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Thursday, April 17 2014 @ 11:32 AM EDT

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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.

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Sacyr confident of reaching agreement to finish Panama Canal project

Canal ExpansionSacyr, the Spanish builder heading a consortium that is working on a project to widen the Panama Canal, expects to reach an agreement with the administrator of the waterway on cost overruns, thus allowing the job to be completed.

“Work will continue; we are only looking at a scenario of an agreement. The work will be finished,” Sacyr’s chairman, Manuel Manrique, told reporters on Monday.

The consortium threatened to suspend work on the project at the start of the year over the cost dispute, which the Grupo Unidos por el Canal (GUPC) consortium estimates at 1.625 billion dollars (1.2 billion euros). Manrique explained Monday that “early warning” had not yet been withdrawn.

Manrique said the negotiations with the Panama Canal Authority (PCA) are focused “on different scenarios aimed at improving the cash flow” of the consortium to avoid freezing work. “The situation is better than a few days ago,” he added. A guarantee by the Spanish government is not one of those scenarios, after Public Works Minister Ana Pastor ruled out such an idea during her visit to Panama on January 6.

The Sacyr chief said the amounts of cost overruns in dispute are of a sizable nature, such as the 500 million dollars the consortium is claiming for basalt. There are others of smaller amounts, between 10 and 50 million dollars, which could be resolved more readily.

Manrique insisted that there was no “conflict” per se with Panama, with the issue at stake being a “time lag” between the liquidity required to finish the project and the resolution of the discrepancies over costs, some of which will go to international arbitration while others will be dealt with within the terms of the contract signed with the PCA.

The project, which involves adding a third set of locks to the 80-kilometer-long waterway, is due to be completed in 2015, eight months behind schedule.

“There are offers on the table,” Manrique said. GUPC on January 7 proposed that the PCA advance the consortium 400 million dollars, with the consortium supplying 100 million dollars in cash flow. PCA had offered 183 million dollars in return for the consortium injecting 100 million and withdrawing its threat to freeze work on the project.

Manrique insisted that Sacyr’s financial solvency “would not be compromised” as a result of the canal project, adding that the builder is “financially solid.”

Sacyr and its partners won the tender for the project with a bid that was one billion dollars below the next lowest offer. That prompted US auction rival Bechtel to say that GUPC’s bid was not enough to even cover the cost of the cement involved, as revealed in the WikiLeaks cables from the US Embassy in Panama.

Manrique insisted the consortium’s bid was not “reckless,” and that the group received the most points for the technical aspect of its bid, which accounted for 55 percent of the valuation of offers. He also said “that no rival at the time made a formal claim” against the awarding of the contract to GUPC.

Editor's Comment: Hmmm. The Panama Canal Authority can now just sit there for another week and wait until Monday, 20 January 2014, to see if the GUPC follows through on their threat and actually walks off of the job. With that in their back pocket, they can activate clauses in the contract which will allow them to basically fire and then sue GUPC, while hiring someone else to finish the project. So these most recent statements from the Sacyr boss are little more that wishful thinking, from someone who's already overplayed their relatively weak hand.

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"Martinelli, you're a traitor to democracy!"

Politics Gerardo Solis, who was running as an independent candidate for President , yesterday became the running mate of presidential candidate Juan Carlos Navarro.

Navarro announced via his Twitter account that Solis - a former judge of the Electoral Tribunal - had accepted the offer to become his running mate as the presidential candidate of the opposition Democratic Revolutionary Party (PRD).

Earlier he had received the approval of the president Ernesto Perez Balladares, who called him an "honest man."

Since the National Directory of PRD has to ratify the appointment, Solis went to the party's headquarters at 3:00 pm where hundreds of party members were waiting.

Once the process was completed, he and Navarro led the political rally.

With a very tough speech railing against the government of Ricardo Martinelli, Solis thrilled the participants. "You're a traitor to democracy," he told the president.

Martinelli responded via his Twitter account, saying "in politics all of the 'packages' attract one another like magnets ... good luck to the two 'packages' ... " (Prensa)

Editor's Comment: Spanish (slang) Lesson! In Panamanian Spanish if you have someone who is worthless on the job, you call them a "bulto." This is most commonly used in situations like construction. The Spanish word "bulto" literally translates to "package" or "bundle" - but when you call someone a "bulto" you're basically saying they just lay there like a "bundle" of building supplies - meaning they are worthless on the job. Martinelli said Navarro and Solis are both worthless - so best of luck. (End of Spanish Lesson)

The PRD politician who I most dislike is easily Balbina Herrera. She's got the #1 spot all locked up. Following closely behind her is Gerardo Solis. He got into the Electoral Tribunal by being a faithful lapdog of Ernesto Perez Balladares. He was first the Electoral Prosecutor, then he became a judge on the Electoral Tribunal, and finally he became the Presiding Judge of the Electoral Tribunal. And in all of that time he went out of his way to twist and tweak each and every decision in favor of the PRD and against anything that was not the PRD. This, while serving in a position that was created specifically to oversee and safeguard the neutrality of the election process. So yeah, complete and total dirtbag. Can't stand his ass. I see his face on the television and I instantly dive for the remote control - can't change the channel fast enough. I mean, almost nauseating...

But what does this appointment mean for the campaign of the PRD's candidate Juan Carlos Navarro? Solis has some followers, and he was going to be running as an independent candidate anyway. It's a relatively smart move by Navarro because it sort of reunites the severely divided PRD party (currently divided into several camps) and everyone who was planning to vote for Solis as an independent candidate will now vote for Navarro.

But, they are still not going to win. This will probably help move Navarro's numbers upward somewhat, but he's still locked in a battle for second and third place with the Panameñistas and Juan Carlos Varela. The winner in May will be Arias and the CD will repeat in office.

TVN just released new polling numbers reflecting just how happy Panamanians are with the performance of president Ricardo Martinelli. He got an astounding 79% approval rating. Now. In January 2014, just a few months before the next election. Clearly, Arias is not an old political war-horse. He's basically a new rookie. Everyone (and I mean, everyone) knows Arias will be just a continuation of Martinelli's plan to change the country. And, they like that. That's what the Panamanian people want. Not only is 79% a "holy shit" number - it's a record. No other president in Panamanian history has ever been so endorsed, especially this close to the end of his term in office and so close to the next election.

The good news is that it's going to be a slam dunk for Arias. This Solis headline is a very small news bump, and with this article he's just about burned up his usefulness. He will now go out and act like a rabid dog (that's why they hired him, he's good at that) so the candidate can act "presidential". So when you see Solis barking on TV, please do me this favor. Just picture a little yapping rabid crazy Chihuahua, snarling and growing and trembling in the corner. That's what I see anyway. Nuts and noisy, but not really all that much of a threat.

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Panama Prices on the Rise!

Real EstateMake no mistake, the last six months in Panama have seen a noticeable rise in property values, especially along waterfront districts like Balboa Avenue, Punta Pacifica, and Costa del Este.

Strong demand from the US and Canada, Venezuela and Colombia, along with an uptick in the economy of European countries like the Spain and the UK in 2013, and a decreased supply of new apartments for sale have driven up prices by as much as 10% in certain areas.

Because developers were not building new high rises between 2009 and 2012, the next 12-24 months supply of brand new apartments will be limited to a handful of projects; this as opposed to the roughly 4,000 new apartments that hit the market over the last three years.

This slackening of new inventory, combined with steady/rising demand will continue to drive prices up.

Now is the right time to take a serious look at the market, which after being flat for over three years is once again trending upwards. In real estate, its not just about location, it’s about timing.

2014 is going to be a game changer for Panama. The Metro will open and the road reorganization projects throughout the city will be completed, plus the historic renovations in old town and the Cinta Costera 3 will also all be completed, breathing new life into a city that’s felt like it has been under construction for the last five years.

All the Best,

Kent Davis

Panama Equity Real Estate

Panama City, Panamá

El Cangrejo, Argentina Tower

Office: +(507) 396-0931 Mobile: 011 (507)6030-6782 USA Number: 404 865 1629

Skype: kentpd22

View listings at www.panamaequity.com

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Spain's Sacyr calls news conference to discuss Panama Canal

Canal Expansion(Reuters) - Sacyr, the Spanish building company leading a consortium to expand the Panama Canal, said on Monday that Chairman Manuel Manrique would hold a news conference to discuss the project at 1700 GMT.

