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Wednesday, September 18 2019 @ 02:58 am EDT

Panama-Guide Top Level Category - The Expansion of the Panama Canal

On 22 October 2006 the citizens of Panama voted to expand the Panama Canal to allow for more transits and bigger ships. The Panama Canal Authority has started to execute the project and is following a comprehensive plan that will take eight years to complete at a cost of $5.25 billion dollars. While this is a subject of tremendous importance to the Republic of Panama and its people, the international maritime industry will benefit directly from the expansion through lower shipping costs, and global consumers will eventually benefit from the greater capacity and efficiency of the Panama Canal. The articles in this section document the details of the construction of the Panama Canal expansion project as it is executed. Articles are added to with the most recent information on top, and older articles get pushed toward down as new material is added. If you require additional information about this or any other category of information regarding the Republic of Panama please take advantage of our powerful in-house search engine. And if you still can't find what you're looking for we even take requests! Welcome aboard, and please remember to tell your friends about, the #1 English Language Website about the Republic of Panama. Salud.
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US East to Pinch 10% of Panama Traffic

Canal ExpansionA new study by C.H. Robinson Worldwide Inc has said that the US East Coast could take as much as 10% of Asian originating cargo from the US West Coast after the opening of the expanded Panama Canal, according to the Wall Street Journal.

The Panama Canal expansion is due to be completed in early 2016 after overcoming various setbacks.

Once opened, carriers coming to the US from China have the option to bypass the US West Coast, which has suffered from ongoing congestion, and head straight to the East, which could see ports in the region benefiting dramatically.

A number of transhipment hubs in the Central American and Caribbean regions are also set to see big growth due to the larger ships traversing the canal.

The cost of expanding the canal is now well over US$5 billion and promises to redefine the global logistics landscape.

However, the century-old Panama Canal faces competition from old rival the Suez Canal, which is also undergoing a ‘two-lane’ expansion that will see ships able to pass each other along the canal as opposed to having to wait for their turn to pass in single file thus doubling speeds, which is due to open before the Panama expansion.

Furthermore, Panama also faces new competition from the incredibly ambitious Nicaragua Canal project.

Funded by the Hong Kong Nicaragua Development Group, the project aims to drill through Nicaragua and have a fully functioning canal by 2020 that can accept even bigger ships than Panama.

However, the viability of the project has been questioned intensely. (Port Technology)

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Panama Canal Authority to appeal US$233m award to contractors

Canal ExpansionThe Panama Canal Authority said on Tuesday it had asked for an international arbitration panel to review a decision to award US$233 million to the consortium expanding the canal in a dispute over cement quality.

The consortium, led by Spain's Sacyr and Italy's Salini Impregilo, and including Belgium's Jan de Nul and Panama's CUSA, said in January it had won US$233 million of the US$463 million it claimed in the dispute.

Any international arbitration would take place in Miami, the canal authority said.

The consortium has filed a series of claims totaling some US$2.3 billion over the dispute that halted work early last year on the expansion to allow bigger vessels to pass through the canal. (Reuters)

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The Invisible Hand and the New Panama Locks

Canal ExpansionBy Sal Haidar - The Panama Canal has served as the global transshipment shortcut for over one 100 years. By connecting the Pacific Ocean with the Atlantic, it allows ships to pass through without traversing around the southern tip of South America. By saving significant time and energy, this is why it is the preferred route for roughly 14,000 ships annually, and the prime accomodator for 10% of all U.S. shipping, because companies are able to obtain cost savings which eventually get passed on to the consumer. After some minor delays due to labor union strikes and cost overruns, the monolithic Third Set of Locks Project will push America’s international trade strategy in the right direction.

The expansion is 85% complete, with the final cost totaling over $7 billion, and a projected date of completion between this coming December, or the early months of 2016 if there are no other setbacks. A new third lane will double the canal's capacity to assist the passage of Post-Panamax ships, which are 1,200 feet in length and carry three times the cargo of 965-feet-long Panamax ships. Further research has shown many benefits the project will bring to U.S. trade, especially with Asia.

According to the reports by the Panama Canal Authority, the route from Sabine Pass in Louisiana to Japan would be cut by 11.4 days. Furthermore, with the “oil glut” resulting in a gloomy layoff frenzy affecting natural gas workers, the Panama Canal may offer new opportunities for the industry due to the newly expanded canal being able to facilitate close to 90% of LNG tankers, compared to less than 10 percent currently. Also included in the prize are substantial increases in coal and propane exports. But benefits aren’t limited only to North American. According to energy analyst Alexis Arthur of the Institute of Americas, the canal has the potential to alter LNG trade routes globally. For Peru’s Camisea Gas Project, the shipment of its natural gas to Spain via the canal would save eight days transit. Additionally, the route from Trinidad and Tobago to Chile would be cut by 6.3 days.

As reported in a study by The Maritime Administration, the expansion will result in a substantial increase in the exports of grain, including soybean, wheat, and corn products, as this new generation of energy-efficient ships will have 25% more capacity than the earlier models, which according to Rabobank analysts, will reduce the cost of shipping grain from the American Midwest corn belt to Asia by roughly 12%. Again, beneficiaries also include Brazil and Argentina with increased cost effectiveness of their grain exports to Eastern Europe.

Of course, not mentioning the trickle-down effects on the Republic of Panama itself would be shortsighted. After all, 6% of world commerce passes through here annually. In 2012, Panama’s GDP grew by 10.5 percent and unemployment is at the lowest levels ever experienced, at 3.5 percent. Jobs are in abundance, as the canals expansion has been accompanied by a huge hiring spree, especially with financial institutions in dire need of professionals to fill vacancies in over 100 banks holding more than $100 billion in assets. Furthermore, the expansion is bringing an influx of commercial developers along the banks of the Caribbean who are seeking proposals of projects that could have substantial impacts on water resources and the tropical landscape. The plans include a $US 6.4 billion open-pit copper mine powered by a 300-megawatt coal-fired power plant, a $US 8.7 billion container terminal east of Colon, and a $US 4 billion residential resort.

As author Jeffrey Tucker writes, “Commerce keeps the world orderly and rational and free. It gives us drive and ratifies our efforts. It sparks imagination and defines its boundaries. It feeds the world, sustains and builds civilization, and unleashes the best in the human spirit.”

The Panama Canal has served as the global transshipment shortcut for over one 100 years. By connecting the Pacific Ocean with the Atlantic, it allows ships to pass through without traversing around the southern tip of South America. By saving significant time and energy, this is why it is the preferred route for roughly 14,000 ships annually, and the prime accomodator for 10% of all U.S. shipping, because companies are able to obtain cost savings which eventually get passed on to the consumer. After some minor delays due to labor union strikes and cost overruns, the monolithic Third Set of Locks Project will push America’s international trade strategy in the right direction. (American Thinker)

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Panama Canal Directors Approve Plans For New Port

Canal ExpansionThe Panama Canal’s board of directors has approved the development and construction of a transshipment port in Panama’s Corozal region at the Canal’s entrance to the Pacific.

Once complete, the port project, which is currently awaiting the final stage of approval from Panama’s National Assembly, will have a 5m teu capacity within a 120 ha area.

The two-phased plan includes the construction of a 2,081 m dock, a container yard, offices and warehouse facilities within a 120 ha area owned by the Panama Canal.

The first phase will comprise 1,350 m of docks, three docking positions for post-Panamax ships, and an approximate handling capacity of 3m teu.

At present, the Pacific side has an estimated capacity of 5m teu but after the expansion, demand on the Pacific side is expected to reach 6m teu and then 8m teu by 2020.

With a 16.3 m deep access canal and a depth of 18 m along the dock, the new terminal facility will provide docking facilities for five post-Panamax ships.

Panama Canal Administrator/CEO, Jorge Luis Quijano, said: “Advancing the terminal in the Corozal region is a priority. It is part of the Panama Canal’s goal to explore and develop areas, products and services that are close to our core business, and that add substantial value to our customers as a one-stop gateway with multiple services.”

He added: “This new facility will result in a significant increase in inter-oceanic cargo traffic, enabling the Canal to add value to the route and customers, consolidate Panama’s position as an international logistics and maritime hub.”

If the National Assembly does approve the bill, which it is expected to review in the coming days, the Panama Canal intends to proceed with the development and tender process by calling for bids to hire a company that will be responsible for all stages of the project.

The contract will, most likely, consist of a 20-year concession, renewable once for 20 years.

Meanwhile, an arbitration court in Miami is now assessing two new claims for cost overruns of almost US$740m submitted by the consortium working on the Panama Canal expansion.

