scheme announced yesterday by the GUPC.

"They have not told us anything. I understand they have released a statement to the press. The fact is that production (levels of work) in the project have been very low since the first day of the year. We reserve our rights under the contract, because they are failing to comply with the contract by not maintaining the pace of work," said Quijano.

He said the ACP sent a note to the GUPC to correct their low production, but even so the consortium has not corrected the pace of the work.

Quijano made an inspection of the work areas in both the Atlantic and Pacific sides of the Panama Canal last week, and saw productivity was below 30%.

Quijano said the GUPC consortium has reduced the pace of work on the construction of the third set of locks by at least 70% compared to November 2013, which he described as a violation of the contract.

Also Labor Minister Alma Cortés said the GUPC has cut its staff from 5,000 to 2,000 workers. After that, the institution conducted an inspection of the work of the third set of locks.

Although the ACP has already announced they will not recognize arbitration by the European Commission, the EC Vice President responsible for Industry, Antonio Tajani , told EFE in a telephone interview "the most urgent" is to "buy time" because the ultimatum given by the companies threatening to stop work on the project ends tomorrow (today).

He also said he would talk with the leaders of the European Investment Bank (EIB) and the Panamanian authorities.

"I now ask all parties to make an effort to converge to a common position. It serves little purpose to repeat their own positions without moving toward the meeting point," he said.

Tomorrow, Tuesday, the ACP plans to meet with representatives of the insurer Zurich, a meeting that was postponed by the GUPC consortium last Monday, because they were not available, according to the Canal administrator.

The insurer has the first option to choose whether to resume the commitment and hire a company to continue the work, or to redeem the bond worth about $600 million if the work on the project is suspended.

According to Quijano, the bond consists of $400 million plus another $50 million in bond payments to subcontractors and labor, as well as other special liability coverage in the amount of $150 million for payments made over the contract for things such as the lock gates and valves.

Proposals

During the negotiations there have been several proposals as a way out of the conflict.

Under a proposal made by the ACP both parties would pay a sum of $100 million, and they offered to extend the deadline for a payment of $83 million the GUPC has to make by two months, for a total of $282 million.

After a meeting in the afternoon, GUPC made ​​a new proposal and requested an advance of $400 million, in addition to extending the current moratorium on the payment until the end of the period of arbitration, among other things.

Subsequently, Impregilo also made another proposal asking for $1 billion dollars.

Both proposals were rejected by the ACP, saying they were outside of the existing contract.

Since then, the president of Sacyr, Manuel Manrique, has held talks as the leader of the group with the administrator of the Canal, but they have not been able to reach an agreement.

Manrique said his company would finish the project, however the consortium never withdrew their threat to suspend work. (Panama America)

Editor's Comment: Ah, those goofy GUPC guys. Now they are trying to bring in an outside mediator or negotiator in the form of the European Commission. And of course that guy - despite the fact the ACP rejected GUPC's proposal outright - immediately urged the ACP to abandon their position and move toward the middle.

Nice try, GUPC. There are already a means and mechanism established within the framework of the existing contract to address any conflict or claim. And obviously, the GUPC already knows they will likely lose any claims presented before those channels, because (in fact) they don't have a leg to stand on. So faced with a losing hand, they are trying to change the ruled to tilt the game in their favor. Nope, not going to happen.

Everyone already knows what the GUPC did, and what they are trying to do now. They low-balled the contract, and now they want to squeeze the ACP for more money. It's not going to work. The ACP will now be able to sue the GUCP member companies for non-compliance, and potentially even force them to pay for the additional expense created by this conflict.

The first thing will be to turn to the insurer. They will take one look at the numbers (they already have) and they will come to the obvious conclusion the project cannot be finished for the $600 million value of the bond. So, they will turn the money over to the ACP.

The ACP will fire the GUPC for noncompliance with the contract. The ACP will hire someone else to finish the project. Then they will go after the GUPC for a total of about $1 billion. But this whole idea of the GUPC keeping a virtual ax hanging over the ACP's head will not work...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Insight: Lowball bid comes back to haunt Panama Canal expansion

Canal ExpansionBy Lomi Kriel and Sonya Dowsett (Reuters) - A bitter dispute between the Panama Canal and a Spanish-led consortium of construction companies over the spiraling cost of expanding one of the world's busiest waterways was years in the making.

The two sides are at odds over who should pay for $1.6 billion in cost overruns to build a third set of locks for the canal, the main part of the expansion of the 50-mile cargo route that connects the Atlantic and Pacific oceans.

The impasse over the 100-year-old waterway could delay construction, which aims to double the canal's shipping capacity and bring in billions of dollars in new revenue for Panama.

Reuters interviews with people involved in the 2009 bidding for the contract, local officials and leaked diplomatic cables reveal their concerns that the Grupo Unidos por El Canal (GUPC) consortium would not be able to finish the job with a bid that was $1 billion lower than its nearest rival.

The GUPC, led by Spanish company Sacyr, said the overruns were caused by problems including flawed geological studies carried out by the Panama Canal Authority (PCA), a semi-independent government entity that has managed the waterway since the United States transferred ownership to Panama in 1999.

But the PCA has rejected the GUPC's assertions.

A top Panamanian official close to the bidding process, who spoke on condition of anonymity due to the sensitive nature of the matter, said within months of the project being awarded, Sacyr executives were saying the work would not stay on budget.

"The PCA knew some years ago that Sacyr authorities were saying that openly, but felt they were protected by the contract," the official told Reuters.

A second Panamanian official, also speaking on condition of anonymity, said even before the deal was signed, discussions with consortium officials showed they believed they would be able to negotiate a higher cost at a later stage.

"But they found in Quijano a brick wall," the official said, referring to the head of the PCA, Jorge Quijano.

Large infrastructure projects often run over budget, and GUPC officials have said overruns are an occupational hazard.

But Sacyr denies it ever planned to ask for more money and says flawed data from the geological studies of the canal pushed up costs, because it meant that local basalt excavated for the work was not right for the concrete mix it planned to use.

"It was not a deliberately underbid offer," the company's chairman Manuel Manrique told reporters this month. "Sacyr has successfully carried out a great number of projects ... and we are still winning and carrying out projects."

The PCA has dismissed that basalt claim, and points out that its contract offered no assurances over the rock.

"The employer in no way guarantees that such (material) is adequate, or meets the requirements for the contractor's proposed design, or is suitable for the works," says the contract, which is publicly available on the PCA's site.

COSTLY DISPUTE

The dispute could prove costly for both sides.

Expansion was originally due to be finished in 2014 to coincide with the canal's centenary celebrations, but that deadline was pushed back to the middle of next year.

If work is delayed, Panama could lose out on millions of dollars in projected revenue from toll charges.

For Sacyr, which has 48 percent of the consortium, the work brings in a quarter of its international revenue. Like most Spanish builders, the company relies heavily on foreign orders to offset a sharp economic downturn at home.