Sacyr said this weekend that it risks losing $574 million in guarantees and advance payments if a dispute over cost overruns at the multi-billion dollar project is not resolved.

Editor's Comment: Wait a minute. Didn't Sacyr just call for the talks with the ACP to be "confidential"? Now they are going to hold a news conference? GUPC simply overplayed their hand in this matter. I've received some documents over the weekend marked "Confidential" indicating the Panama Canal Authority has known GUPC and especially Sacyr have been on the verge of bankruptcy since at least 2010. The ACP has known for a long time this was coming so they were not surprised by this turn of events, and they had a contingency plan in place. Now Sacyr and the rest of the GUPC members are scrambling. Their plan from the beginning was to simply underbid the project in order to lock it in, then get themselves up to the hips in the project and then to use their involvement as "leverage" against the ACP and the Panamanian government, in order to force them to pay more money. The fact they pulled this stunt just four months before the next presidential election highlights and exposes their true interests - Blackmail. So once again, screw those dudes. I hope the Panamanian government boots them all back to Europe and hires another contractor to do it right. The PRD really screwed this one up, didn't they? (grin)

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Dispute Between Panama, Canal Contractors No Closer to Solution

Canal ExpansionPANAMA CITY – Both the GUPC consortium building a third set of locks for the Panama Canal and the waterway’s administrators dug in their heels Thursday in a dispute that threatens to delay completion of a $5.25 billion expansion project.

GUPC – Spanish construction giant Sacyr Vallehermoso, Italy’s Impregilo, Belgium-based Jan de Nul and Panamanian firm CUSA – said last week that it would suspend work Jan. 20 if the canal authority did not agree to pay an extra $1.6 billion to cover cost overruns.

Canal administrator Jorge Quijano denounced the threatened suspension as illegal and urged GUPC to continue working.

He also said that under the contract, the canal authority, or ACP, could find “other contractors” to complete the locks – now about 65 percent done – if the GUCP can’t or won’t.

The ACP and GUCP held talks this week at the urging of Spanish Development Minister Ana Pastor, who traveled to Panama as part of Madrid’s efforts to mediate the dispute.

The ACP said it would advance the GUPC $100 million and give the consortium a grace period of two months on a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

That proposal is the only “reasonable offer” on the table, Quijano told Panamanian lawmakers Wednesday.

The ACP’s stance is “unacceptable and ridiculous,” Impregilo said in a statement released Thursday in Panama, adding that a decision by the canal authority to turn to other contractors at this late date would delay completion of the project by at least three years.

Conversely, if the ACP agreed to pay GUPC an additional $1 billion, the third set of locks would be ready at some point during the first half of 2015, Impregilo said.

The contract for the locks, which is the centerpiece of the canal expansion, calls for the ACP to pay GUPC a total of $3.12 billion.

So far, the ACP has paid GUPC $2.83 billion, including repayable advances, plus an additional $180 million for cost overruns.

The parties are expected to meet again Friday, but neither the ACP nor the consortium has officially confirmed that talks will take place.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential. (Latin American Herald Tribune)

Editor's Comment: Notice the ACP has already paid $2.83 billion dollars plus another $180 million - or a total of $3.01 billion to GUPC. And remember the original contract was for a total of $3.118 billion dollars, so by contract the ACP should only have to pay the GUPC another $108 million for the whole project. And, it's only 65% done. Goodbye, low-balling GUPC...

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ACP Urged To Abandon GUPC, Move Quickly To Complete Panama Canal Expansion

Canal ExpansionThe former Comptroller José Chen Barría urged the Panama Canal Authority to execute the surety bond and complete the construction of the third set of locks.

With the primary contractor on the third set of locks the Grupo Unidos por el Canal (GUPC) facing financial problems, the ACP presented a proposal to the consortium consisting of a proposal to make a joint joint contribution of $283 million, but so far there has been no response from GUPC.

"Rescind the contract with GUPC and don't waste time in delaying processes that will cause work on the project to fall behind even more," said Chen Barria .

In an interview with EFE, the president of Sacyr, Manuel Manrique, said GUPC would finish the project, and he asked for "confidence" in the talks.

The President of the National Council of Private Enterprise (Conep), Gabriel Diez, said if the GUPC is thinking about finishing the project then they should "specify a completion date."

The movement Retired Canal Employees for the Defense of the Panama Canal plan a protest at 11:30 am at the Goethals Memorial in Balboa, demanding that the GUPC fulfill the contract to build the third set of locks. (Prensa)

Editor's Comment: Highlight! Notice when the President of Sacyr said he is asking for "confidence" in future discussions with the Panama Canal authorities, what he really means is they don't want the details of the discussions to be made public. Ah-hem. Gentlemen, this is a multi billion dollar project voted on an approved by the Panamanian people in a national referendum. The fact of the matter is Sacyr is damn near broke and bankrupt, and those details are likely to become more and more clear as the talks and negotiations with the ACP move forward. Sacyr is a publicly traded company in Spain and on other boards - so if it becomes apparent they are going to be thrown out of Panama by the scruff of the neck then their stock price will go down like a Colombian hooker.

In this article José Chen Barría is expressing what many others have already decided as a foregone conclusion - the GUPC will be tossed aside and the ACP should not waste any more time with them, and move on to a different and better plan with a more responsible builder, to get the project done as quickly as possible.

Politically speaking, this is really a no-lose situation for the CD, Martinelli, and their party's candidate Jose Domingo Arias. All they have to say is "we didn't hire these dudes, the PRD did." Then they can follow that up with indirect allegations of bribes and kickbacks, and promise to do things right with the new builder. I have not heard them make those kinds of references yet, but it's bound to happen, and it's only a matter of time before the PRD gets blamed for the current kluuster-fuugen.

Economically speaking, it's a wash. So it's going to take another billion or two to complete the expansion project. So what? the Panama Canal generates a few billion dollars of revenue every year so it will pay for itself - no big deal. And it will cost what it should have cost in the first place. Remember GUPC only got the contract in the first place because they submitted an unrealistically low (low-ball) bid. Reality is now kicking in. Economists prefer reality, over magic.

All of this means strategically speaking, the only ones likely to take it in the shorts on this deal are the members of the GUPC consortium and the PRD. So yeah, that's why the president of Sacyr is asking for the talks to be "confidential." If I were the Director of the Panama Canal, I would respond by publishing the minutes of the meeting, and make every statement, inference, request, comma and period part of the public record. Fuck those guys...

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Jované Not Going To The Dance

PoliticsOver five years ago, when the Panamanians were preparing for the elections of 2009, the university professor Juan Jované filed with the Supreme Court a writ of unconstitutionality to the rule that did not allow independent presidential candidates.

When the 2009 campaign and was in its final phase , the Supreme Court declared the rule as "unconstitutional" and stated independent candidates would be allowed to run.

The Electoral Tribunal has recognized Gerardo Solís, Esteban "of the people" Rodríguez and Gerardo "El Chiricano" Barroso, as the three independent presidential candidates.

The court allowed three days for objections to those applications to be submitted.

As time was running out, Prof. Jované decided to postpone his candidacy for 2014.

However, despite being who promoted this possibility through his legal action before the Supreme Court, today he ends up outside of the election because he was unable to collect the number of signatures necessary to run as an independent candidate.

Gerardo Solis was able to collect more than 35,000 signatures. Esteban Quintana has about 25,000 and Gerardo Barroso has 21,578 and these three will appear on the ballot in May 2014 as independent candidates.

Jované with 21,412 was left outside, looking in.

In short, "no one knows for whom he works."

Editor's Comment: When they set the rules of the game, it was decided that the three people who were able to gather the most signatures would run as independents. It doesn't matter all that much really. None of these people have a snowball's chance in hell of winning. It's all really about vanity, and politicians enhancing their name recognition.

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Panama Canal row could cause three year delay

Canal ExpansionThe Italian builder Salini Impregilo has warned the Panama Canal Authority (PCA) that a failure to find a solution to the current financial wrangling could delay the development by up to three years.

For the past week, the PCA has been fighting with the consortium led by Spanish builder Sacyr over cost overruns in the plan to install a third set of locks for one of the world's most important cargo routes.