Quijano said that the consortium, Grupo Unidos por el Canal, formed by Spain’s Sacyr, Italy’s Salini Impregilo, Belgium’s Jan de Nul and Panamanian company CUSA, has now presented a total of $2.3bn in claims for overruns.

He added: “We’re not taking these claims at face value. We’ve received claims (previously) that, upon review by a third party, have ended in nothing.”

Delays to the project are largely due to the construction of a third set of locks; a process which was orginially supposed to cost $3.2bn.

Quijano told Reuters that he expects the new locks to be delivered by January 2016 and the expanded canal to begin operations two to three months later.

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Pilots fight Panama Canal Authority over expansion

Canal ExpansionOfficials in charge of expanding the canal say Gaillard Cut can handle two post-panamaxes side-by-side but the pilots disagree

When expansion of the Panama Canal is complete, a battalion of local pilots will guide post-panamax vessels through the waterway’s new locks and widened channels.

But the leader of the union representing those 270 pilots tells TradeWinds that its members are being frozen out of discussions over navigation procedures for the widened canal, even though they will be on the frontline of ensuring larger vessels make it through without casualty.

Panama Canal Pilots’ Association president Rainero Salas says the Panama Canal Authority (ACP) is imposing unsafe navigation procedures without the technical endorsement of the pilots.

And the pilots say the ACP is deviating from an expansion proposal presented in 2006 and disregarding studies on how vessels will transit the canal’s narrowest channels, while replacing the original navigation plan with one that is “irresponsible” and “reckless”.

However, in a statement provided to TradeWinds, the ACP said it recognises its workforce as its most valuable resource.

“Decisions made by the Panama Canal Administration regarding the operation of the expanded Canal are not made arbitrarily. They take into consideration the very valuable opinion of highly experienced workforce,” the agency said.

And it says negotiations should take place at the bargaining table as part of efforts to strike a new deal covering the 2,150 of its employees that are unionised.

Salas says the pilots want the ACP to start from scratch on developing navigational procedures, clawing back mandates and launching a more inclusive dialogue.

And the union leader believes the pilots will win in the end.

It is not clear how the war of words will play out as the delayed expansion project continues toward completion, which is currently scheduled for late 2016. By law, the pilots cannot go on strike but Salas says they have the discretion to refuse work they consider unsafe and to request, for example, additional tug support.

Salas acknowledges the canal could suffer slowdowns in transits if the two sides do not come to an agreement on operations.

“It’s not a threat. It’s just a fact. It can only be in the best interest of the canal that [we] do this carefully,” he said.

As an example of navigational procedures that the pilots question, Salas points to the ACP’s plans for navigation in the Culebra Cut, also known as the Gaillard Cut. It is the narrowest portion of the canal, buttressed in some parts by sheer rock walls.

The union leader says the ACP has issued notices to the pilots that post-panamax vessels of 49 metres in beam will be able to “meet” in the cut with the support of two tugs each, even though prior studies advise that the width accommodates only a single post-panamax ship safely. He alleges that there are no new hydrodynamic studies to support the change.

“This is not right. This is not responsible,” he said.

The ACP, however, says widening the cut to 218 metres will safely accommodate two post-panamax ships side-by-side.

Salas says the decision made years ago to build locks that use tugboats instead of locomotives will already have a negative impact on operations. The ACP counters, however, that using tugs for canal transits is a common practice around the world and the agency has purchased 14 state-of-the-art vessels for the task.

But lock design is in the past and construction is well underway.

The pilots say that they now want to be a part of making the most of what the ACP decided to build.

The pilots complain that the ACP has not set up sufficient training programmes to help them become familiarised with the new locks, despite the challenges of moving post-panamax ships through triple-chamber locks with tug support.

The ACP, however, argues that pilots have access to simulators using post-panamax vessels and that it recently unveiled additional training plans including scale model manoeuvring and the chartering of a post-panamax ship to begin trial lock transits once the first set of locks is complete.

Editor's Comment: The ACP will eventually learn that ignoring the warnings being issued by the Panama Canal Pilots was a mistake. But unfortunately there will likely be an accident first. Then the ACP will blame the pilot, and refuse to accept they adopted a significantly flawed plan from the start.

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Japan's Astomos orders new VLGC equipped to transit expanded Panama Canal

Canal Expansion(Platts) Japan's top LPG supplier, Astomos Energy, said Monday, September 29, it has placed an order to build a VLGC with a capacity of 83,000 cubic meters that will be equipped to pass through the expanded Panama Canal.

The order was placed with Japan's Mitsubishi Heavy Industries, and the tanker is to be delivered in the second half of 2016, Astomos Energy said, adding that the new VLGC will replace an older tanker in its fleet.

The Panama Canal Authority is targeting January 2016 for the expansion startup, but the market expects it sometime later that year.

The latest move is part of Astomos Energy's plans to scrap tankers that are 20-25 years old and build new VLGCs to replace them, while it also maintains or expands its use of chartered vessels to have a competitive and stable fleet amid expected increases in LPG output from the US and West Africa.

This is Astomos' third order this year for a vessel that can transit the expanded Panama Canal.

Astomos' previous orders were placed in March and July for VLGCs to be delivered in Q1 2016 and Q4 2016.

In December, Astomos placed two other orders for building new VLGCs that can transit the expanded Panama Canal. Those vessels are scheduled to be delivered in Q4 2015 and Q1 2016.

The vessel in Astomos Energy's latest new tanker order will be part of a fleet that is time-chartered and operated by Japan's Iino Lines, the company said.

As of September, Astomos Energy has a total of 21 VLGCs in its fleet, of which six are its own vessels and the other 15 are time-chartered tankers.

The company aims to expand its LPG fleet to around 30 VLGCs by 2020, Astomos Energy president Osamu Masuda said in April.

Editor's Comment: Just another example of a trickle-down resulting from Panama's decision to expand the Panama Canal.

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Panama Canal Administrator Says GUPC Companies Fear Bankruptcy

Canal ExpansionThe companies that comprise the Grupo Unidos por el Canal, SA (GUPC) fear the consortium will declare bankruptcy and they will not be able to file a claim before the Panama Canal Authority (ACP), said the Administrator of the Panama Canal Jorge Luis Quijano yesterday. (more)

Editor's Comment: (Subscribers can see my comments, which explain what's going on and why. Haven't subscribed yet? Come on, you can't remain clueless forever, can you? (grin) ... )

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Labor Ministry Responds To (Yet Another) Panama Canal Expansion Strike

Canal ExpansionThe construction workers who are working on project to expand the Panama Canal in the area of the Pacific access channel, who are members of the National Union of Construction Industry Workers (UNTRAICS), went on strike at 6:00 am on Monday morning, demanding wage increases. (more)

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Arbitration on Panama Canal dispute to begin in Miami

Canal ExpansionBy Mimi Whitefield - Arbitration of the first claim in a $1.6 billion dispute over cost overruns in the expansion of the Panama Canal gets under way Monday.

It will start with a teleconference to determine procedures, both sides’ positions and a timeline. Then the impasse will be arbitrated by an international tribunal seated in Miami, said Carolyn Lamm, an attorney who is representing the Spanish-led consortium that temporarily halted work on the canal earlier this year.

Ports throughout the Americas, including those in South Florida, are avidly following Panama’s efforts to expand its canal to handle post-Panamax ships that are too long, too wide and too heavy for the current canal. And they’ve made big plans of their own based on the canal expansion.

The money dispute pits the Panama Canal Authority, which oversees operations of the 50-mile-long canal, against Grupos Unidos por el Canal, a consortium of international construction companies that is the main contractor on the $5.25 billion expansion.

The tribunal will work through the dispute claim by claim, said Lamm, a partner in the Washington, D.C., office of White & Case. “Both sides are interested in completing work on the canal as quickly as possible and moving forward on this dispute,” she said. “Both parties do want a quick process.”

GUPC — which includes Sacyr Vallehermoso (Spain), Salini Impregilo (Italy), Jan del Nul Group (Belgium) and Constructora Urbana (Panama) — walked off the job for two weeks in February after several weeks of negotiations failed.

On Dec. 30, Sacyr, the leader of the consortium, gave the canal authority 21 days to cover its additional costs or face a work suspension. The canal authority has always contended that the contract gives the contractor no grounds to suspend work.

Work on the expansion resumed Feb. 20 after the canal authority agreed to pay $37 million to cover December invoices. GUPC also agreed to deliver all rolling gates for the massive new locks by February 2015, and both sides signed off on a financing structure that allows construction to go forward during the period of the dispute.

“In parallel to this, the dispute resolution is going on,” Lamm said.