Winning the bid gave the company a major lift.

At the end of 2008, Sacyr was grappling with falling core earnings, punished by weak construction and property markets as Spain's economy swung from boom to bust. The company was swamped with 14.5 billion euros ($19.7 billion) of debt, around seven times its market value. Sacyr's shares had lost nearly 90 percent of their value from the 2006 all-time peak.

In July 2009, GUPC clinched the contract for the locks with an offer worth $3.12 billion - significantly below the $3.48 billion target reference issued by the PCA for the process.

That was $1 billion below the second lowest offer tendered by a group fronted by U.S. engineering company Bechtel.

Both Bechtel and another consortium led by Spanish company ACS, whose bid was worth $6 billion, quickly sent letters to the PCA complaining the GUPC proposal did not meet the bid requirements and had inherent structural risks.

But neither losing bidder formally challenged the process, and Canal Administrator Quijano told Reuters those structural concerns had since been resolved.

Jorge Sanchiz, a Panamanian engineer with experience in canal work, said both the PCA and the consortium were to blame: one for underestimating the costs, the other for allowing it.

"They only way (the consortium) was going to be able to cover this was asking the Canal Authority to meet the overruns," said Sanchiz, who forecast before the PCA made its choice in 2009 that the winner would run substantially over budget.

The overall expansion of the canal was initially forecast to cost $5.25 billion in total. But the overruns now being claimed by the consortium are pushing it close to $7 billion.

"COST OVERRUNS COMMON"

A senior figure within the GUPC said the PCA was being unrealistic if it thought the project would not cost more than originally projected by the consortium.

"To think that a five-year project with the complexity and size of this one won't have overruns is absurd," the official said, asking not to be identified. "In a lot of projects the deviations were much bigger than in this one."

One of the biggest academic studies on the issue in recent years was a 2003 investigation at Aalborg University in Denmark which looked at 258 transport infrastructure works worldwide and found they had an 86 percent chance of incurring cost overruns.

On average, the costs were 28 percent higher than forecast, the study said - but below the 50 percent jump on the GUPC bid.

Sacyr's main partner is Italy's Salini Impregilo, which has a similar share in the project. The GUPC also includes Jan De Nul from Belgium and Panama's Constructora Urbana (CUSA).

A day after the PCA published its evaluation of the bids, the U.S. embassy, which had backed the Bechtel-led consortium, described the GUPC proposal as a "bargain basement bid," according to cables published by WikiLeaks.

"It is widely expected that during construction, Sacyr will attempt to renegotiate the price," the cable said.

Less than six months later, the U.S. embassy cabled Washington that Panamanian vice president Juan Carlos Varela had expressed grave misgivings about the winning offer.

"When one of the bidders makes a bid that is a billion dollars below the next competitor, then something is seriously wrong," the cable quoted him as saying at the end of 2009.

Alberto Aleman, who headed the PCA from 1999 to 2012, said all the competitors had faced the same rules and that the Sacyr-led group had offered both the best design and the best price.

"Bechtel's offer had a different design in which the gates were 50 percent bigger, using much more concrete," he said.

But costs were always likely to be an issue, he admitted.

"We knew before we put this together that any project of this complexity would have claims. No matter who would win."

The dispute has not surprised industry experts in Spain.

The practice of making low offers for a contract, then negotiating costs later has been a popular strategy for Spanish construction firms for years, industry officials told Reuters.

Companies put in low bids in the hope of booking extra pay-outs on modifications and extensions as revenue, they said.

"We've all done that at some time or another, making low bids was a typical Spanish tactic," said one official, speaking on condition of anonymity.

The Spanish government passed a law in 2011 aimed at preventing the practice of underbidding, and said at the time that 98 percent of public contracts signed in the previous 15 years had ended up with cost overruns.

The PCA said this month it could take over the project from early February if GUPC made good on its threat to suspend work unless the authority footed the bill for the cost overruns.

The dispute over costs looks likely to be settled by arbitration panels agreed in the contract, but a question remains over whether the GUPC will finish the project.

The first Panamanian official said he expected the expansion to be taken out of the GUPC's hands. The consortium's suspension was due to take effect Monday, but GUPC said work would continue for now while it remains in talks with the canal authority.

However the row plays out, the expansion looks unlikely to suffer the fate of the 19th century scheme to build a canal through Panama led by Frenchman Ferdinand de Lesseps.

Starting work in 1880, it collapsed after the loss of thousands of lives and millions of dollars, allowing the United States to step in and take control of the canal project in 1903.

Panama's President Ricardo Martinelli said the expansion of the waterway could not be stopped.

"The Canal will be finished regardless of what's said, come rain, wind or hail," he said. ($1 = 0.7352 euros)

Share
  • Facebook
  • Google Bookmarks
View Printable Version

GUPC Trying To Indefinitely Extend Their Threat To Suspend Work on Panama Canal Expansion Project

Canal ExpansionThe consortium Grupo Unidos por el Canal (GUPC) changed the deadline they imposed on the Panama Canal Authority as part of the warning they issued with a threat to stop working to construct the new third set of locks as part of the project to expand the Panama Canal, which according to the letter they issued to the ACP was supposed to take effect today.

The consortium said yesterday in a statement the notice they sent on December 30 to the ACP entitles the consortium to suspend work at any time, starting tomorrow.

However, the ACP said the suspension announced today by the GUPC "is invalid, without merit, and is contrary to the contract for construction of the third set of locks."

"Currently, levels of work on the project are low without any justification," said a statement issued by the ACP.

The ACP went on the explain sub-clause 16.1 of the contract cited by the consortium as their justification for suspending work on the project is "wrong" because the clause cited only applies if the employer - the ACP - should fail to make monthly payment to the contractor for bills, and this has not occurred.

ACP officers toured the construction site on the Pacific side of the Panama Canal yesterday, where they noted the slow pace of work being conducted, the statement said.

Although it is not established in the contract , the European Commission offered to mediate in the conflict between the ACP and the GUPC. (Prensa)

Editor's Comment: So, now the GUPC thinks they can simply hold their threat to suspend work over the heads of the ACP? While simultaneously having laid off more than 2,600 workers (more than half of the workforce)? And that their perpetual threat to walk off the job will end up with them getting paid $1.6 billion dollars more than what they agreed to by signing the contract to build the new locks for $3.118 billion? Money they are trying to force the ACP to pay, by exploiting the leverage they have due to their current participation in the project? All of this adds up to simple extortion. Blackmail.

No princess, that's not going to work. This entire scenario will eventually wide up in textbooks around the business world on "how not to" manage your way through this sort of problem. The GUPC made their first mistake when they underbid the project in the first place, in order to win the contract. The GUPC also overplayed their hand when they threatened the ACP. I don't think they ever suspected the ACP's answer would basically come down to "screw you." The GUPC gambled that their leverage, created by their simple presence on the work site, would be enough to force the ACP to negotiate with them and to pay them $1.6 billion dollars in "cost overruns." They also thought the timing would work in their favor, being just a few months before the next general election to select the new Panamanian president. But really, who is advising these idiots? They've blown it, several times, and at many levels. Phale, on a massive scale...