Impregilo said it had put forward two alternative solutions that involved the authority paying $1bn to the consortium, known as Grupo Unidos por el Canal (GUPC), to complete the work.

But the announcement from Italy prompted an immediate rebuff from the head of the PCA, Jorge Quijano.

The $1bn payment "is impossible. It is outside the contract," Quijano told reporters in Panama City.

The consortium had threatened to suspend work on the massive infrastructure project by 20 January unless the PCA paid for $1.6bn in cost overruns. The authority has rejected that demand but has said it is willing to consider detailed claims.

Quijano said the PCA had a plan ready to bring in a third party to finish the expansion if no deal is reached with the consortium to keep the project running in the weeks ahead.

But a statement from Impreglio said: "There is no alternative to honoring the contract and the law. PCA still has at its disposal hundreds of millions of dollars from the financial plan for contingencies and unforeseen events, which it has not yet used. Now is the time to do so."

The project was originally expected to cost about $5.25bn, but the overruns could raise it to near $7bn.

"The PCA’s threat to put in place the so-called Plan B- that is, to terminate the contract with the consortium and entrust the implementation of works to others- is not only illegal and against the terms of the contract, but it is also against the interests of the State of Panama and squanders the money of Panamanian citizens," the statement added.

"The alternative to the completion of the works by the current consortium would result in a delay of at least three years, the expected time for the construction of a new set of gates by any new contractor, even if it were ever possible to replace the consortium without further delays to the civil works."

In 2007, work began on the expansion, which will create a new lane of traffic along the canal and double its capacity. The overall project is 72% complete.

Should the sides fail to reach an agreement, the issue would pass to the international arbitrator, which is based in Miami. (constructionweekonline.com)

Editor's Comment: Yeah, well, maybe. I think the GUPC would not have been able to deliver the third set of locks on time, anyway. I think their projections of when it will be done have been overly rosy and optimistic. I think their timing in asking for this $1.6 billion dollars is basically blackmail, timed perfectly to create a serious problem for the administration of Ricardo Martinelli, just four months before Panamanians are to select their next president in May 2014. Yeah - screw those guys. They were playing fast and loose with the rules themselves. It's jaw-dropping to hear the Italians say the ACP's plan to have someone else finish the project is "illegal and against the terms of the contract." Good point, Poindexter. Now go finish the project yourself, according to the terms of the contract you signed, for $3.1 billion. Bye. I'm sure the lawyers are salivating over this one...

Historically speaking - it's appropriate that the Europeans fucked up the first go-round (as did France with the original Panama Canal) and then the Americans come in to save the day and actually build the damn thing. I really hope the ACP hires Bechtel - simply because it gives me a warm fuzzy in that sense. The French were also sloppy, crappy engineers, had a bad plan, worse execution, spent their money poorly, and screwed over their investors. You know, like the GUPC guys are apparently doing. Yeah, I like it. Come on, Bechtel! Bid that puppy and build it for cost. I can see the plaque now - "Started by GUPC (they fucked up) Finished by Bechtel." Perfect.

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ACP Preparing To Take Over Panama Canal Expansion Project From GUPC

Canal Expansion Yesterday the Panama Canal Authority (ACP ) rejected a financial proposal put forward by the Italian company Salini Impregilo - one of the member companies of the Grupo Unidos por el Canal (GUPC) consortium - in which they asked for $1 billion - and reiterated its willingness to take control of the construction of the third set of locks, currently 65% completed.

The administrator of the ACP, Jorge Luis Quijano, flatly rejected Salini Impregilo's proposal, which controls 48% of GUPC, because it exceeds the amount of $3.188 billion agreed to in the contract by hundreds of millions of dollars.

Quijano said on Monday he has planned a meeting with representatives of the Zurich American insurance company, which backs the majority of the bond the ACP holds, worth $600 million dollars.

In case the GUPC consortium abandons the project, the intervention by the insurer is the first option.

The insurer may decide to continue the project with the GUPC, to find another contractor to complete the project, or to credit money to the ACP to finish the work.

If the ACP becomes responsible for the project directly, one option is to hire a management company to complete the construction of the third set of locks.

GUPC, exploring by all means the billion dollars it needs to overcome its financial hole, has turned to international banks for support. (Prensa)

Editor's Comment: Please - for the love of God - ignore the rants and raves of idiots who don't know the first thing about macroeconomics, when they talk about the potential impacts of this whole fight between the GUPC and the ACP in terms of the Panamanian economy.

Let me spell this out for you in clear and precise terms. Right now - today - the Panama Canal as it exists (before the expansion) receives about $3 billion dollars per year in revenues from all sources (tolls, services, selling electricity, selling water, etc.) It spends about $2 billion dollars of that money on operations, maintenance, salaries, services, fuel, and what have you. Most of that money (almost all of it) is spend inside of Panama, so it has direct impact on the Panamanian economy, one of the reasons why Panama's economy has been growing by about 8% per year (or more) for the past decade. The other $1 billion is handed over to the Panamanian government, for them to spend as they see fit as part of the general budget.

So if the expansion of the Panama Canal is to cost $5.25 billion dollars, then the pre-expansion canal itself can pay off the cost in about five years or less. No sweat. Any bank in the world will take those numbers.

But here's what happens once the newly expanded Panama Canal opens. Those revenues will jump to $5 billion per year. About $3 billion will be spent on operations and maintenance. And the remaining $2 billion will be turned over to the Panamanian government.

In short, who gives a rat's ass if there are cost overruns? The bottom line is the GUPC submitted a low-ball bid to win the contract. The contract was issued by the PRD's Martin Torrijos. This little kerfuffle will now allow the Martinelli (or Arias) administration to toss out the PRD cronies, take over control of the expansion project, and make some money on bribes and kickbacks.

Will there be any sort of negative economic impact on the Panamanian economy? No. Of course not. There are abject morons out there who are painting scenarios of woe and doom - spouting off as if they have a clue. They don't. It's no surprise to anyone (and literally, no one, except the morons maybe) that this problem with GUPC occurred. I've been reporting on their problems for years, and predicted this exact scenario a long time ago. So, yawn.

The Panama Canal expansion project will be built. There will be cost overruns, and it won't cost a total of $5.25 billion but probably more like $7 billion. Again, so friggin' what? The newly expanded Panama Canal can pay for that in no time. The banks will finance the costs and make money on the interest because that's what banks do. Newly elected president Jose Domingo Arias will continue with the CD's programs of "change" (code for "build shit") and the Panamanian economy will now chug up to 11% expansion per year, now that the global financial crisis is finally winding up, for real.

But the real bottom line here is - please ignore the rants and raves of idiots. If there's a crazy man alone and screaming in the basement of the house next door, does it make any sense to try to figure out what he's saying? Of course not...

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Panama demolishes residence of former dictator Manuel Noriega

Panama NewsPanama City (AP) A bulldozer is demolishing a mansion once owned by former dictator Manuel Noriega, after the Panamanian government found no buyers for it.

Panamanian President Ricardo Martinelli said Thursday the rambling, weed-choked residence had become a breeding ground for mosquitoes, rats and other pests.

The estate valued at $2.5 million is in Panama City's posh San Francisco district, but a yearslong effort to sell it received no bids.

Previously, Martinelli proposed using the site as a "Memory Park" to remind Panamanians of the damage Noriega did to Panama.

Noriega was toppled by a 1989 U.S. invasion and served 17 years in the U.S. for drug trafficking.

The 79-year-old was later convicted in France of money laundering and returned to Panama to serve a 60-year sentence on charges including murder.

Editor's Comment: So what? The building itself was worthless. The land it sits on is worth a lot of money, because it's right on Calle 50. The Panamanian government didn't sell it, because they didn't want to. They had offers, but it's going to take a few more years before that particular patch of ground is no longer "Noriega's." No one was willing to pay a premium price any other similar parcel in the same area would have fetched, just because it's been smeared with the ghosts of Pineapple Face.

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Panama Canal refuses to pay $1 billion more for expansion work

Canal ExpansionBy Lomi Kriel and Elida Moreno - PANAMA CITY (Reuters) - The Panama Canal on Wednesday rejected a proposal that it pay $1 billion to continue work on expanding the waterway, and warned the building consortium behind the project that it could bring in others to finish the job.