In their contract, both sides agreed to arbitration to resolve their differences using International Chamber of Commerce rules and Miami as the arbitration venue. Private arbitration in a neutral location is growing in popularity as a way to resolve cross-border disputes among multinationals.

The high-profile arbitration comes at a time when Miami is coming into its own as an international arbitration center. Arbitration activity in Miami increased by 161 percent between 2010 and 2013 when there were 128 proceedings, according to the International Centre for Dispute Resolution.

Ultimately, the canal dispute will be settled by a tribunal composed of Bernard Hanotiau of Hanotiau & Van den Berg in Brussels, Bernardo Cremades from Madrid (appointed by GUPC) and Robert Gaitskell of London (appointed by the canal authority). Hanotiau is serving as president of the tribunal.

“There is no appeal,” Lamm said. But in the case of “something fairly egregious,” Lamm said, there is a legal mechanism in which an award can be set aside.

Arbitration tribunals often meet in a hotel, but it will be up to the Panama Canal tribunal to designate a place for its closed-door sessions.

GUPC won a $3.1 billion contract in 2009 to build a third set of bigger locks for the canal. Its bid was $1 billion lower than its closest competitor and there have been criticism that it was a low-ball bid. GUPC says it needs more money to finish the project because, among other things, it ran into unanticipated geological conditions at the work site.

The canal’s current locks will be used in conjunction with the new locks when the project is finished. Originally, the canal authority had hoped the expansion would be completed this year — in time for the 100th anniversary of the canal in August.

But the completion date has been pushed back several times and it may be early 2016 before big ships begin transiting the canal. The canal authority says the expansion project is now more than 76 percent completed.

PortMiami plans to have a dredging project finished by the summer of 2015, making it the only East Coast port south of Norfolk, Virginia, expected to be big-ship ready by the time the canal expansion is completed. (Miami Herald)

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Reduction in Panama Canal Revenues Expected

Canal ExpansionThe Ministry of Economy and Finance (MEF) anticipates contributions from the Panama Canal between 2015 and 2019 will be approximately $2.775 billion less than previously forecast, due to the global economic crisis and the delay in the construction of the new locks. (more)

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Arbitration over $1.6 billion Panama Canal cost dispute to begin in July

Canal ExpansionBY ZACHARY FAGENSON (Reuters) - Arbitration to decide who will bear the Panama Canal expansion project's $1.6 billion cost overrun, a dispute that temporarily halted work earlier this year, will begin in closed-door sessions in Miami later this month, according to lawyers arguing the matter.

On July 21 "both sides will submit their terms and draft procedural orders for how things will work," said Carolyn Lamm, an attorney with White & Case representing the Spanish-led construction consortium.

Labor and cost disputes have plagued the effort to expand the 100-year-old canal, fanning fears of delays that could cost Panama millions of dollars in lost shipping tolls and posing a setback for companies worldwide that want to move larger ships through the waterway that links U.S. South and East Coast ports to Asian markets.

Panama's largest construction union resumed work on May 8 following a two-week strike demanding higher wages. Work had also ground to a halt in early February due to the dispute over who would bear cost overruns that boosted the project's $5.25 billion budget to near $7 billion.

In a deal signed in March, the Panama Canal Authority and the consortium led by Spain's Sacyr and Italy's Salini Impregilo agreed to inject $100 million to resume work. Both also agreed to extend repayment of $784 million of advanced payments made by the Panama Canal Authority to the consortium until 2018 at the latest.

Panama Canal Administrator Jorge Quijano in June said between "75 and 76 percent" of the engineering project is completed and a third set of locks to allow bigger ships to pass through the 50-mile (80-km) waterway should open in January 2016.

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Panama Canal chief says new locks operational by January, 2016

Canal ExpansionReuters – The Panama Canal’s new set of locks will be operational by the January, 2016 deadline, the canal’s chief said on Tuesday, after fears that a recent labor strike could have further delayed the project.

“In January, 2016, the widened canal will be working,” Panama Canal Administrator Jorge Quijano told reporters. “We have already completed between 75 and 76 percent” of the engineering project.

PANAMA CANAL EXPANSION (EPA) – Workers observe the arrival of four new gates for the locks of the Panama Canal expansion from Italy where they were built, in Colon, Panama, June 10, 2014. With the arrival of the second set of four gates, from the total of 16 of the new locks for expanding the Panama Canal, it is estimated that works to increase the capacity of the waterway have been completed in more than 75%, said the administrator of the waterway, Jorge Luis Quijano.

Quijano said there could still be some work outstanding, but the new locks will be ready for use.

The strike, which ended on May 8, brought work to widen the 100-year-old canal to a halt for more than two weeks.

Panama’s largest construction union walked out on April 23 demanding higher wages from employers, halting work on hundreds of projects across the country.

The expansion was originally scheduled to be completed this year, but has been delayed several times, in part due to a dispute earlier this year because of about $1.6 billion in cost overruns.

The Panama Canal Authority and the consortium contracted for the project, led by Spain’s Sacyr and Italy’s Salini Impregilo, signed a deal in March to resolve the dispute and finish the project.

The expansion involves building a third set of locks to allow bigger ships to pass through the 50-mile (80-km) waterway.

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Port of Los Angeles approves nearly $1B budget

Canal ExpansionLOS ANGELES (AP) -- The leaders of the nation's busiest seaport approved a nearly $1 billion budget Thursday that focuses on fending off competitors by expanding and modernizing the sprawling trade complex.

The Port of Los Angeles will spend almost a third of its $939 million budget next year on upgrades to shipping terminals and transportation infrastructure. Those improvements include $107 million for road and railway upgrades to improve traffic and cargo flow, and an additional $136 million for renovations to several of the port's 23 terminals.

The capital spending is key as the port, a major economic engine in Southern California, faces competition from near and far.

The neighboring Port of Long Beach is in the middle of completing about $4.5 billion in structural upgrades. In addition, the expansion of the Panama Canal — slated to be completed in 2016 — will allow larger ships to reach East Coast ports and bypass Southern California altogether. Last year the port finished deepening its main channel to 53 feet, a $370 million upgrade that allows ever-larger vessels to reach the docks.

Last year, about $285 billion worth of cargo — ranging from furniture to scrap metal — passed across its docks, mainly in trade with Asia.

"In the face of fierce and increasing competition from around the world, we must do whatever we can to maintain our position as the nation's premier trade gateway," said Ambassador Vilma Martinez, the president of Los Angeles Harbor Commission.

To partially pay for this year's budget, the port expects to take out $200 million in bonds.

Along with the budget, the port's commissioners also approved the appointment of former shipping executive Gene Seroka as the new director. Seroka's appointment, announced last month by Los Angeles Mayor Eric Garcetti, must be confirmed by the City Council.

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ACP to charter post-Panamax ship for training in Panama Canal's new locks

Canal ExpansionThe Panama Canal Authority (ACP) will charter a Post-Panamax vessel before the opening of the expanded Canal to be used for training purposes in the Third Set of Locks, the ACP press release said.

The Executive Vice President of Operations Esteban Saenz reported that the Panama Canal will charter a Post-Panamax ship to train pilots and tugboat captains that will assist in transits through the new lane.

Saenz said the vessel will be used several months before the opening of the expanded Canal to test the new locks.

"This is one of the best ways to train our pilots and tug captains in the joint effort required to transit through the two new lock complexes of the expanded Canal," said Saenz. He added that since 2011 the Panama Canal has promoted workforce training for the operation of the expanded waterway.

Panama Canal Updates Simulator for Expanded Canal

Since 2012, a total of 186 of the approximately 280 Canal pilots have been trained at the Panama Canal's Center for Simulation, Research and Maritime Development (SIDMAR) using Post-Panamax model ships.

"SIDMAR's mathematical modelling and simulations have been updated and parts of the expanded Panama Canal such as the locks, navigational channels and Culebra Cut have been added to train our pilots and captains in such maneuvers," added Saenz.

Panama Canal Pilots Train with Post-Panamax Vessels

The Executive Vice President of Operations said that 77% of the Panama Canal pilots have participated in maneuvers with Post-Panamax ships and more than 2,000 operations have been registered with these types of vessels at the ports located on both entrances of the waterway.

In addition, Canal pilots have participated in theoretical and practical training programs in Berendrecht Locks in the Port of Antwerp, Belgium, which are of similar size and operation.