I had some conversations with several people on the ground over the weekend, who are involved in the process from various angles and at different levels. The general consensus is that it's going to cost the ACP and the government of Panama another $1.5 billion dollars, at least, in order to finish the project. So why in the name of God should they pay that money to these morons, who have repeatedly negotiated in bad faith and acted in bad faith? It makes no sense whatsoever. And besides, it's probably even illegal for the ACP to simply hand $1.6 billion dollars to the GUPC that's not in the contract. This comes down to an attempted extortion - blackmail. Pay us, if you ever want to see your baby alive. And right now the ACP and Martinelli are pissed. Severely pissed.

The Panamanian people are almost 100% behind the ACP and president Ricardo Martinelli, so there will be no political backlash over this kerfuffle. By demonstrating strong leadership and a steady hand, the ACP and the Panamanian government will gain even further political support - not that it's even necessary. The ACP and Martinelli are fearless, and the polls show strong support and a probable win for their presidential candidate Jose Domingo Arias in the May 2014 election. I have not seen them directly blame the PRD (yet) for this mess, but that will probably emerge in the final run to the election, in the last few days before the vote. So politically speaking, the GUPC made a big mistake when they thought they could gain the upper hand by timing their attempted gut-shot for January 2014.

All of this adds up to one conclusion. The GUPC will get tossed off of the job, and they will be replaced. Someone else will finish the job. The newly expanded Panama Canal will eventually be opened, albeit with a delay. No big deal there, it's already going to be delayed, thanks to the ineptitude of the GUPC. The additional money - $1.5 billion or so - is a ho-hum, so what, no big deal part of the equation. But having a responsible builder on the ground who will drag the project through to completion will be a significant improvement over the current situation. The ACP and the Cambio Democratico will come out smelling like a rose. The share prices of the companies making up the GUPC will get pummeled in the exchanges where they are traded. Locally, construction workers will get laid off for awhile, until the new builder gets up and running.

Stay tuned as this situation continues to slowly develop. I expect all of this to be resolved, and there will be a new group working, before the May elections. But it's going to take that long to get all of the details sorted out. Expect a three to four month delay in the progress of work. I expect the project to be completed in early 2016.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

The ACP Has Been Talking To Other Contractors

Canal ExpansionThe Panama Canal Authority revealed today they have been talking to contractors other than those currently responsible for building the new third set of locks, in order to face the possible suspension of work on Monday, but they have not lost all hope the GUPC will reconsider their position, and resume work on the project "at full speed."

The Administrator of the Panama Canal Authority of Panama (ACP), Jorge Quijano told reporters he is holding the names of the new companies in reserve "until we are ready to act," after a meeting with with the Panama Business Executives Association.

"We are ready for the eventuality (but ) we still have some hope that the contractor will reconsider and re-focus on resuming work at full speed," said Quijano.

After these statements, Quijano held a closed-door meeting with Manuel Manrique, the President of the Spanish company Sacyr leader GUPC, and representatives of Belgium's Jan de Nul and the Panamanian company CUSA, during which "they agreed to keep channels of communication open in the coming days" to overcome the conflict, according to an official statement.

These three companies, along with Italy's Impregilo, comprise the Grupo Unidos por el Canal (GUPC) , who announced they would suspend work on the project starting next Monday due to liquidity problems arising from "overruns" in excess of $1.6 billion that the ACP refuses to recognize.

Sacyr and Impregilo each have a 48% stake in the GUPC consortium, while Jan de Nul has 3% and CUSA has 1%.

In brief statements made to the press today as he left the headquarters of the ACP, Manrique told reporters the talks "continue" without further details.

In the statement released by the ACP after the meeting between Quijano and the three companies, the Authority said "the situation remains similar to the points made this morning" by the administrator, and that "in the event of any significant progress presented (in the conversations) we will release it."

Quijano revealed this morning that yesterday he met with Manrique and the contractors but so far they had not presented a "positive" solution to the crisis.

Sacyr "is willing to keep talking and is keen" to finish the construction of the new locks, a project that was awarded in 2009 to the GUPC for $3.118 billion dollars, which is currently 65% finished, according to the ACP.

The ACP has paid $2.831 billion, including $ 784 million in repayable advances, plus $180 million in additional costs which represent about 6% of the contract cost.

Quijano reiterated this morning that the ACP maintains its proposal to grant a two-month moratorium on the payment of an advance of $83 million given to GUPC, and for both parties to disburse $100 million to revive the project and ensure the work for the next "two to four months."

He also said during a tour of the project yesterday they have confirmed the consortium "has significantly slowed" the rate of work being done on the project, by about 70% compared to last November, which he considers to be a violation of the current contract.

"Or, it is not only that they are waiting for next week to stop work, but rather what we see now is not the same level of activity from two months ago and that (...) is totally outside of the contract," he said.

Quijano also stressed the ACP's commitment to see the project through to completion, and that next week "there will be decisions one way or the other" because it is not in their plans for work on the project to remain stopped "for three to four months."

He announced he has a meeting scheduled "next Tuesday" with the insurer Zurich International, which has a $600 million dollar bond as part of the contract to build the third set of locks, which is the first option to continue work on the project if the GUPC walks off the job.

Quijano explained the contract states if the consortium stops working, the project can be taken over directly by the insurer, or they can pay the bond to the ACP, which would then take direct control and finish the project through subcontractors.

In the scenario in which the ACP takes control of the project, Quijano said the work could "start walking quickly," and although he avoided quantifying the delay the conflict would cause, he said the ACP would establish a work schedule that would allow for the project to be completed "well within the 2015 time frame."

Under the current contract the GUPC has to have construction finished by October 2014, but the GUPC had already warned - before the current conflict - that it would be delayed until June 2015. (Critica)

Share
  • Facebook
  • Google Bookmarks
View Printable Version

More Than 2,600 Construction Workers Laid Off - Panama Canal Expansion Project

Canal ExpansionMore than half of the workers involved in the project to expand the Panama Canal have been laid off in the past five months, according to the Minister of Labor and Workforce Development, Alma Cortés, who believes the consortium in charge of the project is facing economic problems.

"Here many have been laid off and they have not been called back to continue the work," Cortes said Thursday after meeting with the administrator of the Panama Canal, Jorge Quijano.

According to Cortés, more than 1,600 workers have been laid off in the past five months and another 1,000 have stopped working on the project voluntarily.

"We are talking about 2,600 workers who are no longer working on the project to expand the Panama Canal." She said the total labor force was more than 5,000 workers before the layoffs started.

The meeting between Quijano and Cortés occurred in the context of the crisis triggered last December 30, when the consortium Grupo Unidos por el Canal ( GUPC ) threatened to suspend work on the canal next Monday if the ACP refuses to recognize cost overruns of $1.6 billion dollars.