For the past week, the Panama Canal Authority (PCA) has been fighting with the consortium led by Spanish builder Sacyr over cost overruns in the plan to install a third set of locks for one of the world's most important cargo routes.

On Tuesday, there were signs the two sides were narrowing their differences. But on Wednesday, Italian builder Salini Impregilo weighed into the debate with a separate proposal that suggested a deal was still some distance away.

Impregilo said it had put forward two alternative solutions that involved the authority paying $1 billion to the consortium known as Grupo Unidos por el Canal (GUPC) to complete the work.

But that announcement from Italy prompted an immediate rebuff from the head of the PCA, Jorge Quijano.

The $1 billion payment "is impossible. It is outside the contract," Quijano told reporters in Panama City.

The consortium had threatened to suspend work on the massive infrastructure project by January 20 unless the PCA paid for $1.6 billion in cost overruns. The authority has rejected that demand but has said it is willing to consider detailed claims.

Quijano said the PCA had a plan ready to bring in a third party to finish the expansion if no deal is reached with the consortium to keep the project running in the weeks ahead.

Bechtel, a U.S. engineering company which lost out to Sacyr when the project was awarded in 2009, had been tipped by some analysts as a likely beneficiary of the dispute.

Quijano said the third party was not Bechtel, but did not elaborate on which other companies could step up.

"We are not going to have another contract like we have with GUPC right now. We'll have another contractor that works directly for us to administer the rest of the contractors and people," he said of the contingency plan.

The project was originally expected to cost about $5.25 billion, but the overruns could raise it to near $7 billion.

Impregilo's proposal showed signs of a split in the consortium that has been expanding the canal.

People familiar with the discussions said that Impregilo perceived Sacyr as too soft in negotiations and said the Italian company could be trying to wrest control of the project.

There was no immediate word from Sacyr on Impregilo's move.

Halting construction on the project would be a setback for companies eager to move larger ships through the century-old waterway such as liquefied natural gas (LNG) producers who want to ship exports from the U.S. Gulf coast to Asian markets.

BLAME GAME

In 2007, work began on the expansion, which will create a new lane of traffic along the canal and double its capacity. The overall project is 72 percent complete.

Last week, the consortium, which also includes Belgium's Jan De Nul and Panama's Constructora Urbana, said it had faced the added costs due to unforeseen setbacks in the $3.2 billion section of the project to build the new locks.

The group said flawed geological studies carried out by the authority were responsible for the cost overruns. The authority has not yet responded.

U.S. diplomatic cables published by Wikileaks showed the government of Panama President Ricardo Martinelli was worried about progress before six months had passed.

Sacyr won the canal contract in 2009 with an offer considerably below the main rival bids and also below the $3.48 billion reference set by the canal authority.

Sacyr, whose debts at the end of September were three times its market capitalization, made 55 percent of its revenue outside Spain in the first nine months of 2013.

Panama contributed 25 percent of the company's 1.3 billion euros ($1.78 billion) in international sales, according to its 2013 nine-month earnings statement.

Spain's ambassador to Panama has said his country's government will not provide any financing.

Sacyr's shares fell 2.65 percent on Wednesday, after rebounding sharply earlier in the week following a steep sell-off when the dispute flared in early January.

Shares in Impregilo rose 0.37 percent.

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GUPC requests 400 million dollars

Canal ExpansionThe Panama Canal Authority (ACP) made the first efforts to temporarily solve the financial problems of its largest contractor, Grupo Unidos por el Canal (GUPC), however they responded to the offer by "raising the bar" and requested more money than the ACP is willing to disburse.

The Canal Administrator Jorge Luis Quijano, met yesterday morning with representatives of GUPC and proposed a contribution of $283 million under the parameters set by the contract for the design and construction of the third set of locks.

The ACP's plan is to advance a payment of $100 million (against bank guarantees) and extend to the company, for two months, the $83 million moratorium for "repayment." Under this scheme, GUPC must contribute another $100 million.

In the afternoon, and after two hours of conversations with the representatives from the GUPC consortium, Quijano made ​​public the plan the ACP put on the table.

The cash injection would have to be approved by GUPC. What's more GUPC would have to agree to lift (cancel) their notice of suspension of construction work on the project slated for 19 January, and deliver the second shipment of four of the new lock gates in February.

Four hours after Quijano told the press about his plan, the GUPC unveiled their counteroffer. They are asking for three times the amount the ACP was willing to advance.

The GUPC promised to inject $100 million, but they asked the ACP for an advance of $400 million, in addition to extending the moratorium from now now until the end of the period of arbitration for their claims for $1.6 billion that the ACP has not been able to fully account for.

This newspaper (La Prensa) learned the GUPC's proposal was not formally presented at the meeting, although one of the consortium's representatives had it "in his pocket."

Superficially they talked about the consortium's plans to continue working, but the sum of $400 million was not an issue.

As of 6:00 pm yesterday the ACP still had not formally received the counter offer from GUPC.

The company reiterated its willingness to define the differences only in the ways specified in the contract. (Prensa)

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The "Kangaroo Scandal" Claims Its First Victim

Corruption The ball is bouncing and the scandal spreads, over the allegations of offers of money to the leader of the youth of the Democratic Revolutionary Party (PRD) Felix Moulanier, for him to change from the PRD in order to join the MOLIRENA political party.

A text message on cellphone and a tweet, released yesterday, took the case to the center of the political stage.

At 3:52 pm yesterday afternoon president Ricardo Martinelli announced via Twitter he had accepted the resignation of the director of the National Lottery, Emilio Somoza, who has been wrapped in the so-called "Kangaroo Scandal" for having offered money and politically appointed positions (jobs) to the leader of youth of the PRD in exchange for him jumping ranks to the MOLIRENA political party.

"I just accept the resignation of the Director General of the National Lottery of Panama," Martinelli wrote.

Last Friday - just minutes before Moulanier filed a formal complaint over the alleged bribes before the Electoral Prosecutor - president Martinelli wrote via Twitter "if there is evidence of what is being denounced by Mr. Moulanier, the Director of the the National Lottery of Panama will be immediately fired."

Somoza did not wait for the conclusion of the investigation, and he left the position he held since last October, when he replaced the President of the MOLIRENA party, Sergio González Ruiz.

His Resignation Is Not Enough

The social networks exploded with comments following Somoza's resignation.

The former Attorney General Ana Matilde Gomez was one of the first to call for the investigation requested by Moulanier.

"Faced with what happened in front of the Electoral Tribunal with the Director of the National Lottery, it's good that he resigned, but it's not enough. There should be an investigation," she said.

The opinion expressed by the former Electoral Tribunal judge Guillermo Márquez Amado was similar to that of Gomez.

"The resignation of the director of the Lottery should not mean that the investigation should be suspended," he said.

Márquez Amado added that "the one who should resign is the Electoral Prosecutor."

Yesterday afternoon the secretary of the Electoral Prosecutor, Juan Alvarado, said an investigation has been started in this case.

Somoza, in a brief statement issued by the Presidency of the Republic, said he resigned to devote time to clear his name of what he calls 'false accusations.'

"Kangaroos" in Panamanian Politics

Three days after the scandal broke, Moulanier appeared on television where he displayed a conversation via text chat, in which he receives the alleged offer to abandon the opposition group.

The conversation displayed by Moulainer was with Eduardo Lamphery, who also claimed to be a member of the PRD.

"Brother," - says the conversation displayed by Moulanier - "50k for you to switch, and five positions for your wife and family members. Two positions of $2,000 (per month) and three of $500 (per month). It's right now. He's already talked to the HD president and SGR."

According to Moulanier, that was part of the offer made to him by the MOLIRENA party for him to resign from the PRD and to support the candidate of the ruling Democratic Change party, José Domingo Arias.

Moulainer's complaint received an immediate response from Lamphrey. He was clear when he said "I take responsibility for the chat, but I do not take responsibility for the conversation."

About the content of the conversation with Moulanier, Lamphrey explained that the "50k" mentioned in the chat "did not refer to money, but rather I was talking about 50 kangaroos."

This, he added, was part of the "jokes" he exchanged with Moulanier, who supported his campaign to become the Secretary of the Youth of the PRD.

Such discussions should not be presented in this way (on TVN and Telemetro) and must appear in court, said the lawyer and PRD member, and he challenged the complainant to prove the chat was his (from Lamphrey.)