Editor's Comment: I've been contacted by Panama Canal pilots, who have expressed their serious concerns with the design of the new locks. They are experts with decades of experience, and several of them have told me they expect there will be "serious problems" with the planned scheme of using tugboats to move and maneuver these massive ships in the tight confines of the locks. The tugboats won't have the room or space to maneuver, to be able to use their powerful engines to move the ships, especially when the wind is blowing hard. The massive post-Panamax vessels that will be using the new locks present very large side profiles that will act basically as a huge sail. The predicted bottom line is - the ships will be hitting the sides of the locks. Both the locks and the ships will be damaged. And once the ACP figures out that the new scheme won't work when the wind is blowing from X direction over X miles per hour - then they will be forced to shut down operations and delay transits until weather conditions improve. Let's see what happens once they actually start to use it...

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Gates For Expanded Panama Canal Locks Leave Italy

Canal ExpansionThe administrator of the Panama Canal Authority, Jorge Quijano announced a new set of locks, part of the project to expand the Panama Canal, have been sent from Italy to Panama, so therefore he urged the striking construction workers to return to work.

The first four lock gates arrived in Panama on 16 August 2013. The transfer of the remaining lock gates was delayed due to a conflict with the Grupo Unidos por el Canal (GUPC) over alleged cost overruns, because the carrier was not paid.

These first gates that are already in Panama measure 57.60 meters long, 10 meters wide, 30.19 meters high, with an average unit weight of 3,00 tons.

The gates were transferred aboard the vessel M/N Sunrise, in a trip that took about a month, from the Trieste in the Pordenone province, northeast of Italy to Panamanian waters on the Atlantic coast.

The manufacture, transportation, and installation of gates is being done by Cimolai SpA, a subcontractor of the Consortium Grupo Unidos por el Canal, SA.

The gates are designed to roll, placed in a niche on the side of the lock and moved to the other side on little cars, on both ends of the gate.

The movement is perpendicular to the central axis of the lock, unlike the hinged doors of the existing locks, consisting of two sheets, each fixed to a wall of the lock, and swiveling to effect closure.

Although the heaviest gates weigh about 3,700 tons, their design, which incorporates buoyancy chambers in the structure, allow them to move on the rails with an average of 15% of their actual weight. (TVN)

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The Road To The Gatun Locks Collapsed - Sinkhole

Canal ExpansionThe roadway of one of the roads used to access the Gatun Locks on the Panama Canal sank yesterday afternoon, near the area where work is being done to expand the Panama Canal, apparently due to damage caused by two large pipes that pass through the area.

"The water began to undermine the land until the land subsidence occurred, affecting vehicular traffic access to the sector of Gatun," firemen and the National Civil Protection System (SINAPROC) who responded to the scene.

A team of security and maintenance personnel from the Panama Canal Authority are working right now to open a provisional roadway, and to restore normal traffic flow. The depth of the sinkhole was not revealed.

There were no vehicles transiting the site at the moment of the collapse, therefore no casualties or injuries were reported.

ACP Press Release

In a statement, the ACP urges drivers to take necessary precautions, after a section of the Thelma King roadway in Colon suffered a collapse as the result of a sinkhole.

"Personnel responsible for the administration of the construction of the third set of locks in the Atlantic sector reported that traffic on the Thelma King roadway, near the entrance at the northern part of the project, passing the railroad tracks, has been interrupted. However, a detour has been enabled that allows drivers to reach their destination," the statement added.

The press release says personnel of GUPC and the Panama Canal Protection established an alternate route for vehicles through a detour, passing through the project site where the locks are being built. All drivers in the area are asked to obey traffic signs and take the necessary precautions. (Prensa)

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SUNTRACS Strike - A New Threat To The Expansion Of The Panama Canal?

Canal ExpansionWork on the project to expand the Panama Canal could be interrupted again, if the SUNTRACS construction workers go on strike.

Hector Hurtado, who is the coordinator between the Union of Construction and Related Workers and those who work for the Grupo Unidos por el Canal de Panama - GUPC - today expressed the support for whatever SUNTRACS decides to do.

"We are on alert because of the negotiations and whatever SUNTRACS decides to do, we will be there," Hurtado said.

For now, SUNTRACS has decided to hold a "warning strike" on April 1 to protest the lack of an agreement with the Panamanian Chamber of Construction, over their demands for a new collective agreement.

The conciliation period ends on 4 April, after which the Suntracs will have 20 days to decide whether to call for a national strike if they fail to reach an agreement with the CAPAC, Mendez said on the morning news today.

The GUPC stopped work on the project, demanding payment of $1.6 billion dollars in cost overruns, and now as a result the completion date for the project has been pushed back to December 2015. (TVN)

Editor's Comment: There are now about 250,000 people working in construction in Panama. The once all powerful SUNTRACS labor union only has about 12,000 members, so they no longer represent even a significant portion of all construction workers. It's wishful thinking to say that all of those who are currently working for GUPC would walk off of the job to support whatever SUNTRACS is doing - because most of them will not. It's also important to point you that the vast majority of construction workers can't stand the SUNTRACS, and they work very hard to stay away from them. This news piece is nothing more than Saul Mendez making noise, and trying to create some additional leverage to use during the negotiations with the CAPAC.

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Will the Panama Canal Expansion Be Complete Before 2016?

Canal ExpansionA Panama Canal expansion, scheduled for completion by December, 2015, may not meet its deadline, says a new American Farm Bureau Focus on Agriculture feature.

Writer Stewart Truelsen for AFBF says almost all work on the canal was suspended at the beginning of the year, with the exception of some excavation. Cranes, costing $40 million each, he reports, were not moving.

Only four of the new gates are in Panama, while a total of 16 are needed. They come from Italy and won't all arrive until the end of the year, he says.

"To make matters worse, this is the dry season in Panama. In a month or so the rainy season will take hold and make work more difficult. What happened? Simply put, contractors ran out of money," he writes.

International hold-ups?

Critics contend that the $5.25 billion project to build a third set of locks was seriously underbid, Truelsen reports.

The contractors – a consortium from Spain, Italy, Belgium and Panama – were likely held up by the debt crisis in Europe, Truelsen says. An agreement to resume work, however, was reached in late February.

U.S. agriculture has a big stake in the eventual outcome, too, as tonnage through the expanded canal is expected to double by 2025. According to the USDA, 17% of world grain shipments pass through the Panama Canal and 90% of them are from the U.S.

An analysis by Rabobank forecasts a 12% drop in the cost of transporting grain from the Corn Belt to Asia when the new locks are in use.

This will make U.S. grain more competitive with Brazil, Argentina and grain-exporting countries in Eastern Europe, Truelsen explains.

The canal expansion could cause other changes in shipping agricultural products. For example, in recent years, more grain, oilseeds and grain products have been loaded on container ships, and the trend is expected to continue. At the same time, the expansion could boost Gulf and East Coast ports that have been losing business to the Pacific Northwest, Truelsen says.

"The Panama Canal route is so important to world trade that China claims to have reached a $40 billion deal with Nicaragua to build a longer canal through that nation to accommodate even larger ships," Truelsen notes.

"In any event, American agriculture should be an important beneficiary of the Panama Canal expansion, if American highways, waterways and ports are properly maintained and upgraded to take advantage of it," he says, "and that's a big 'if.'" (Farm Futures)

Editor's Comment: There are a lot of people in the United States and around the world who are looking hard at the project to expand the Panama Canal. The GUPC has acted with incredible irresponsibility - primarily in the way they underbid to snatch up the contract, then by trying to hold the Panama Canal Authority hostage, and to use methods of extortion and blackmail in an attempt to extract $1.6 billion from the Panamanian people. No matter what, the Panama Canal expansion project will be completed - eventually. However every month of delay will cost Panama money, and will negatively impact those customers who are looking forward to using the newly expanded waterway.

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Panama Canal expansion critical to the U.S. [Commentary]

Canal ExpansionBy Gene E. Bigler (Baltimore Sun) Work on the expansion of the Panama Canal, led by a European consortium, resumed recently after a disturbing interruption of the project because of a cost dispute. Completion of the work may now have been set back to December 2015 or later. The visit to the canal last November by Vice President Biden, Baltimore Mayor Stephanie Rawlings-Blake and several others from major port cities demonstrated how much we have at stake in Panama. Yet since we turned the canal over to the Panamanians at the end of 1999, most of the rest of us have failed to realize that U.S. global competitiveness may depend even more now on how well the big ditch continues to work for us.

The government of Panama entrusted the job of running the canal to the Autoridad del Canal de Panamá (The Panama Canal Authority), and the ACP professionals have done a tremendous job of operating and modernizing the canal for over 13 years, and U.S. concerns for what was once Ronald Reagan's hot button political issue have all but disappeared. Now with about two thirds of our seaborne trade depending on the $5.25 billion enlargement, the U.S. stakes in Panama have again been dramatically revived.