Quijano said on Thursday work on many of the elements of the construction for the expansion of the Panama Canal and the new third set of locks "have been discontinued and stopped" in recent weeks.

"I get the impression that they (the GUPC consortium ) were already suffering some kind of economic situation," he said.

"It seems like this was a problem they have been dealing with for months," added Cortés.

The GUPC consortium led by the Spanish company Sacyr, with the Italian company Impregilo, Belgium's Jan de Nul, and the Panamanian company Constructora Urbana (CUSA) threatened to suspend all work on the the construction of the third set of locks, the largest contract (at $3.118 billion) of an overall $5.25 billion for the entire project.

The GUPC argues that cost overruns were caused by "unforeseen" and erroneous geological reports of the ACP.

In response, the ACP says GUPC had the information for 14 months, and had ample time to conduct their own tests and studies. (Estrella)

Editor's Comment: So, more than half of the work force working to expand the Panama Canal has been laid off. Further evidence the GUPC knew what they were doing. They planned this, and tried to time it for maximum effect by making their announcement just a few months before the upcoming national general elections in May. They gambled that the ACP and the government of Panama would be willing to roll over and take the $1.6 billion dollar hit, rather than suffer the headlines relating to a work stoppage. Well, it seems like they overplayed their hand, and misjudged the political calculus. Did they forget that they were hired by the PRD? Or maybe it's more simple. Maybe they just ran out of cash and had to quit now. Either way, they're done.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Soon To Be Finished Projects Will Improve Traffic in Panama City

Infrastructure UpgradesPanama's Ministry of Public Works (MOP) will be delivering four new, large, and important roadway infrastructure projects between February and May of this year (2014), as part of their "New Road Network Plan" for Panama City.

The government of Panama has invested more than $900 million on all of the projects contemplated for the modernization of the road network in Panama City.

By the middle of next month (February 2014) the project to improve the streets of the "Casco Antiguo" (Old Town) in San Felipe will be completed, corresponding to the second stage of the project for the preservation of historical heritage of Panama.

As part of this project, all public utilities have been buried, a new sewage collection system has been installed which will be connected to the larger project to clean up the Bay of Panama, as well as a new system for the distribution of potable drinking water.

Also, the sidewalks were improved, and about 100,000 square meters of paved streets were overhauled.

The next big project on the list - to be delivered in April 2014 - is the Third Phase of the "Cinta Costera" (Coastal Strip), connecting the Avenida de Los Poetas with Avenida Balboa.

As part of this project 2.6 km of new new roadway will be delivered - six lanes wide - with three lanes coming in to Panama City and three lanes leaving.

This Third Phase of the Cinta Costera project also includes the construction of a pedestrian sidewalk and bike lanes, as well as the creation of suitable sites where pedestrians can view the panorama, among other components. A total of $782 million was invested in this project.

In the second half of April 2014 the Ministry of Public Works should be delivering the second Viaduct (traffic bridge overpass) which is part of the Second Phase of the Vía Brasil corridor, which will connect the roadway with Calle 50.

What's more, this month the MOP plans to deliver the first part of the project to expand the Vía Domingo Díaz, including the rehabilitation and expansion of the road and the road bridges in the vicinity of Brisas del Golf and San Antonio, the three pay zones, two of these located in the Metromall and Las Colinas, as well as nine pedestrian bridges.

All of the work on this project will be completed in May. This is when the new concrete bridge in Pedregal will be opened to traffic, which has been expanded to three lanes in each direction, and a new bridge to be built to meet the entrance and exit to the community of Bello Horizonte.

Taking into account the cost of some of these projects, some of which have already been completed and others still being built, the MOP will be delivering projects worth more than $1.37 billion in the first half of this year. (Panama America)

Editor's Comment: The heat is on all of these contractors to finish and deliver these projects before election day, 4 May 2014. These public infrastructure projects represent some of the biggest accomplishments of the CD and the Martinelli administration. They have to be open and delivered before the voters go to the polls, so the politicians can point to them and say "See? Look what we did? Want more of that? Then you should vote for Jose Domingo Arias!"

The Panamanian people already know this administration has accomplished more in the past four years than all previous administrations did in the forty years before them. There's no doubt about it, they got a lot of stuff done. The list of accomplishments is long, and impressive. You can't argue with results. And, their political strategy is sound. Who in their right mind would put either the PRD or the Panameñistas back in charge of the country? (Rhetorical question) For these reasons and others, Jose Domingo Arias will win the election in May 2014. The CD is positioned to run the country for another 50 years, as long as they keep performing.

And yeah, they're corrupt and they steal a bunch of public funds, but all Panamanian politicians are corrupt - so that becomes the common denominator which simply gets zeroed out in the political equation...

Anyway, more road projects will be getting delivered soon. Hopefully they will ease traffic pressures somewhat.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama: North Korea ship owners will pay fine

Panama NewsPANAMA CITY — The owners of a North Korean ship seized by Panama for carrying Cuban fighter jets and missiles are paying a $670,000 fine to recover the vessel.

Panama’s foreign minister, Fernando Nunez, said Thursday that North Korea has agreed to pay the sum.

The nation’s canal authority had initially set a $1 million fine because the crew didn’t declare that it was transporting weapons. The country later reduced the fine.

The ship was headed from Cuba to North Korea when it was seized in June by Panamanian authorities, who suspected it was carrying drugs. Two Cuban fighter jets in perfect condition were discovered inside the vessel.

Panama’s prosecutors said crew members are still in custody but they will soon decide whether they will be freed or held for trial. (AP)

Share
  • Facebook
  • Google Bookmarks
View Printable Version

USA Gives Panama $7.8 Million To Strengthen Security

Panama NewsThe United States will provide $7.8 million dollars in security assistance to Panama through its Central America Regional Security Initiative (CARSI) program. The money will be used for counterterrorism training, counter drug efforts, to enhance public safety, reduce gang crime, as well as for the modernization and professionalization of the police force.

This was announced during a ceremony to sign Amendment No. 18 to the CARSI letter of understanding, the US Ambassador to Panama Jonathan Farrar and Panama's Foreign Minister Fernando Nunez Fabrega, held yesterday in the Bolivar Palace.

Farrar said the assistance offered is part of the "regional security strategy" of his government and that the agreed amount is in addition to the $30 million awarded last year as part of the "strategy of global cooperation," which includes the "implementation of the bilateral trade promotion agreement and the eradication of child labor."

The U.S. assistance program also includes institutional strengthening of the justice system .

The Foreign Minister Núñez Fábrega stressed the importance of this support in the fight against transnational crime through the "training of the members of the National Police to manage their tactical teams, and sensitive investigation units" against trafficking drugs, among other areas of action.

Nunez Fabrega referred to other conflicts of an international character, including that relating to the retention by Ecuador of the Panamanian-flagged ship Doria, in October 2013.