The lawyer's explanation continued. "HD and SGR are people who I do not know," he replied when he was asked about the meaning of the initials.

For a similar case of a payment for someone to jump from one political party to another, there are those who dare to predict the outcome of the complaint filed by the PRD party member.

Aurelio Alonso, the Representative from Pajonal who denounced the bribery of Gabriel De Janon, said the Electoral Prosecutor will investigate, but he will do so in order to clear the names of those who are members of the ruling government party. (Estrella)

Editor's Comment: "50k" means "50 kangaroos". That's rich. I love it when corrupt politicians are caught red handed. They say the funniest things with a straight face, and they expect us to just believe them at their word. These guys were flat-out buying political support with cash and jobs. The really funny part is - this isn't news. It's the way the Panamanian political machine has functioned for generations.

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Panama Canal offers $283 million deal to continue expansion

Canal ExpansionBy Lomi Kriel and Elida Moreno (Panama City) The Panama Canal's operators on Tuesday proposed a $283 million joint financing package to ensure work to expand the top world trade route continues while it seeks to resolve a dispute with the building consortium over massive cost overruns.

Under the plan, the canal authority and the consortium would each put up $100 million, while the canal would give the companies more time to repay $83 million that was advanced to them.

The authority's head, Jorge Quijano, said the proposal was conditional on the consortium, led by Spanish construction company Sacyr withdrawing a threat to stop work on January 20 and to process its claim for $1.6 billion in cost overruns separately via agreed arbitration panels.

Halting work on the $5.25 billion project to widen and deepen the canal would be a setback for companies eager to push liquefied natural gas (LNG) exports from the U.S. Gulf coast to Asian markets through the century-old waterway.

Work on the expansion, which will create a new lane of traffic along the canal and double the waterway's capacity, began in 2007, and the project is 72 percent complete, according to the Panama Canal Authority's Web site.

There was no immediate word from building consortium Grupo Unidos por el Canal (GUPC) on the financing proposal. Quijano said the consortium had neither accepted nor rejected it.

Sacyr's consortium, which also includes Italy's Salini Impregilo (SALI.MI), Belgium's Jan De Nul and Panama's Constructora Urbana, said last week it had faced the added costs due to unforeseen setbacks in the $3.2 billion project to build a third set of locks for the canal. (Reuters)

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ACP Deal Would Keep GUPC Liquid - So They Can Continue To Work

Canal ExpansionThe Panama Canal Authority proposed to the Grupos Unidos Por el Canal (GUPC) a deal involving the payment of 100 million dollars of the 794 million dollars the contractor already has backed by various guarantees, and giving them an extension on the moratorium for the repayment of outstanding debts for about two months.

This deal would allow for the regular work on the third set of locks to continue while the contractor's claims are resolved using the mechanisms established by the contract.

This was announced by the administrator of the ACP, Jorge Luis Quijano, at a press conference, who also said the GUPC should make a similar contribution ($100 million).

Quijano explained that contributions - made under mechanisms that exist within the contract - would allow the GUPC to meet its financial obligations, while clarifying that the funds need to be secured by letters of credit.

However, the ACP established some conditions for the delivery of the funds, including the removal of GUPC's threat to suspend work on the project to expand the Panama Canal, in addition to expediting the process of dispute resolution on appeal.

What's more, the GUPC would have to guarantee that the ACP will receive the four lock doors that are ready to ship in Italy, no later that during the month of February, and the identified contributions - about $ 283 million in total - must be directed to subcontractors and suppliers, particularly those who have not been paid.

"The proposal has not been accepted or rejected by the GUPC, but this would be a way to inject cash flow to the proejct," Quijano said.

On 30 December, the GUPC consortium led by the Spanish company Sacyr, sent a letter to the ACP in which they warned of their intentions to suspend work on the project, if the ACP did not recognize their demands for "cost overruns" of 1.6 billion dollars by 20 January. (Panama America)

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GUPC Consortium Will Abide By Contract With ACP

Canal ExpansionThe consortium Grupo Unidos por el Canal (GUPC) promised Spain's Minister of Development, Ana Pastor, they will abide by the stipulations of the contract they signed with the Panama Canal Authority to submit their claims for cost overruns in the construction of the third set of locks.

This was stated by the Spanish official to the President of the Republic, Ricardo Martinelli, and the administrator of the Panama Canal Authority (ACP), Jorge Luis Quijano.

"We see a little bit of light at the end of the tunnel," Quijano said at the end of the meeting with Pastor in the afternoon in the offices of the ACP, in Balboa.

A few hours earlier Pastor had pointed the way for the GUPC to continue, with whose executives she met before going to the Presidency and the offices of the Panama Canal.

"The commitment by the consortium is that all economic claims will go through the way of the contract," said Pastor, who has been acting as a mediator with Sacyr, the Spanish company that is leading the GUPC consortium.

The ACP and GUPC resolved to arrange a model today - yet to be defined - to provide capital to the project and prevent the work from being stopped.

"We talked about some additional (funding) that we have to verify, as long as the GUPC makes an equal contribution. That is the condition," Quijano said.

This additional disbursement would give solvency to the consortium, while the Dispute Resolution Board resolves the claim for $585 million that the GUPC filed before them.

"The problem they have now is cash flow," said Quijano, noting that the decision of the DAB may take two to three months.

Despite the initial approach, GUPC's decision to suspend work on the Panama Canal expansion project remains, if the ACP does not respond to their request for the payment of cost overruns for $1.6 billion.

Quijano said this issue is not up for debate, and the GUPC must follow the channels established in the contract for filing claims. (Prensa)

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Director of National Lottery Resigns

CorruptionLast Friday, Emilio Somoza, the Director of the National Lottery, presented his letter of resignation. President Ricardo Martinelli officially accepted his resignation. President Martinelli confirmed the information through his Twitter account. (Critica)

Editor's Comment: This is the guy who was left standing red-faced on the steps of the Electoral Tribunal, when supposedly the PRD Director of Youth was going to jump over to the MOLIRENA political party. That all blew up once the television cameras were rolling, and instead the PRD guy accused Somoza of having offered him money and political appointments (positions) within the Lottery if he would switch teams. And the next day, he resigned from his post for having embarrassed Martinelli's government.

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Spain won’t help Sacyr financially in Panama canal row

Canal ExpansionBy Lomi Kriel and Elida Moreno - PANAMA CITY (Reuters) – Spain will not provide financial help to a Spanish company leading a consortium locked in a dispute over the costs of expanding the Panama Canal, its ambassador said on Monday as he headed to a meeting with Panamanian officials.

Spain’s public works minister, Ana Pastor, began a day full of meetings by holding discussions with officials for building consortium Grupo Unidos por el Canal, which is fronted by Spanish construction company Sacyr .

As Pastor entered the meeting, Spanish Ambassador Jesus Silva said his government would provide no financial help to Sacyr in sorting out the row overshadowing one of the world’s most important maritime cargo routes.

“The Spanish government is not a party to this; it is a problem between a contractor and its client,” he said as he accompanied Pastor to the meeting. “Under no circumstances is it contemplated that the Spanish government contribute funds.”

Later in the morning Pastor is due to meet Panamanian President Ricardo Martinelli, who last week accused the GUPC of “great irresponsibility” when it threatened to suspend work on January 20 if the canal operator, the Panama Canal Authority, did not pay for big cost overruns.

The GUPC also includes Italy’s Salini Impregilo , Belgium’s Jan De Nul and Panama’s Constructora Urbana.

Arguing that the project to build a third set of locks for the canal had suffered unforeseen setbacks, the GUPC said last week it had faced $1.6 billion in added costs. It blamed the Panama Canal Authority for carrying out flawed studies of the geological terrain.

Martinelli has turned on Spain and Italy, saying their governments had given him assurances that they would finish the $3.2 billion project to build the locks, prompting Pastor to fly to Panama to seek an end to the impasse.

PCA head Jorge Quijano has said Panama is prepared to discuss the cost overruns if they prove justified, and a Panamanian official told Reuters the government had considered putting together a bailout with the parties involved.

However, Spain has been coping with a deep economic crisis that has put a strain on the country’s finances.

After her discussions with Martinelli, Pastor is due to meet the canal operators and give a statement to the media at about 5:30 p.m. local time (2230 GMT).

THIRD PARTY?