U.S. interests in the Panama Canal had already been raised a lot. Most of us just did not know about it. When the Panamanians took control in the 1990s, they launched a comprehensive modernization program that widened channels, provided lighting for 24-hour operations, improved navigation aids to increase safety and upgraded equipment to speed transits. Then they introduced a new system of reservations and bidding to determine the place of ships in transit instead of the old first come, first served U.S. practice. Increasingly since 2000, ships have been able to cross the isthmus more rapidly and safely, and the Panamanians have also increased environmental protection and restored some of the watershed the U.S. had allowed to deteriorate.

Yet the success of the ACP in running the canal only tells part of the story of the new advantages for the U.S. When the security of the canal was threatened by terrorism after the 9/11 attacks, the ACP and the government of Panama quickly turned to the U.S. to develop a new security system in which other stakeholders now also share the burden. Panama then took the lead in convincing the International Maritime Organization to adopt the U.S. proposal that has become the new standard for global maritime security, the International Shipping and Port Security Code.

The government of Panama also took advantage of the U.S. return of territory by opening up the former Canal Zone for development of a new hemispheric shipping and logistics hub for which we in the U.S. are also the major beneficiaries after the people of Panama. The four sleepy little ports that moved a couple of hundred thousand containers a year under U.S. control have been transformed into mega terminals that will move over 8 million containers, mostly to U.S. consumers or customers, this year.

The expansion project launched in 2009 to double the capacity of the canal will make the inter-oceanic connections there all the more valuable. Ports all over the U.S. have launched expansion, dredging and other improvements worth at least $12 billion to accommodate the larger ships that will be docking thanks to the canal's new third set of locks, now about 70 percent complete. The reputation of American business is also at stake because the job of managing the expansion project was awarded to the CH2M Hill Inc. of Colorado.

Most importantly, the success of President Obama's drive to deepen our economic revival depends greatly on the effort to boost U.S. export competitiveness, and nowhere is this more important than for the big new ships needed for growing liquefied natural gas exports. Clearly, the U.S. needs to do whatever possible to keep the work on track. The world needs to know that we still trust the ACP to get the expansion completed with the same competence and reliability with which it has run the canal.

Gene E. Bigler is a retired foreign service officer and former professor who has followed U.S.-Panama relations closely since 1968.

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Panama Canal signs deal to end expansion dispute, awaits consortium

Canal ExpansionBy Lomi Kriel PANAMA CITY (Reuters) - The Panama Canal Authority has signed a deal to end a major dispute over the multibillion-dollar expansion of the waterway, an official said on Thursday, raising hopes that the consortium behind the project will follow suit before the week is out.

The building consortium and insurer backing the plan to expand one of the world's major trade arteries could sign the accord as early as Friday, an official close to the negotiations told Reuters, speaking on condition of anonymity.

The canal and the consortium led by Spanish builder Sacyr and Italy's Salini Impregilo , reached an initial deal in late February to complete work on a project stymied over $1.6 billion in cost overruns.

The deal foresees the consortium finishing work by December 2015, and the sides had been due to sign off on it last week.

Officials from the consortium, which is building a third set of locks for the waterway, said this week that a final agreement would be inked soon, but the canal is still waiting.

In a statement, the Panama Canal Authority repeated that the deal foresaw the consortium and the canal each injecting $100 million for immediate cash flow needs to fully resume work.

The accord would also extend repayment of advanced payments made by the Panama Canal Authority to the consortium that are worth $784 million until 2018 at the latest.

The Panama Canal Authority also agreed that the consortium could use a $400 million surety bond through insurer Zurich North America as backing to seek financing.

The expanded waterway connecting the Atlantic and Pacific oceans was originally due to open this year, but disputes over the funding and delays have pushed that deadline back.

Limited work on the project resumed last month after a two-week stoppage. The dispute has fanned fears of delays that could cost Panama millions of dollars in lost shipping tolls.

The delays are also a setback for companies eager to move larger ships through the canal, including liquefied natural gas producers that want to ship from the U.S. Gulf Coast to Asia.

The overall project, of which the consortium is building the lion's share, was first expected to cost about $5.25 billion, but the overruns could increase that to nearly $7 billion.

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ACP and GUPC Still Have Not Signed Formal Agreement

Canal ExpansionAlthough the administrator of the Panama Canal Jorge Quijano announced that the pact between the Panama Canal Authority (ACP ) and the consortium Grupo Unidos por el Canal ( GUPC ) would sign an agreement on March 6th, the two sides still have not reached a final agreement that would ensure the completion of the project by 2015.

Despite the announcement, the pace of work remains low at 25% of capacity, just as it was in January 2014 when the GUPC consortium threatened to suspend work on the project completely, and they reduced the pace of construction.

Now 14 days after the closure of talks between the GUPC and the ACP was announced, and after having achieved a conceptual agreement subject to documentation, review, and final signature by the parties, it is still in the legal review process.

The conceptual agreement falls within the terms of the existing contract between the ACP and GUPC, and it discards any type of claims for payments (for cost overruns).

However, a source said the deal is close, but until documentation is signed, because of the sensitivity of the issue, it cannot be said there is a final agreement.

The source explained that when they went to put everything that was discussed into black and white (writing), discrepancies begin to emerge, however, the source stressed they are very close to getting the document signed this week, and that these discrepancies are almost closed.

The conceptual agreement establishes that the construction of the third set of locks should be completed by December 2015.

In addition, the twelve lock gates that are currently located in Italy must be transported to Panama no later than December 2014, and transported in staggered shipments.

The performance bond for $400 million may only be released to Zurich, in order to obtain additional financing to allow for the project to be completed.

It also includes that GUPC will inject $100 million into the project, and later the ACP will inject the same amount, which will allow a return to the normal pace of work during the month of March 2014.

It also indicates the moratorium on the repayment of advances granted to GUPC will be extended until 2018.

However, the extension of the moratorium is subject to GUPC having to meet certain milestones and other conditions, such as the delivery of the lock gates from Italy this year.

The agreement also establishes that the GUPC must formally and officially withdraw its warning letter of suspension, that they must deliver an updated schedule showing how they plan to work, in order to complete the project under the new plan.

The idea of ​​the ACP authorities was to be able to advance work on the project during the months of the dry season, however this could not be achieved due to the problems that arose starting on 30 December 2013, when the GUPC sent a note to the ACP, that said if the ACP did not recognized their claims of $1.6 billion for cost overruns, they would suspend work on the third set of locks.

Work on the project was suspended for 16 days, and work on the project resumed on 20 February, after the ACP pressured the consortium, sending them a letter worded in strong terms, to notify them that if they did not obey and return to work, then the ACP would end the contract with the GUPC. (Panama America)

Editor's Comment: So, they are still trying to get the lawyers to agree on the wording of the new formal agreement. The GUPC simply does not have the money to keep working. They can't pay their workers or pay for the materials and services needed, which is why they are dribbling forward at only a 25% pace. The $400 million dollar performance bond will be used to help the GUPC secure new and additional funding so they can keep going on the project. And that might be the sticking point right there. Who in their right mind would give them funding, knowing they are going to be losing about $1.6 billion dollars on this project. Oh, I forgot about the governments of Spain and Italy - who will likely be helping their companies in order to save face. So isn't that nice, the taxpayers in Spain and Italy will be helping to fund the construction of the expanded Panama Canal, because their companies managed to get the contract through a low-ball bid process. Funny how things turn out...

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ACP appreciates the support received during work stoppages

Canal ExpansionThe Panama Canal Authority (ACP ) acknowledged the support received from multiple sectors, from both organizations and Panamanians in general, during the last two months while an agreement was sought to standardize the construction of the third set of locks.

"The support and confidence in all of us who are part of the ACP was a tremendous motivator, and those voices served to reaffirm our intention of reaching an agreement that would protect the interests of Panama and the Canal," said ACP manager Jorge Luis Quijano.

Multiple civic groups, labor unions, and teachers unions expressed their support for the managers of the ACP through public statements in the middle of the negotiations to reach an agreement with the contractor for the construction of the Third Set of Locks.

"Now that we have gotten past this stage, all of us at the ACP reiterate our commitment to continue managing, operating and expanding the Panama Canal to efficiently service the world, and to benefit Panama," Quijano said. (Telemetro)

Editor's Comment: Practically everyone in Panama stood shoulder-to-shoulder with Quijano and the ACP during this crisis. It was clear that the GUPC was trying to take advantage of the situation, and the normally contentious Panamanians came together as Panamanians, to support the ACP against the actions of the GUPC to basically extort money through blackmail. The GUPC - comprised mostly of foreign companies - had no chance of winning the public argument in Panama.