The return of the ship to Panama has been delayed, because the Ecuadorian prosecutor Galo Chiriboga is investigating the case after having discovered 799 kilos of drugs on the Panamanian vessel. In turn, the for President of the Central Bank of Ecuador, Pedro Delgado, is being investigated for alleged acts of corruption. Fabrega said "he has not had time" to consider the Panamanian request for the ship to be returned. The process began in April last year. (Prensa)

Editor's Comment: Good. $7.8 million isn't a whole lot of money but the United States is certainly getting a good return on its investment with regards to the anti drug efforts here. Panama seizes about 50 tons of cocaine per year. The US government should place strong emphasis on corruption in the judicial system. There is no judicial security in Panama. None. It's like a bridge that's built out of mystical, magical clouds. Sometimes you can skip right over it and get whatever you want. Sometimes it looks like it's there and it's real, but when you try to use the system to right some wrong, it melts away and evaporates like it was never there. In Panama big money can "buy justice" at any time. This issue is particularly important to the members of the English speaking community of expatriates living in Panama, as well as those who invest in Panama, own property, or conduct any other sort of business here. I've literally seen people get away with murder, simply because they have money and political connections. The fact that you're a "gringo" is not a positive, but rather a negative. There is no judicial security in Panama - the law is selectively enforced. I'm going to say that a thousand times, until people understand that it's real. And, it's a huge and massive problem, especially for foreigners.

Just this week I received no less than three new cases - one involving the theft of more than $500,000 from an investor. They simply take the money, then use it to pay bribes to make sure they are never prosecuted. Pretty cool gig, eh? The US Ambassador should be screaming this from the rooftops, but he's not. Don't expect any help at all from the US Embassy. Well, they might give you a cup of coffee while they listen to your sob story, but that's about it. They will tell you to "hire a lawyer".

I guess it's not very diplomatic to complain about judicial corruption in the press. The US State Department has bigger fish to fry, I guess. YOU are not their priority.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

One Foreigner Killed In Panama Sport Fishing Lodge Fire

Safety & SecurityOne person is dead and one other was injured in a fire Tuesday at the Panama Sport Fishing Lodge in Boca Chica, Chiriquí.

Chiriquí Fire Chief Manuel de la Cruz said the cause of the fire is under investigation. Firefighters from San Felix, David and Bugaba responded to the call. The names of the victims have not yet been released.

He lauded the quick work of firefighters to contain the blaze and keep it from spreading to nearby areas where fuel is stored.

The injured person was reportedly hurt while jumping out of the building to escape the flames.

The fire chief said that the investigation will focus on why so much fuel was being stored at the resort. (Prensa)

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama has $200 billion in mineral reserves

Gold & MiningMining is one of the sectors that is gaining strength in the Panamanian economy. Last year it grew by more than 25%. And it is estimated there are proven reserves worth approximately $200 billion.

"Panama has identified 50 billion pounds of copper, 12 million ounces of gold, 25,000 ounces of silver, and 250 tons of molybdenum. This adds up to $200 billion," said Zorel Morales, the Executive Chairman of the Mining Chamber of Panama.

Of this total, 53% will stay in the country through income taxes and dividends, said the senior executive of the organization.

Projects In Development

But despite Panama's important mineral reserves, mining is not well developed in the country.

There is only one operating gold mine - in Molejón in the province of Cocle, operated by Petaquilla Gold.

Right now a new mining project is being built to extract copper, gold, silver, and molybdenum, by Minera Panama, in Donoso, province of Colon.

It is estimated the new mine will begin operations within two and a half years. It's a big project.

There is another mine being built at Cerro Quema in Los Santos of medium size, which could be in operation within a year and a half.

In addition, a company is doing feasibility studies to look into the possibility of reopening the Santa Rosa mine, located in the province of Veraguas.

Mining activity produces 2.1% of Gross Domestic Product (GDP). However, all projections indicate that in two or three years mining will take on a greater participation in the economic structure of Panama.

The trend indicates that in 2013 the mining and quarrying activity produced about $ 550 million, as measured by real gross domestic product.

Last year $5.1 billion was invested in Panama for the development of mining.

Minera Panama invested $5 billion while the Santa Rosa and Cerro Quema projects invested $100 million.

For 2014 wide variations are expected, "we do not expect there to be a significant increase in exports because the sector's flagship project, Minera Panama, is still being built," Morales said.

But not everything that glitters is not gold. Last year the business did not go through its best moments.

Gold exports fell by 35% influenced by the fall in prices of this metal.

But despite this setback, mining activity is destined to be the most important economic activity in the country, given the large reserves of minerals in the country.

However, it must overcome opposition from environmental groups, among others. (Estrella)

Editor's Comment: Minera Panama is going to invest more - and spend more money - to build their mine than it will cost to build the expansion of the Panama Canal. Eventually when all of these new mining projects are up and running they will be bringing in new revenue worth almost as much as the Panama Canal. So yeah, right now all of the money is coming in thanks to Foreign Direct Investment as these companies plow investor dollars into building infrastructure. But the real big numbers come once the mine is operating. All of the money spend on operations and maintenance will remain in Panama. The government of Panama receives a percentage of every dollar earned in the form of either taxes or commissions.

And of course, it's mining, so there will be constant opposition from environmentalists. I believe there are ways to responsibly mitigate the potential environmental damages, and to extract the minerals in a manner that does not necessarily have to produce toxic sludge for generations. However, no one ever called an open pit copper mine in the jungle "pretty."

Share
  • Facebook
  • Google Bookmarks
View Printable Version

ACP and GUPC Agree To "Keep Communications Open"

Canal ExpansionThe Panama Canal Authority (ACP) and three of the four contractors responsible for building the new third set of locks as part of the Panama Canal expansion project agreed today to "keep the channels of communication open in the coming days," while looking for a solution to the conflict threatening to stop work on the project next Monday.

In a brief statement, the ACP said this was the result of a closed door meeting held on Thursday between the Administrator of the ACP Jorge Quijano, and representatives of the construction company Sacyr, the Belgian company Jan de Nul, and the Panama company CUSA.

These three companies, together with Italy's Impregilo, comprise the Grupo Unidos por el Canal (GUPC).

The GUPC announced they will suspend work on the construction of the third set of locks starting next Monday, 20 January 2014, due to a lack of liquidity caused by "cost overruns" of more than $1.6 billion - which the ACP will not recognize.

Both Sacyr and Impregilo each have a 48% share in the consortium, while Jan de Nul has 3% and CUSA 1%.

The Panama Canal Authority said in its statement "the situation remains similar to the points made by the ACP administrator this morning," when Quijano told reporters the contractors had not presented a "positive" solution to the crisis.

"We are prepared for the eventuality," a suspension of work on Monday, as announced by the GUPC, but "we still have some hope that the contractor reconsider and re-focus on resuming work on the project at full speed," said Quijano.