On Sunday, the PCA maintained a firm stance, again rejecting the GUPC’s arguments on the overruns and referred the consortium to the arbitration panels the two sides agreed on when the contract was signed.

Quijano told Spanish newspaper El Pais that the two-page letter the GUPC had submitted last week did not justify its demands and that the consortium would need to provide more detailed information to make a viable case.

If work on the project did stop, the authority could take steps to ensure it was completed regardless, “be it by a third party or by the PCA,” Quijano told the paper.

Sacyr won the canal contract in 2009 with a $3.12 billion offer that was considerably lower than that of at least one rival, as well as below the $3.48 billion reference set by the PCA.

Less than six months later, Martinelli, Panamanian Vice President Juan Carlos Varela and other top officials were already worried about how the project was progressing, according to U.S. diplomatic cables published by Wikileaks.

The canal expansion, whose total cost is about $5.3 billion, has been one of the top priorities for the government of Martinelli, whose term in office ends midyear.

Sacyr, whose debts at the end of September were three times its market capitalization, has also staked a lot on the canal expansion.

The company made 55 percent of its revenue outside Spain in the first nine months of 2013, and Panama contributed 25 percent of its 1.3 billion euros ($1.78 billion) in international sales, according to its 2013 nine-month earnings statement.

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Health authorities confirm fifth dengue death

HealthcareAuthorities of the Ministry of Health (MoH ) confirmed on Sunday, the fifth death from dengue type 2.

A 35 year old woman who lived in the sector of Belén in the area of Tocumen died after being hospitalized for several weeks in the Santo Tomás hospital.

Authorities have confirmed 3,307 cases to date that are not serious, and 9 severe cases.

On 30 December, the MoH declared an epidemiological alert after an increase in the number of cases of dengue transmitted by the mosquito Aedes aegypti . "We've gone into the epidemic area. We are in an epidemic of dengue," said Health Minister, Javier Diaz.

The Ministry of Health is also seeking cooperation from the general public in their efforts to eradicate mosquito breeding sites of the transmitter, and reinforce operational fumigation nationwide. (Panama America)

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Politics is involved in Panama Canal litigation

Canal ExpansionRicardo Martinelli's decision to intercede with the governments of Spain and Italy, in the conflict between the Panama Canal Authority (ACP) and its largest contractor, establishes the precedent of a President who is interfering internationally with the contractual matters of the waterway.

When the Grupo Unidos por el Canal (GUPC), the consortium responsible for the design and construction of the third set of locks, threatened to suspend the work due to cost overruns reaching 1.6 billion dollars, Martinelli said he would require both governments to make their companies meet the contract, because they have a moral responsibility to do so.

But neither the government nor the State of Panama have any legal authority to mediate the dispute.

The contract signed by the ACP and GUPC states that the relationship is between the contractor and the Panamanian company (the Panama Canal). The Canal used its income to guarantee the project, and not the financial backing of the State.

Tomorrow on Monday morning there will be a meeting between the Minister of Development of Spain, Ana Pastor, and the Panamanian President Ricardo Martinelli, from which two likely scenarios might emerge, according to people who are familiar with the topic.

One, is that the governments of Spain and Italy might decide to inject capital into their businesses, in order to avoid the international embarrassment of abandoning the work. And the other option - they might choose to try to generate greater pressure on the ACP to abandon the contract and to agree upon new terms.

This conflict would not be new for the president. His chief political consultant Aníbal Galindo is also a partner in the law firm that advises GUPC in Panama. (Prensa)

Editor's Comment: Leave it to La Prensa to try to find a way to bash Martinelli - no matter what he does. If Martinelli had gone to the microphones and said "this is a contractual matter between the ACP and GUPC in which the government of Panama and me as its chief executive have no legal power" then La Prensa would have eaten his lunch for ignoring such an important issue. OBVIOUSLY there's a massive moral imperative for Martinelli to step up and lead in this case. I'm sure it would not be hard to go back and read La Prensa's archives - to see how many times Mireya Moscoso opened her mouth with regards to Canal issues when she was president. In short - whenever you read something out of La Prensa just remember they are always (always) anti-Martinelli, no matter what. Severely biased...

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Panama botched geological studies in canal cost row

Canal ExpansionFlawed geological studies of the terrain of the Panama Canal by its operator has led to big cost overruns in the project to expand the waterway, the building consortium at the center of a dispute with Panama's government over the plan said on Saturday.

Earlier this week, the consortium led by Spanish builder Sacyr said the scheme to build a third set of locks for the canal had incurred additional costs of $1.6 billion, and demanded Panama foot the bill or work would be suspended.

Panama rejected those arguments, but has hinted it could negotiate some kind of compromise with the consortium, which also includes Italy's Salini Impregilo, Belgium's Jan De Nul and Panama's Constructora Urbana.

Complaints by consortium officials on Saturday about geological problems provided some of the most detailed explanations yet on what pushed costs above the projections to expand one of the world's major maritime cargo routes.

The consortium known as Grupo Unidos por el Canal (GUPC), on Saturday reiterated that it did not plan to abandon the project, but would suspend works on Jan. 20 if no deal was reached.

GUPC officials told reporters that when excavations to build the locks began, they found the geology of the area was more complex than had been made clear when the project was tendered.

"The main part of (the cost overruns) is due to geological flaws and is related to problems with the concrete," said Paolo Moder, a member of the GUPC's board of directors.

After the group began digging in the Pacific zone of the canal, the basalt they found there was not right for the mix of concrete they planned for the locks, so they had to bring in basalt from elsewhere, resulting in higher costs, said Jose Pelaez, head of the GUPC section building the Atlantic locks.

But the canal authority rejected that mix, and for seven months the GUPC had to develop other mixes until in the end the authority finally approved the original one, he added.

He said the geological studies were carried out by the canal authorities in tandem with international advisors, and formed the basis for the subsequent tender the consortium won.

"The (Panama Canal Authority) studied these technical conditions for more than seven years and didn't detect them, and it's not fair to assign GUPC or any contractor unlimited risks for something the GUPC only had months to study," Pelaez said.

A team of Spanish government officials is traveling to Panama this weekend to try to help resolve the dispute over the massive infrastructure project, which aims to broaden and deepen existing channels so bigger vessels can sail through.

The canal authority responded to the comments by stating that the GUPC could present its arguments to the arbitration authorities set out to resolve disputes under the contract.

Asked whether the companies could seek government aid, Pelaez said the consortium was "a private group and the actions undertaken by the government are strictly diplomatic".

The canal expansion, whose total cost is estimated at around $5.3 billion, is at the center of the Panamanian government's plans to modernize the Central American country, and President Ricardo Martinelli is insistent the project must be completed.

Spain is also keen to demonstrate its builders can be relied on after a slump in the local construction industry plunged the country into an economic crisis that has dragged on for years. (worldbulletin.net)

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Panama seeks int’l help on canal cost row

Canal ExpansionPanama City/Madrid (Reuters) – The president of Panama said on Thursday he would go to Spain and Italy to pressure companies to honor contracts to expand his country’s canal after a building consortium behind the project threatened to suspend work because of a row over costs.

The consortium – Spain’s Sacyr, Italy’s Salini Impregilo, Belgium’s Jan De Nul and Panama’s Constructora Urbana – said on Wednesday that $1.6 billion in cost overruns on the $3.2 billion plan to build a third set of locks for the canal should be met by Panama.

The consortium, known as Grupo Unidos por el Canal, said the Panama Canal Authority (PCA) had 21 days to respond to its demands during which work would continue, but the project would be suspended if that requirement was not met.

Just a few hours later, the PCA rejected the demand, hinting it could find others to complete the job.

Shares in Sacyr, which heads the consortium, slumped 9 percent on Thursday.

Panamanian President Ricardo Martinelli accused the companies of “great irresponsibility’’ and said they had endangered the massive construction project, which has been a major driver of the Central American nation’s economy.

Martinelli, who took power in 2009, said he expected Italy and Spain to uphold commitments to back the project which the countries’ leaders made to him during his first year in office.

“So I’m going to go to Spain and Italy to demand this from them, because a company should not be able to put such a high amount of overrun costs on a project that belongs to humanity,’’ he told reporters in Panama City.

The Spanish and Italian governments have a “moral responsibility’’ to help resolve the dispute because their companies were engaged in the construction, Martinelli said.