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Panama Canal says deal with consortium to be signed next week

Canal ExpansionBY LOMI KRIEL (Reuters) - The Panama Canal Authority said on Friday it expects to sign a financing deal next week to finish work on expanding the waterway and end a dispute over cost overruns that has held up the multibillion-dollar project.

Following bitter wrangling with the Spanish-led building consortium since the start of the year, the authority announced a preliminary deal Thursday night. Canal Administrator Jorge Quijano said he expected the agreement to be signed on Thursday.

The deal with the construction group led by Spanish builder Sacyr and Italy's Salini Impregilo foresees work finishing by December 2015 and would require the canal and the consortium to immediately each inject $100 million.

Both sides have agreed to continue disputing the $1.6 billion in extra costs through international arbitration. In the meantime, the deal gives the consortium immediate cash to resume work.

The expanded waterway connecting the Atlantic and Pacific oceans was originally due to open this year, but disputes over the funding and delays have pushed that deadline back.

Mistrust over the process still lingers, and canal chief Quijano was far from jubilant as he discussed the accord with reporters in a conference call from Panama City.

"I'm always very cautious because the relationship has not been very good with this contractor, I must admit," he said.

"We will very closely supervise whatever is happening in the field. All of the monies ... will go directly into the project. It cannot be siphoned out to the shareholders," he added.

Quijano said he expected the $100 million cash injections to be in place by next Friday, and stressed the consortium would not be "getting any more money from me."

The overall canal expansion, of which the Grupo Unidos Por el Canal (GUPC) consortium is building the lion's share, was first expected to cost around $5.25 billion. But the overruns could increase that bill to nearly $7 billion.

The agreement with the GUPC envisages extending repayment of advanced payments made by the canal authority to the consortium worth $784 million until 2018 at the latest.

Antonio Tajani, the European commissioner for industry and entrepreneurship, said the deal was "crucial."

"This is one of the most important infrastructure (projects) in the world," he said in an interview.


As part of the deal, the Canal Authority agreed that the consortium could use a $400 million surety bond through insurer Zurich North America as backing to seek financing.

However, the Zurich part will take up to six weeks to arrange, for which reason the $100 million cash injections were necessary to jump-start work at full capacity, Quijano said.

Limited work on the project resumed on February 21 after a two-week stoppage. The dispute has fanned fears of delays that could cost Panama millions of dollars in lost shipping tolls.

Holdups in the prestigious project posed a setback for companies worldwide that want to move larger ships through the waterway that links the U.S. Gulf Coast to Asian markets.

Following the deal, Quijano said the newly expanded waterway would begin operating commercially by January 2016.

But he cautioned that if GUPC does not comply with the agreement, the canal will find other ways to complete the work.

"We remain prepared for another option," Quijano said.

The agreement contains safeguards related to the payback of the advances so that if the companies fail to comply they have to return the money straight away, he added.

Sacyr, which receives a quarter of its international revenue from the canal project, reported on Friday a net loss of 496 million euros ($679 million) for 2013.

Editor's Comment: Sounds to me like this deal will simply further delay the inevitable. I expect the GUPC will lose their bid to suck another $1.6 billion out of the project for what they are calling "cost overruns" - but in fact they simply under bid the contract (in order to get it) and now that they have it, they are using their entrenched position to try to force the ACP to pay them more. So - this is a delaying tactic. The ACP is perfectly ready to toss the GUPC out on their asses. The GUPC overplayed their hand. They also over estimated their negotiating power and position. They have lost on every front, so with this deal they are limping back to work, confident in the knowledge they are now "Quijano's bitches" who are working for free in Panama. The shareholders in the GUPC companies should rightfully be going nuts. I still think there's no way in hell the GUPC ends up finishing this project. I think they will walk off for good, once the $1.6 billion dollar question is eventually answered by arbitration, with a resounding no.

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Panama Canal expansion in doubt yet again as saga grinds on

Canal ExpansionBY LOMI KRIEL AND SONYA DOWSETT (Reuters) - A deal to resume work on the multibillion-dollar Panama Canal appeared in doubt on Thursday, just hours after an apparent breakthrough, in the latest twist in a protracted dispute over massive cost overruns.

The Panama Canal Authority said late on Wednesday that the Spanish-led consortium expanding the major world waterway had agreed to restart work first thing on Thursday after a two-week stoppage.

It said they had given themselves three days to iron out remaining issues such as how to continue financing the project.

While workers gathered at the site on Thursday, works were still idle on Thursday afternoon. Local media said Panama's President Ricardo Martinelli pointed at the consortium, whose main partners are Spanish builder Sacyr and Italy's Salini Impregilo.

"It seems there is some internal difference between the different contractors," local media cited Martinelli as saying.

Officials have in the past cited a power struggle between the two main members of the consortium, saying Salini Impregilo wanted to take over the lead role from its Spanish partner.

The delay in the project, which centers on a dispute over $1.6 billion in cost overruns that the consortium wants the Panama Canal to pay for, could cost Panama millions of dollars in lost shipping tolls.

Delays are also a setback for companies worldwide that want to move larger ships through the waterway that links the U.S. Gulf Coast to Asian markets.

Earlier on Thursday, the consortium issued a statement saying the parties were engaged "in intense discussions and made progress Wednesday on key issues that would allow funding, resumption of works and payments of subcontractors and workers".

Sacyr was unavailable for comment on why work had not resumed. However a source with knowledge of the matter said he understood there would be a "ramp-up" period and that engineers needed to evaluate the site.

A key part of negotiations is the role that insurer Zurich plays and whether it will convert a $400 million surety bond, taken out by the consortium in case the project wasn't completed, into backing for a loan to help raise the $1.6 billion funding needed to finish the project, sources with knowledge of the matter said.

Zurich does not want to put money into the project but has asked banks to do so, another source familiar with the matter said. The banks are asking for counter-guarantees, the source said. The parties of the consortium are each liable for their own obligations, not jointly, the source said.

Shares in Sacyr rose 4.3 percent on Thursday after news of the agreement to restart work. The project represents a quarter of the company's international revenue.

Salini Impregilo shares gained around 3.2 percent.

Zurich said it was in talks with both parties and was comfortable with its level of exposure to the project, which it said was limited due to reinsurance mechanisms and was well within its risk tolerance.

"As the discussions are still ongoing, we are not in the position to provide any further details," it said in a statement.


The Spanish government is likely to agree to change the status of a $200 million state-backed guarantee it gave heavily-indebted Sacyr in 2009 when Panama awarded it the contract, turning it into backing for finance to finish the project, sources told Reuters on Wednesday.

The guarantee was originally drawn up by Spanish state-backed insurer Cesce as a counter-guarantee to the Zurich bond. The government insurance bonds must be changed if Zurich changes its insurance into backing for a loan.

Cesce and Spain's Economy Ministry declined to comment. Italian state-backed export credit agency Sace, also a part of the guarantee scheme with Zurich, was not immediately reachable for comment.

There has been disagreement within the Spanish government over whether to interfere with the private project, one source with knowledge of the matter said, but it is likely to tweak the conditions of the guarantee because the Sacyr-led contract is such a high-profile one for Spanish business.

Spanish builders are working on big engineering projects around the world, from a train linking the Islamic holy cities of Mecca and Medina, to a metro in Riyadh, Saudi Arabia. Overseas construction has been one of the few bright spots for companies as the domestic economy splutters.

Under Wednesday's deal, the Canal had agreed to pay the consortium $36.8 million to cover work done in December once works resumed.

The project to expand the nearly 50-mile (80-km) transoceanic cargo route was originally expected to cost about $5.25 billion, but that could increase to nearly $7 billion.

Officials and diplomats expressed concern in 2009 when the contract was awarded to the consortium over its ability to complete the work, since its winning bid for the work was $1 billion lower than that of the nearest competitor

The Wood Mackenzie consultancy said on Thursday it expected the cost overrun dispute to be resolved with limited disruption, but cautioned that longer delays would affect U.S. liquefied natural gas producers and created a tighter LNG shipping market.

"If the delays last 6-12 months, it will have limited impact, as trade will carry on much as it does now," Andrew Buckland, senior LNG shipping analyst at Wood Mackenzie, said in a research note.

"But further delays threaten the investments of a significant number of groups that are set to benefit from expanded capacity on the waterway."