The administrator reiterated this morning the Canal stands by its proposal to grant a moratorium of two months for the GUPC to repay an advance of $83 million dollars, and for both parties to disburse $100 million each to revive the project and ensure that work continues for the next "two to four months."

Last week the GUPC asked the ACP to give them between $400 million to $1 billion, which Quijano rejected because it was "outside" the provisions of the contract.

At the meeting on Thursday " the ACP told the GUPC that any solution must be developed in accordance with the agreements in the contract," the statement said.

They added "in the event of any significant progress in the talks, the ACP will let the public know, in accordance with our policy of transparency and accountability."

The GUPC was awarded the contract in 2009 for the construction of the new third set of locks for 3.118 billion dollars, and so far the construction is 65% completed.

Thus far the ACP has paid $2.831 billion on the contract, including $784 million in repayable advances, plus an additional $180 million in additional costs representing about 6% of the contract cost. (Panama America)

Editor's Comment: Yeah, it's not going to happen. I think both sides have already come to the same conclusion. The GUPC is going to stop working and walk away, and the ACP is going to hire someone else to complete the job. The ACP is legally bound to stick to the letter of the contract, and the $1.6 billion the GUPC wants has nothing to do with the contract - it's not in there, so why should the ACP pay it?

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Alemán Zubieta defends ACP contract

Canal ExpansionThe former Administrator of the Panama Canal, Alberto Alemán Zubieta, yesterday revealed the details of a solid system used by the ACP to guarantee a shielded contract, awarded for the construction of the third set of locks as part of the project to expand the Panama Canal.

Alemán Zubieta, who led the ACP until September 2012, explained that all of the elements were considered as part of the effort to mitigate the risks involved in the project, passing through an outside evaluation and oversight by a group of international technicians in the selection process, as well as auditors, and a group of qualified Canal workers who were responsible for the technical evaluations, as part of the bidding process.

They spent 14 months clarifying doubts, and the necessary changes were made to the specifications.

"No one can talk about concerns or surprises," said the former official, who defends the posture of the current manager Jorge Luis Quijano.

In turn, yesterday the board of the ACP reaffirmed its full support for the canal administration in the management of the awarding of the contract for the construction of the third set of locks.

At the same time, the Society of Engineers and Architects of Panama provided support to the administration of the Canal, and asked the entity to exercise its autonomy and to manage and implement the contract, without being influenced by external pressures and strangers. (Prensa)

Editor's Comment: Before Alberto Alemán Zubieta was appointed by former (PRD) president Martin Torrjos to take over as the Administrator of the Panama Canal, he was the President of the CUSA construction company - probably the largest in Panama - creating an obvious conflict of interest in the awarding of the contract to the GUPC. But of course "this is Panama" where people are paid good money to look the other way and ignore these sorts of things. So, what do the political tea leaves say on this one?

Early in the selection process for the upcoming presidential election, everyone already knew that Juan Carlos Varela would be the presidential candidate representing the Panameñista political party, and Juan Carlos Navarro would be representing the PRD. However president Ricardo Martinelli and the ruling Cambio Democratico (CD) party had not yet made up their minds as to who they should run as their candidate in the 2014 elections. Many possible candidates were being considered, among them Alberto Alemán Zubieta.

There was a period of time at the end of 2012 and going into 2013 during which Alberto Alemán Zubieta was a leading candidate. The CD actually tried to "woo" him into being their man. See the following articles;

So, the PRD appointed Alemán Zubieta to the post of Panama Canal Administrator. His company CUSA won the biggest contract worth $3.118 billion dollars to build the third set of locks for the Panama Canal expansion. The CD tried to lure him away from the PRD and to get him to run as their candidate in 2014 - but he refused. Apparently his links (money and kickbacks) to the PRD were too deep and strong to overcome - even with the potential of becoming Panama's next president. Fast forward to today...

Ricardo Martinelli is nothing if not vindictive. He doesn't like it when people say "no" to him. If Alemán Zubieta had accepted the CD's offer made during this week last year and if he was now the presidential candidate for the CD political party, then we would not be having this discussion regarding the cost overruns and the GUPC right now. It would have waited until after the elections in May 2014.

And then the money would have flowed. The ACP and GUPC would have shared responsibility in public. The project would have been built - relatively harmoniously - and the "cost overruns" would have been taken care of. All of that was part of Martinelli's plan.

However because Alemán Zubieta snubbed him and decided to remain loyal to the PRD, Martinelli sharpened his sword. Now the GUPC (and CUSA) are about to get screwed. You can ignore the content of this article which is little more than an exchange of hugs between the former ACP administrator and the new regime. The reality is that the ACP is part of the government of Panama - whether or not they are supposed to be "independent" - and Martinelli calls the shots.

I expect the ACP and the government of Panama will be saying "screw you" to the GUPC (and CUSA and Alemán Zubieta). They will toss them off of the job and find someone else whose willing to finish the project - and so what if it costs a couple of billion dollars more to build. Remember, Martinelli and his crew redefined the art of building shit and skimming government tax dollars into offshore accounts. Whoever the new contractor is, it won't be anyone with deep ties to the PRD, you can bet on that.

(And this is why you subscribe to this website ... you won't hear this anywhere else. Well, now that I've published it you will. These are the things that all Panamanians know, but they are too afraid to talk about either in the press or in public.)

Editor's Comment: Clarification - in response to a comment. Alberto Alemán Zubieta was appointed to the Panama Canal Commission in 1996, under the PRD administration or Ernesto Perez Balladares. Two years later, in 1998, he was appointed as the Administrator of the Panama Canal Authority. In 2005, during the administration of the PRD's Martin Torrijos, he was reelected by the Panama Canal's Board of Directors to lead the Panama Canal Authority for another seven years. His term in office ended in 2012.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Police find $7.2 million cash stashed in suitcases at airport in Panama

Drug TraffickingBy Catherine E. Shoichet (CNN) - It started when police found nearly $7.2 million stuffed in eight suitcases at a Panama airport.

Investigators say they suspect the cash, which had been concealed in hidden compartments in luggage on a flight from Honduras, was being moved for a powerful cartel, but they haven't said which one. The money was mostly in U.S. $100 bills, authorities said.

In a case that highlights the regional impacts of the drug trade, now Honduran investigators are trying to figure out how the suitcases slipped by airport authorities, drug police and special investigators at the Toncontin airport in Tegucigalpa.

Authorities have suspended dozens of officers as they investigate, Honduran police told CNN affiliate Televicentro.

Panamanian police, who described the suitcase stash as their largest seizure in years, arrested three Honduran nationals at Tocumen International Airport.