Jorge Quijano, the head of the PCA, said if the project were delayed due to the dispute, Panama would see it through.

“This work will be finished, never fear, even if it takes longer to complete,’’ he told reporters.

Panama has already moved back the scheduled completion date for the expansion from October 2014 into mid-2015.

To see that the work was concluded, Quijano said the PCA had since November been in contact with insurer Zurich in North America, with which it had $600 million in surety bonds that could be used to support the project.

In addition, the PCA could tap the $1.2 billion it had not yet paid to the consortium to finish the work, he added. So far the PCA had only paid the contractors $2 billion, he said.

The new locks represent the biggest chunk of the canal expansion plan, which overall is worth some $5.3 billion.

The PCA says the total expansion is just over 70 percent finished with the locks 65 percent complete. The canal’s extension aims to broaden and deepen existing channels so that more and bigger vessels can sail through.

The consortium said the overruns were due to unforeseen events during construction, which it said was “normal’’ in such projects. It also said the PCA had failed in its obligations and given the consortium “inexact’’ information for the project.

But the PCA said that if the consortium was not capable of honouring its agreements, it would initiate “mechanisms from the contract that would allow the work to be completed.’’ It did not explain what those would be.

Sacyr won the bid on the canal contract in 2009 with a $3.12-billion offer, which was considerably lower than that of rivals, as well as below the $3.48 billion reference set by the PCA.

Political columnist Pepe Oneto, writing in opinion blog republica.com, said the news was terrible for Spain’s attempt to rebuild its image abroad following a severe economic crisis with the collapse of the country’s building and property sector.

“The Spanish government... knew that it was impossible for the budget to be met. Sacyr bid low, convinced that, in the end, the cost overruns it is demanding now would be met,’’ he said.

A spokesman for Sacyr said that part of the cost overrun was because some building materials as originally budgeted were not adequate for the final work. The PCA had rejected the concrete mix the consortium had planned to use for the project.

“The consortium’s intention is also to find a solution within the terms of the contract, as there are mechanisms that make it possible,’’ Sacyr’s spokesman said, without elaborating.

The company’s debts at the end of September were three times its market capitalization. Analysts at the brokerage of Banco Sabadell said the news was not good for Sacyr or its image, but played down the impact on the builder’s results.

Newspaper El Pais reported in 2009 that Panama’s foreign minister, Juan Carlos Varela, had predicted the project would fail because the builders were in financial trouble.

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Allegations of Politically Motivated Bribery Against MOLIRENA Party Members

PoliticsFelix Moulanier, the President of the Youth of the Democratic Revolutionary Party (PRD), disguised his interest in changing over to the MOLIRENA political party, and instead made a public denouncement, saying he was offered money and politically appointed positions (for his people) in the National Lottery Office for his wife and others, by the directors of the ruling party, in exchange for him quitting the PRD and enrolling in the MOLIRENA political party.

At noon he went to the offices of the Electoral Tribunal accompanied by Emilio Somoza, the director of the National Lottery and MOLIRENA party member.

He was also accompanied by the Secretary of the Youth of the MOLIRENA Alberto Arjona and some party activists who were supposedly there to act as witnesses.

But his change from the PRD to the MOLIRENA party would be impossible to register, because a decree was issued by the Electoral Tribunal announcing the suspension of political party registrations dated 30 December 2013 - which will remain in effect until after the elections of May 2014.

But Still, Molulanir and the MOLIRENA party members went to the Electoral Tribunal.

SURPRISE - Upon arrival Moulanier was thoughtful. He was silent for a minute, even though his face was surrounded by microphones and tape recorders, as journalists waited for him to make a statement.

Felix continued slowly and speaking with pauses, as though he was structuring a speech that was costing him to get off of his chest.

He did not speak until a reporter broke the ice, and then he spoke as if he was unburdened, saying "at 50 years of commemorating the historic feat of January 9, where the youths fought for our country with principle and dignity, today, I Félix Moulanier, have become proof of what the MOLIRENA is doing with the political youth of this country."

The young opposition leader surprised the MOLIRENA party leaders when - instead of resigning from the PRD - he reiterated his support for the PRD presidential candidate Juan Carlos Navarro. What's more, he said what no one though he would say when he denounced the Director of the National Lottery, who was standing right beside him, of having offered him money and politically appointed positions in exchange joining the ranks of the MOLIRENA.

Moulanier shouted "I invite the Electoral Prosecutor to come here, and to take a statement from the Director of the Lottery and the staff of that institution."

Emilio Somoza 's face began to change. He was amazed by the speech from the person who was supposedly going to weaken the PRD. He was stunned. He did not say a word as he and several of his companions kept their mouths shut, spun on their heels, and started walking towards the exit. Other MOLIRENA party members followed. They took off their distinctive red hats, rolled up their banners, and walked to the exits.

Among the complaints, Moulanier said he has recordings and videos and that he can prove his accusations.

He claims that the cameras installed in the Lottery building can attest to his words and will serve as evidence supporting his claims.

And he told a television channel that in the morning he went to the Lottery building, where he was taken to the offices of the Counseling Department where he was attended by Alberto Arjona, who asked him to send in his resume in order to add him to the payroll.

Then Moulanier said he was taken to Somoza's office, where the conversation began.

They phoned Sergio González Ruiz, the President of the MOLIRENA political party, who congratulated him and promised him that many more opportunities would come "because MOLIRENA would give him the best opportunities."

According to Moulanier, they were trying to organize things so that the presidential candidate Jose Domingo Arias would be there at the Electoral Tribunal, who would witness his resignation from the PRD.

The strange thing is that before this happened there was some confusion over what Felix's decision would be.

PRD sources say it was a closely guarded secret, and that's why no one from the party was there to provide support to Moulanier once the action was taken.

Moulanier was left alone standing in front of the Electoral Tribunal. He had come there with the MOLIRENA party members, and now he had no ride back. (Estrella)

Editor's Comment: Go figure. It seems like this Moulanier guy didn't know which way he was going to go until he actually got there to the Electoral Tribunal. Then, at the last minute he got cold feet and backed out. I seriously doubt the story that this was supposedly some sort of a PRD secret move in an attempt to make the MOLIRENA look bad. It's much more likely that Moulanier was simply weighing his options between the short term (and relatively small) gains of switching over to the MOLIRENA party, as compared to the potential to become a larger player over the longer term in the PRD. He simply decided to stick with the PRD, and in the process he threw some mud in Somoza's face. And of course now there will be no action taken against Somoza or anyone else, because this is simply how the game is played in Panama. But, it did make for a mildly interesting news cycle, to say the least.

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GUPC Has Slowed The Pace Of Work Being Done On The Panama Canal Expansion Project

Canal ExpansionThe Panama Canal Authority (ACP ) said today that the consortium Grupo Unidos por el Canal ( GUPC ) has "reduced" the pace of work being done on the construction of the third set of locks for the waterway, and they reiterated that it is "invalid" for GUPC to call for a "suspension" of the project over a claim for cost overruns.

A spokesman for the ACP said "it is visible" that since 30 December 2013, they day GUPC presented the "notice of suspension" letter, that the "pace of work" has fallen, but they said they do not have any accurate estimate of this decrease.

The ACP reiterated the position of the Canal Administrator Jorge Quijano, when he said the GUPC has invoked a suspensive clause (in the contract) "which can only be applied if you're not paying someone for having done the job, which is not the case, because they have received more than 2 billion dollars" of the original contract, which was for $3.118 billion, signed in 2009.

"Invoking this clause, which does not a mean termination of the contract but rather a temporary suspension, is invalid," said the source.

GUPC, led by the Spanish company Sacyr Vallehermoso in partnership with Italy's Impregilo, Belgium's Jan de Nul, and the Panamanian company Cusa, is demanding that the ACP recognize more than $1.3 billion in cost overruns to complete construction of the giant third set of locks of the Panama Canal expansion.

The deadline is January 20, according to the letter given to the ACP by the GUPC.

On another front, the same ACP source said the works on the fourth and final phase to dig the access channel to the new Pacific locks, being built by a consortium led by the Spanish company Fomento de Contratas y Construcciones (FCC), is running "smoothly and without any important delays," contrary to previous reports published in the Spanish electronic press which speak of delays.