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GUPC Promises To Restart Work On Panama Canal Expansion Tomorrow

Canal ExpansionFinally, the Grupo Unidos por el Canal (GUPC) has agreed to the repeated calls by the Panama Canal Authority, and tonight after more than five hours of meetings, they promised to resume work on the project to expand the Panama Canal on Thursday morning, said the ACP in a press release.

The ACP announced that when work resumes on the project, they will pay the GUPC $36.8 million, for work billed during December 2013.

This money will be used to pay the paychecks for the workers, as well as to cover other obligations to suppliers.

Another 72 hours were given as a deadline, in order to agree on points such as the delivery dates for the lock new gates, an implementation schedule, a schedule for repayment advances, and other key aspects for the development of the project.

These decisions, adds the ACP statement, occurred during telephone conversations between the ACP and the directors of Impregilo, Sacyr Vallehermoso, Jan de Nul and Constructora Urbana, the companies composing the GUPC.

The press release ends by saying there are still some topics upon which the sides have not yet reached an agreement, but it does not say what they are. (TVN)

Editor's Comment: The GUPC finally came to the realization that if they didn't get back to work, then the ACP really would (no shit) throw them off the job, hire someone else to complete the project, then sue them for the excess costs. They went into this gaggle thinking they had a strong negotiating position, and acted like they could use a combination of extortion and blackmail to simply demand 1.6 billion dollars - above and beyond the contract they signed.

The answer from the ACP was simple. No.

Over the ensuing six weeks, the GUPC came to realize exactly how incredibly weak their negotiation position is, in reality. Now they will be forced to meekly return to work, after having been kicked in the balls. They might be able to finish the project, but they will take a loss doing so. The $1.6 billion simply is not going to happen.

Silly Europeans, thinking they could come to the land of the "juega vivo" and get over.

In short, they got their asses handed to them. They signed the low-ball contract for $3.118 billion then tried to force the ACP to pay them 50% more. Nope. Not going to happen that way, fellas.

Forget about making a profit. They will be lucky if they can get out of this without taking massive losses. So who's low-balling who now? The ACP flipped their gambit on its head. Books will be written about these negotiations for use in future business management classes. The GUPC will be used as an example of how not to do shit, while the ACP has proven themselves to be more than capable of dealing with this situation, admirably.

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Deadline looms as Panama Canal, consortium seek end to cost dispute

Canal ExpansionBy Lomi Kriel and Sonya Dowsett (Reuters) - The Panama Canal and a Spanish-led construction consortium expanding the major global waterway discussed options on Tuesday to keep the multibillion-dollar project afloat amid a dispute over costs, but any deal seemed unlikely ahead of a looming deadline.

The disagreement between the two parties over $1.6 billion in cost overruns and how to maintain financing has already halted work on the project for two weeks and has delayed its projected completion until at least December 2015.

Delays could cost Panama millions of dollars in lost shipping tolls and are a setback for companies worldwide that are eager to move larger ships through the canal, including liquefied natural gas (LNG) producers that want to ship from the U.S. Gulf Coast to Asian markets.

"The Panama Canal Authority reports that despite efforts to agree with (consortium) Grupos Unidos por el Canal to resume work on the new locks project, positions between the parties remain apart," the canal authority said in a statement.

"Although last week the parties seem to have come to an agreement on certain components during the talks, there were serious disagreements at the time of putting it in writing," it added, saying the parties agreed to resume talks on Wednesday morning.

Canal administrator Jorge Quijano last Wednesday set a target of no more than a week to reach a deal to jump-start the project, a deadline that will lapse in the coming hours.

Quijano had previously warned that the canal could terminate the contract with the consortium and push ahead with a third party if a deal proves elusive.

A major sticking point in the negotiations on Tuesday was converting a $400 million bond from insurer Zurich North America into backing for a loan so the consortium can secure a short-term cash injection needed to continue its work, sources familiar with the talks said.

The consortium took out the bond as a required insurance policy in case it did not finish the project. The bond is payable if the project is not completed by the consortium for any reason.

The insurer was ready to provide the loan if shareholders of the consortium, which is led by Spain's Sacyr and Italy's Salini Impregilo and includes a Belgian and a Panamanian company, shoulder the risk and are liable for repaying the loan, one source said.

But the consortium's chief executive officers want the insurer to be the primary risk-holder, which Zurich considers unacceptable, one source said.

A key issue centered on the share of the risk the Italian and Spanish governments would take, one source said.

Spain's majority state-owned insurer Cesce, set up to financially aid international expansion of Spanish companies, provided a guarantee for the Sacyr bid in 2009.

Although Cesce has declined to comment on how much was guaranteed, a source with knowledge of the operation said it was for $200 million and helped underwrite the $400 million Zurich bond.

Officials at Zurich were not immediately available for comment. A spokesman for Sacyr declined to comment.

The parties also continued to debate a weekend proposal by the canal authority that would allow work to restart immediately, with it and the consortium each contributing $100 million.

But a source familiar with the negotiations said the consortium had not yet accepted the deal and wanted to wait on an answer from Zurich.

The overall expansion project, of which the consortium is building the lion's share, was originally expected to cost about $5.25 billion, but the overruns could increase that to nearly $7 billion.

Editor's Comment: The ACP simply can't afford to keep negotiating with GUPC. At some point in time, the ACP is going to have to pull the plug. They will probably make a public statement this afternoon that negotiations with the GUPC have officially ended without a deal, and the GUPC has failed to build the third set of locks as required and specified under the contract. And because the GUPC walked off of the job and stopped working, that means the ACP can then exercise the clauses in the contract which were put there exactly to protect the government of Panama from the sort of shenanigans the GUPC is trying to pull. They will then hire someone else to finish the project, or at the very least to manage the process for them, because the many of the same subcontractors and employees will still be doing the same work, but just answering to a different boss.

My prediction holds. I think the GUPC is toast, and they will be finished today. Remember this whole thing started almost two months ago. It's time to end it, one way or the other. And the "billion dollar bitch slap" foretold the way things were going to go.

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Billion Dollar Bitch Slap? Panama Canal Authority Will Announce A Final Decision Today

Canal ExpansionThe Panama Canal Authority (ACP) should make a final decision today on the contractual conflict it has with the consortium Grupo Unidos por el Canal (GUPC), which has stalled work to expand the waterway.

Earlier, the administrator of the ACP, Jorge Luis Quijano, said communications with the GUPC never broke down, and during a long teleconference they managed to reach some agreements, and he said there was a significant amount of progress being made.

Editor's Comment: Let's see what they come up with. Considering that one of the lawyers representing the GUPC slapped president Ricardo Martinelli in the face at a private wedding on Saturday night - things are not looking so good for them right now. There are not many "billion dollar bitch-slaps" in the world, but that might have been one of them...

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ACP Still Trying To Reach An Agreement With GUPC

Canal ExpansionThe administrator of the Panama Canal Authority (ACP), Jorge Luis Quijano said at no time have they suspended communications with Grupo Unidos por el Canal (GUPC), the consortium responsible for the project, when speaking about the contract dispute that has been dragging on for months, and he said they have established a "long conversation" that could resolve the majority of the issues that remain on the negotiating table.

"We have advanced significantly in the negotiations," said Quijano.

In fact, Quijano reported the GUPC has accepted the ACP will not pay any money out of the contract, and everything that will be negotiated from now on will be made withing the parameters of the contract, after the consortium insisted on demanding they be paid a specific amount of money outside of the contract, he said.

"Now the GUPC has accepted we will not pay them a single nickel of the claims they were making outside of the contract," said the Administrator of the Panama Canal Authority, Jorge Luis Quijano, during his appearance before the plenary session of the National Assembly.

"Maybe we'll lose some of their claims and that will be paid, but not outside of the contract," said Quijano.

The manager said he participated in a conference call with the senior executives of the three major international companies.

Losses To The Canal Because Of The Conflict

The culmination of the expansion of the Panama Canal will be delayed at least until December 2015 which means there will be "lost profits" of more than 95 million dollars, only if they are able to reach an agreement with the GUPC consortium in charge of the project to get them to resume work in the short term.

According to the contract, the construction of the third set of locks of the Panama Canal should be ready by next October, but last year the Grupo Unidos por el Canal (GUPC) , the consortium in charge of the work, announced a delay to June 2015.  

Quijano said the new (additional) six-month delay in the project comes as a result of "two or three months" of a slow pace of work, and "two weeks of total paralysis" on the job site, counting this week during which the negotiations continue, seeking a consensus agreement.

This delay will generate a "loss of earnings of $95.3 million", that is to say, the profits the Canal will not receive "starting from the middle of 2015 when we expected them to finish the project," he added.