Editor's Comment: In Panama the cocaine moves North and the money moves South. There are many people in Panama City who have a unique problem - too much cash. Money laundering is a major activity in Panama. And just like cocaine busts - in the US when they nab a kilo or two that's considered to be a "major" confiscation. In Panama if it's not a couple of tons, then it's a relatively boring and routine action. 300 kilos is sort of "so what" anymore...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama economy grew 8.9 % in the third quarter of 2013

Money MattersPanama's economy grew 8.9 % of gross domestic product (GDP) in the third quarter of 2013, compared with the same period last year, driven by domestic consumption, the government reported today.

Panama's GDP stood at 7089.6 million for the third quarter of last year, 582.1 million over the same period of record in 2012.

This was stated at a press conference by the Project Coordinator of the Secretary for Economic Affairs and Competitiveness of the Ministry of the Presidency of Panama, Gina Gomez.

She said the accumulated growth between January and September 2013 reached 8 % of GDP, higher than the 7.5% calculated by both the International Monetary Fund (IMF) and the Economic Commission for Latin America and the Caribbean (ECLAC), which the official assessed as "very positive."

The GDP growth in the third quarter of 2013 was based on the "success" of sectors such as retail, construction, mining, manufacturing, land passenger transport, telecommunications, banking and real estate, health, private education, and services, according to official information.

Also the export of fruits such as banana, watermelon and cantaloupe, and by fishing, hotels , air transport and port activities.

According to statistics from the Comptroller General's Office, cited by Gomez, activities that registered declines were commerce from the Colon Free Zone, the second largest in the world after Hong Kong, and Panama Canal operations.

There were also declines in agricultural activities such as rice, corn, sorghum, beans, vegetables, coffee, raising cattle, and hogs.

Gomez said the Monthly Index of Economic Activity (MIEA) for October rose by 8.26% compared to the same period in 2012, which showed "positive rates all categories measures of economic activity."

The 8.26% expansion for October left a cumulative rate of 7.79% for the first ten months of the year.

The IMAE not reflect one hundred percent of the economic activity in the country, but its components are used as a reliable basis for making investment decisions, according to official information.

Foreign direct investment (FDI ) in January-September totaled 2.962 billion dollars spent, or $74.6 million more than over the same period in 2012.

Panama's economy grew by 10.6% of GDP in 2012 and the Government has estimated that it will expand by 8.5 % in 2013. (Panama America)

Editor's Comment: I literally can't remember the last time I wrote or covered a "bad news" economic story for Panama. The economy has been growing by an average rate of about 10% per year or more since at least 2004. The GDP per capita (PPP) continues to improve and expand, meaning the average Panamanian has more money to spend than ever before. There are still a couple of counties that are "richer" than Panama (depending on whose data you choose to believe) such as Chile and Argentina - but in the next decade or so the Panamanian economy will continue to grow. Before too long Panamanians will be the "richest" citizens of Latin America - it's inevitable.

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Crucial meeting in Panama to unlock conflict over canal construction

Canal ExpansionBy Juan José Lagorio - The consortium responsible for expanding the Panama Canal, Grupo Unidos por el Canal (GUPC), and government authorities will meet on Thursday (Jan 16) to try to unlock a conflict over increased costs that threatens to halt the US$5.25bn project.

GUPC - a consortium led by Spanish construction firm Sacyr and Italy's Impregilo, along with Belgian firm Jan De Nul and Panama's Constructora Urbana - warned it would down tools on January 20 unless the Panama Canal Authority (ACP) met US$1.6bn in cost overruns.

The authority has declined to provide all those funds and only agreed to pay US$283mn.

The meeting between Panama Canal Authority (ACP) head Jorge Quijano and Sacyr president Manuel Manrique is seen as one of the last opportunities to settle the dispute.

Despite initial tensions, the parties involved have tried to tone down the rhetoric.

Earlier this week, Sacyr said it was committed to completing the canal construction, while the head of Latin American development bank CAF, Enrique García, said the expansion "will not be halted".

This "is an iconic project, not only for Panama, but also for Latin America ... I think there will be an agreement," García told Spanish news agency EFE. CAF is helping to finance the canal expansion with US$300mn.

ACP canceled a scheduled meeting with its insurance provider Zurich on Monday, suggesting that a deal might be imminent.

Still, the canal authority said it was ready to continue with the expansion on its own if GUPC suspended works next week.

"We are ready to access the funding needed to move on," Quijano said, adding ACP could restart expansion works within 15 days.

Construction of the third set of locks, the largest project of the expansion plan, is nine months behind schedule and is now set to wrap in June 2015. GUPC has blamed the delays on the ACP. (Business News Americas)

Editor's Comment: And now the GUPC has figured out that they severely overplayed their hand, and they are looking for a way to negotiate their way out of the mess they have created for themselves, with the least amount of pain (financial loss). They understand that if they follow through on their threat and actually walk off of the job, then they will be held legally responsible for any future costs associated with getting the job done. The ACP recognizes that it will cost about $1.5 billion more to finish the job, but the GUPC is not either necessary or crucial to getting from here to there. I don't think the ACP or the government of Panama will be willing to give up a whole lot to the GUPC. Let's see what comes out of the meeting tomorrow...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

It Will Cost $1.5 Billion (more) To Complete Third Set Of Locks - Panama Canal Expansion

Canal Expansion The Panama Canal Authority said it will take approximately $1.5 billion to complete the construction of the third set of locks, of which they have $1.389 billion available.

The calculations made by the canal administration is very different than the requests being made by the Grupo Unidos por el Canal (GUPC), which was awarded the contract for $3.118 billion, and now they are requesting an additional $1.6 billion, for a total of $4.718 billion. (Prensa)

Editor's Comment: Everything I'm seeing seems to indicate the Panama Canal would prefer to use the funds they have to pay someone else to finish off the project. Right now they are simply waiting until Monday, 20 January 2014, to see if the GUPC actually follows through on their threat and suspends work on the project to build the third set of locks. As soon as that happens (if it does) then the ACP will step in, take over, and move forward without the GUPC. Of course they will then sue the GUPC for failing to perform on the contract, as agreed. Meet the $1.6 billion dollar yuca, that's about to get rammed up GUPC's ass...

Share
  • Facebook
  • Google Bookmarks
View Printable Version

American Society of Panama - Gala Scholarship Ball

Groups & OrganizationsThe American Society of Panama is rolling out the red carpet for you for the Gala Scholarship Ball on Friday, February 14, 2014 from 7:30 p.m. to 10:30 p.m. Dance to the music by Orquesta Zafiro.

Cocktail Attire (Red, White or Black). Will be held at the US Ambassador’s Residence, Calle Manuel J. Hurtado , La Cresta.

This is your opportunity to meet the students who have been awarded scholarships for 2014.

R.S.V.P. via email to: american.society.panama@gmail.com or by calling cell phone 6747-6762.

The deadline to get tickets is February 3, 2014, at 9:00 a.m. NO EXCEPTIONS!!