The source also clarified that the construction of the third bridge over the Panama Canal, to be located in the Atlantic sector, has started without difficulty. It is being built by the French company Vinci Construction Grands Projets for $365.9 million. The company received the order to proceed with construction on 8 January 2013. (Panama America)

Editor's Comment: So, GUPC is already slowing down, and preparing to either walk off the job or get booted...

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GUPC Has Received $2.831 Billion For Panama Canal Expansion Project

Canal ExpansionThe Panama Canal Authority (ACP ) said it has paid $2.831 billion to the Grupo Unidos por el Canal (GUPC), of which $ 2.47 billion was for work that has been completed, and $784 million in advances.

The contract for the design and construction of the third set of locks for the Panama Canal was awarded to GUPC in July 2009, after they made an offer to build the project for $3.118 billion, the lowest among two other contractors.

The payments to GUPC are made according to progress of work as it advances, and the ACP notes they have always made the payments within 15 days after receipt of invoice, although according to the contract they are allowed a period of 56 days to make the payments.

In January 2010, the ACP made ​​the first advance payment for "mobilization" to the GUPC (to get them started). The ACP paid this amount to the contractor to buy equipment, install fabrication plants, and to build other required infrastructure.

As part of the agreement , the consortium has to return these funds to the ACP, according to an established schedule. (Prensa)

Editor's Comment: Hmmm. Interesting. So according to the ACP, if the GUPC walks off the job and the ACP has to hire someone else to complete the project, then as of right now the GUPC has already been paid for all the work they have completed, and what's more they now owe the ACP $784 million dollars.

It's been coming out in the Spanish press that the government of Spain basically subsidized the Spanish company Sacyr Vallehermoso, S.A., one of the four companies comprising the GUPC consortium. Their stock (SCYR:SM) is tanking in Spain on the news of this fight with the Panamanian government over payments for "cost overruns."

In reality, everyone knew the GUPC consortium simply underbid in order to get the contract. They knew (everyone knew) from day one that they would not be able to build this project for the $5.25 billion dollars offered. No one should be surprised by this news. I know the guys at Bechtel are not surprised, at all.

The math does not lie. There's no way in hell GUPC can build this project for $5.25 billion and either make a profit or stay in business. If they don't get the (at least) $1.6 billion they are demanding, then they will walk off of the project. The ACP and the Panamanian government will then be left to scramble to hire someone else (Bechtel) to replace them and to finish the project. If that happens then Sacyr will be either seriously or fatally wounded as a company - they were already on shaky ground financially speaking. The government of Spain will lose all of the money they "loaned" (subsidies) to Sacyr to help them get the contract. The government of Panama will be somewhat embarrassed - but Martinelli will be able to say "hey, I didn't hire these idiots - the PRD and Martin Torrijos did. I'm just going to clean up their mess..." So politically speaking it won't be much of a black eye for either the CD or Jose Domingo Arias as a presidential candidate.

With regards to the expansion of the Panama Canal - it will eventually be built. No problem there, because remember the Panama Canal already generates about $1 billion per year in straight profits (and an additional $2 billion that's spent on operations and maintenance inside of Panama). And it will be generating about $2.5 billion per year in profits after the expansion is complete. It will be built (by someone) and it will open, albeit with a substantial delay from the initial projections. Name me one massive infrastructure ever built anywhere that came in one time and under budget. It's a rarity.

So, while on the surface it appears that Sacyr and the GUPC have the ACP by the balls - in reality it's the other way around.

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Somoza Challenges Moulanier To Present Evidence

PoliticsThe director of the National Lottery, Enrique Somoza challenged the leader of the Youth of the Democratic Revolutionary Party (PRD), Felix Moulanier to present proof for the "so-called payment" he would have received for leaving the PRD and switching to the MOLIRENA political party.

Somoza said he was willing to submit to polygraph and "unmask" a Moulanier, who accused him of having offered $50,000 and other perks in exchange for changing parties.

"I'm going to take a polygraph, and after that I'm going to put him in prison," Somoza said. (Critica)

Editor's Comment: This is a little mini-scandal that sort of exploded in the news today. According to the PRD politician Moulanier, supposedly Somoza offered him money and other things to abandon the PRD and switch to the MOLIRENA political party. Right now things are heating up in preparations for the next general elections in May 2014. There's a full court press on by the CD to round up as many players as they can from all other political parties - including small little bit players such as Moulanier. The MOLIRENA party is in a political alliance with Ricardo Martinelli's Cambio Democratico (CD) party, so it serves as a handy stepping stone for those who wish to jump from an "opposition" party to one that's going to be winning the 2014 elections. So, did this bribe offer happen? Hard to say. This afternoon lawyers for Somoza filed a criminal complaint against Moulanier for defamation and slander. In any case, it's a side show - but at the same time possibly indicative of some of the back room deals that are being made in order to sew-up the 2014 election.

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Spain weighs into Sacyr row over Panama Canal work

Canal Expansion(Reuters) - Spain's government is pushing for talks to settle a dispute over $1.6 billion (974.3 million pounds) in cost overruns for expanding the Panama Canal, a project led by Spanish builder Sacyr, Spain's ambassador to Panama said on Friday.

Ambassador Jesus Silva told Spanish state radio that Public Works Minister Ana Pastor and Sacyr Chairman Manuel Manrique may visit Panama in the coming days.

"We're trying to get them to sit down for talks to see if they can reach an agreement, and to make all sides understand that everyone loses if the contract is terminated," Silva told Spanish state radio.

The expansion will triple the size of ships that can ply the canal, helping the small Central American nation compete in global trade. It will affect shipping routes - for example making it easier for cargo to move between Asia and the eastern coasts of the Americas - and the cost of transporting commodities and manufactured goods.

Silva said Sacyr stood to lose money on the contract - one of its biggest - if the issue was not resolved, but said it would be an "acceptable" loss.

Sacyr, Italy's Salini Impregilo (SALI.MI), Belgium's Jan De Nul and Panama's Constructora Urbana said on Wednesday the overruns on the $3.2 billion project to build a third set of locks along the canal should be met by Panama, and it would suspend the work unless the authorities came up with a solution within 21 days.

The project is more than two-thirds complete and is scheduled to conclude in 2015.

The consortium said the overruns were due to unforeseen events during construction that it deemed normal on such large projects.

Sacyr blamed part of the cost overrun on materials included in the original budget being declared inadequate during the construction phase. For example, the Panama Canal Authority (PCA) rejected the concrete mix the consortium had planned to use, the company said.

The PCA dismissed the complaints by the consortium, known as Grupo Unidos por el Canal.

"Regardless of what kind of pressure is put on the PCA, we will maintain our demand that Grupo Unidos por el Canal respects the contract that they themselves accepted and signed," the head of the PCA, Jorge Quijano, said in a statement.

Shares in Sacyr fell sharply for a second straight session, dropping 5.7 percent to 3.236 euros by 12:04 British time.

Panamanian President Ricardo Martinelli accused the companies on Thursday of "great irresponsibility" and said they had endangered the massive construction project, a major driver of Panama's economy.

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Jose Ayu Prado Elected As New President of Supreme Court

Law & LawyersJose Ayu Prado was sworn in Thursday as the new President of the Supreme Court for the period 2014-2015, succeeding Alejandro Moncada Luna this position.

Ayu Prado won the election with five out of nine votes.

The remaining votes went to Judge Victor Benavides.

The nominations began at 2:45 pm and the voting began at 4:45 pm. (Telemetro)

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Cabinet Approves Repeal of Articles 2 and 3 of Law 120

Money MattersThe Cabinet Council met on 2 January 2014, and approved a Cabinet Resolution authorizing the Minister of Finance to present a bill to the National Assembly to repeal Articles 2 and 3 of Law 120 of 2013, thereby restoring the effect of Article 694 of the Tax Code.

This law will be of public order, and is retroactive from December 30, 2013.

The project will be presented on Monday, January 6, when the National Assembly restarts sessions in the regular period.

With this move the Government reaffirms its historic commitment to the principle of territoriality in the source for the purpose of calculating the income tax applies for both natural and legal persons operating within the territory of the Republic of Panama. (Critica)

Editor's Comment: So, they tried to slip in this thing about taxing worldwide income, and it got slapped down. They admit they "made a mistake" and now they make it go away. Nice try. Boy, that was stupid...

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