Share
  • Facebook
  • Google Bookmarks
View Printable Version

"The Panama Canal Expansion Will Be Completed 'With or Without' the GUPC" - Martinelli

Canal ExpansionPanamanian President Ricardo Martinelli said today the Panama Canal expansion project will be completed "with or without " the consortium currently responsible for the project, which announced a suspension of work next Monday due to a lack of liquidity.

"We will finish the project to expand the Panama Canal with or without them," meaning the consortium Grupo Unidos por el Canal (GUPC ), Martinelli told reporters after attending a public event.

The GUPC, led by Sacyr, and comprised of Italy's Impregilo, Belgium's Jan de Nul, and the Panamanian company CUSA announced last December they plan to stop work on the project on Monday, 20 January 2014, because they can no longer continue with "cost overruns" of more than $1.6 billion dollars.

In brief remarks to reporters, the Panamanian president again expressed his support for the actions of the Panama Canal Authority (ACP), which rejected the alleged "cost overruns" as "unjustified," and they asked the consortium to use the routes available to them through the contract for the resolution of disputes.

The ACP and GUPC have said they are in ongoing negotiations in order to achieve, within the framework of the contract, a solution to the "cash flow" problem faced by the consortium which would force them to suspend work.

"We expect between Monday and Tuesday (next) to take more decisive and deep decisions, and it will depend on the actions of GUPC," which may include taking over the project to complete it, said the ACP Administrator Jorge Quijano on Tuesday. (Critica)

Editor's Comment: More signals from the government of Panama saying they don't really need GUPC all that much. Martinelli is saying "we got this..."

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Jované Demands To Be Recognized As An Independent Candidate (After The PRD Picks Up Solis)

PoliticsThe campaign team of economist Juan Jované filed a legal challenge against the proclaimed independent presidential candidates in Panama, demanding that the Electoral Tribunal recognize him as an independent candidate, following the departure of the former judge Gerardo Solis.

Yesterday, the judges of the Electoral Tribunal met to analyze Jované's case, however, a source said they did not reach an agreement because Solis, who on Sunday became the vice president on the ticket of the PRD presidential candidate Juan Carlos Navarro, has not renounced his candidacy as an independent.

Javier Víquez , Jované's attorney, said Solis, having accepted the vice-presidency for the PRD ticket, tacitly renounced his candidacy as an independent.

The lawyer said in this situation, the TE should immediately recognize Jované because the third position is now vacant, as established by the Electoral Code, because the period allowed for appeals had not yet finished as of yesterday.

On Friday 10 January, Electoral Tribunal proclaimed the former judge Solis, Esteban Rodriguez, and Gerardo Barroso as the three independent presidential candidates.

However this Sunday Solis became Navarro's running mate, leaving his position as an independent candidate vacant.

Jované, who was the person who filed the lawsuit that eventually resulted in a Supreme Court decision opening the door for all independent candidates, ended up out of the game himself, because the electoral law stipulates that only the three applicants with the most signatures will be those chosen. Jované finished fourth, so he was left in the cold.

The former president of the National Bar Association, Rubén Elías Rodríguez, said the terms of the law are clear, and Jované can only be made a candidate if Solis's nomination is invalidated.

He said Solis should resign his candidacy as an independent because he is no longer an independent, but rather he has now been nominated by a party.

It was impossible to obtain a reaction from Solis. (Estrella)

Editor's Comment: Poor Jované - won in the Supreme Court. Got left out in the cold in fourth place. Now he can't even get in after Solis gets picked up by the PRD. Doesn't matter, really. He's the definition of a snowball in hell - no chance of winning whatsoever. Well, I guess he's got even less of a chance if he's not in the race at all, right?

Share
  • Facebook
  • Google Bookmarks
View Printable Version

Panama canal threatens to take over key expansion project

Canal ExpansionBy Lomi Kriel (Reuters) - The Panama Canal Authority (PCA) said on Tuesday it might take over a key part of the waterway's expansion if the consortium in charge of the project makes good on a threat to suspend work.

PCA chief Jorge Quijano told reporters the remaining work, which could be taken over as early as February, would cost about $1.5 billion. He added the PCA has the means to cover the sum.

The consortium, known as Grupo Unidos por el Canal (GUPC), threatened to suspend work by Jan. 20 unless the PCA paid $1.6 billion in cost overruns. The authority has rejected that demand and asked GUPC to withdraw the threat of suspension, but Quijano said the consortium has yet to reply.

The canal authority has said it is willing to consider detailed claims through arbitration.

The consortium won the contract to build a third set of locks for the century-old canal, the biggest part of the expansion project, in 2009.

"We have to act immediately to make sure that the project isn't suspended for an excessive time," said Quijano.

He added that PCA could take over the project after any work suspension lasting about 15 days.

"At that point we are talking about the possibility that we could take over the project," he said.

Quijano said he expects to make a decision Monday or Tuesday of next week, depending on what action is taken by GUPC.

The consortium, which is led by Sacyr SA of Spain, includes Italy's Salini Impregilo SpA, Belgium's Jan De Nul and Constructora Urbana from Panama.

Sacyr's chairman, Manuel Manrique, said at a Monday press conference in Madrid that the dispute will not have a significant impact on the company's earnings and is not putting its solvency at risk. He said he expects that the consortium will finish the project.

The canal is one of the world's most important shipping routes. The entire project was due to cost about $5.25 billion, but the overruns could bump that up to nearly $7 billion.

Quijano has previously said that the PCA had $600 million in surety bonds with insurer Zurich in North America that could be used to support the project.

"Right now, we're in a position to have access to the necessary funds to be able to keep pushing forward in a definitive manner with the help of Zurich," said Quijano.

He added that a meeting with representatives from the PCA, GUPC and Zurich had been scheduled for Jan. 13, but GUPC postponed the meeting for a week until after the suspension could take effect.

The PCA has proposed a $283 million joint financing package to resolve the row. But that proposal is less attractive for the firms because it requires them to put up fresh cash while the authority would simply advance funds it would have paid anyway.

GUPC has asked the PCA for a $400 million advance, while Salini Impregilo proposed the authority pay $1 billion. Quijano has said such payments are "impossible."

Editor's Comment: Yup, that's exactly how this is going to play out. The GUPC overplayed their hand, so now they are left with their (empty) threat. If they actually do walk off the job, then they will be fired and tossed. The Panama Canal Authority will hire someone else to finish it up, and then they will go after (the bones of) GUPC in court to recoup their losses.

Ladies and Gentlemen - the GUPC signed a contract in which they promised to do a job for a price. At the most basic and fundamental level, they never actually intended to be able to complete the project for that price. Their plan - practically the definition of bad faith - was to simply underbid in order to lock-in the contract, and then force (blackmail) the APC to pay them more money. In this case $1.6 billion dollars. They are actually trying to take the project hostage, and use their involvement as leverage to extort more money out of the government of Panama. So yeah, screw those guys. They are "drawing dead" as they say at the card table ... GUPC is holding a losing hand, they just haven't realized it yet.

Share
  • Facebook
  • Google Bookmarks