The Legal Status Of The Workers On The Expansion Project

Quijano made it clear that the ACP has no connection with the workers, because the employment relationship is maintained with GUPC, however, recognizing that the ACP is responsible to this liability in the labor payment bond "that's another 50 million dollars," and according to Quijano, by priority, the first to receive any compensation for debt cancellation labor liabilities are employees.  

"And the labor liabilities the GUPC may have at any time is well below the figure of 50 million, meaning that workers should have no problem in accessing solutions to their labor liabilities," he said.  

Quijano made ​​it clear they are fully prepared to finish this conflict in favor of Panama, and he said the expansion will be completed. (Panama America)

Editor's Comment: So, the GUPC has given up trying to coerce $1.6 billion out of the ACP, by using threats and extortionist tactics, which are outside of the contract? In that case, they have finally come to the realization that the ACP will - in fact - toss them off the job and carry on without them.

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Panama Rallies Behind Engineer in Fight Over Canal

Canal ExpansionPANAMA CITY — He has the weight of Panama's pride and a good chunk of global commerce on his shoulders.

Yet weeks of acrimonious, late night negotiations to rescue the Panama Canal's $5.25 billion expansion haven't taken a toll on Jorge Quijano. The canal's top administrator wakes up at 5 a.m. each day for a brisk 40-minute walk along the bluff atop which sits the century-old plantation home where he resides as successor to the 17 American governors who lorded over the canal zone until 1979.

"I wish there were more crises like this," jokes Quijano, who claims to be growing more fit even as he struggles to find a way out of a dispute over $1.6 billion in cost overruns.

"I've never felt healthier, stronger or more confident."

The extra mettle is needed. Last week, work on the construction of a third set of locks, already nine months behind schedule, was stopped after talks broke down on how to finance the charges. A consortium led by Spain's Sacyr SA and Italy's Salini Impreglio blames Quijano's poor planning and is demanding payment, while the canal says the companies are responsible for the unforeseen costs.

With a lengthy legal battle looming, ports around the world that have spent billions on upgrades in anticipation of a quicker route for giant container ships and tankers between Asia and the Eastern U.S. seaboard are bracing for further delays.

While both sides say they're still open to an agreement, the window for a deal is closing fast, Quijano said in an interview at the canal's office. Meanwhile, he says a plan B that he and his staff have been working quietly on since October is being readied, though he's not disclosing any details.

Panamanians are cheering Quijano on. Since the crisis erupted, the nation of 3.4 million has rallied almost unanimously behind the 61-year-old engineer, thrusting him into the media spotlight to defend the canal, which is almost synonymous with the nation's identity. They applaud him for standing up to public attacks by contractors that he likens to "extortion" and "terrorism."

Quijano likes to point out that the talks broke down on Feb. 4 — 125 years to the day after another European digger from France went bust and declared bankruptcy while working on the canal.

U.S. engineers, riding on the coattails of a military invasion ordered by President Theodore Roosevelt, were then left to complete the work. Washington ran the 50-mile (80-kilometer) waterway and adjacent areas as an overseas territory until President Jimmy Carter agreed in 1977 to cede control gradually.

Ironically, given the resentment the decades-long occupation still stirs here, Americans may have another chance to step in.

That's because U.S. firms have expressed the most interest among international companies in completing the 30 percent of work that remains, Quijano said. One candidate is Englewood, Colorado-based CH2M Hill, the canal's main project consultant and which Quijano says has the know-how and resources to finish the job according to its original design. Tellingly, as talks stalled last month, Quijano gave the U.S. ambassador to Panama a personal tour of the construction.

What's not in doubt is Panama's determination to finish the job in 2015, he said.

"If necessary I'll get down there with you holding a pick and shovel," Quijano, the son of a diplomat who has spent part of his childhood in Japan and Malaysia, recently told a group of workers to celebrate the canal's centennial anniversary.

Quijano joined the canal in 1975 shortly after graduating from Lamar University near the Texas Gulf Coast, an area whose booming natural gas industry stands to be one of the biggest beneficiaries of an expanded canal. He climbed through the ranks, earning a reputation as a hard-charging engineer who held his American managers accountable to their commitment to hand it over in tip-top shape.

"He's an engineer's engineer," said Joe Reeder, a former US Under Secretary of the Army who served as the canal's American chairman in the 1990s. "He's a good listener, very studious and drills down to operate based on the facts."

Reeder says that Quijano shies away from the cameras and would have preferred to manage the dispute quietly through the arbitration mechanisms set forth in the contract. But the same cool and collected temperament serves him well in the media dogfight the dispute has become.

"You want someone who can throw a body blow when it's been richly earned as is the case here," said Reeder, who believes the European consortium's aggressive stance against the canal in the media belies the shakiness of its claims.

Appointed to a seven-year term in 2012, Quijano runs a business that has blossomed since the Americans handed over full control of the canal at noon on December 31, 1999.

Average time to cross the canal has fallen below 24 hours, a feat the Americans, who managed the canal more like a break-even utility, tried but were never able to achieve, Reeder said. The safety record has also improved and revenues have more than tripled under Panamanian management to $2.4 billion last year.

The canal is the linchpin of Panama's economy, providing almost $1 billion in direct contributions to the government and related activities generate nearly 20 percent of the nation's gross domestic product. Almost 6 percent of global commerce passes through the canal.

But not everyone has praise for Quijano, least of all the consortium, which blamed his "inflexibly rigid" position for an impasse that put at risk 10,000 jobs and threaten to blemish Panama's reputation as a magnet for international investment.

It says the extra costs resulted largely from problems with studies conducted by the Panamanian authority before work began and says geological obstacles encountered while excavating have prevented it from getting the basalt needed to make the vast amounts of concrete required. The canal says all bidders had access and ample time to study the canal's preliminary work before the auction.

In the absence of a deal, the consortium is promising years of litigation and can assert some powerful leverage by withholding delivery of massive lock gates made in Italy that would be costly to build from scratch.

Even supportive Panamanians question whether Quijano, who as the top engineering executive oversaw the expansion program's design, doesn't share part of the blame for the selection of a consortium that raised eyebrows when it was awarded the contract by the canal's board of directors in 2009 with a bid $1 billion below that of its nearest rival, San Francisco's Bechtel Group Inc.

"This is a very delicate moment for Panama," said Juan Carlos Navarro, one of three front-runners in May's presidential race, told the AP. "Later there will be time to do a complete analysis of what went wrong and assign responsibilities. But right now everyone needs to support Quijano and demand that the expansion is completed."

Part of Quijano's popularity stems from the canal's track record of not wading too deeply into Panama's messy politics. Panama's constitution guarantees the canal financial and operational autonomy, and a string of canal administrators, all of them trained by the Americans, has built a reputation for above-the-fray decision making that Panamanians jealously safeguard.

Even Panama's President Ricardo Martinelli, a billionaire businessman not known for ceding the spotlight easily, had to back down after meeting with Spanish officials in the early days of the crisis, a move that was widely criticized. Last week he called on Panamanians to "close ranks" behind Quijano.

"Too bad our politicians don't have the same integrity" as Quijano, said Leonel Martinez, a 58-year-old taxi driver who worked as a stevedore in the canal until the Americans pulled out. "Whatever happens we can't let them defraud us." (NY Times)

Editor's Comment: Remember Alberto Alemán Zubieta was the Administrator of the Panama Canal Authority, the position currently held by Quijano, until 2012. He was the person at the helm when they decided to select the GUPC consortium to build the third set of locks. And also remember Alberto Alemán Zubieta was the President of the Panamanian company Constructora Urbana (CUSA) which is part of the GUPC consortium. Zubieta climbed to his position atop the Panama Canal with the help of the former President Ernesto Perez Balladares (1994 - 1999) from the Partido Revolucionario Democratico (PRD) political party, which is currently not in power in Panama.

It's ironic for this article to quote the PRD presidential candidate Juan Carlos Navarro with regards to assigning blame for this crisis - because the blame does not rest on Quijano's shoulders, but rather those of the PRD's Alberto Alemán Zubieta, who with the complicity of the former PRD President Martin Torrijos (2004 - 2009), decided to give the massive $3.118 billion contract to - himself.

The ACP "above-the-frey" of Panamanian politics? Don't be absurd. It's just disguised or camouflaged slightly better than normal, and it's harder for most people to pick out the chunks in the soup, but those chunks are still there.

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Panama president blames former canal chief for crisis

Canal ExpansionPanamanian President Ricardo Martinelli Monday blamed the Panama Canal's former administrator for the current crisis surrounding its massive expansion project -- where work has been halted over a billion-dollar payment dispute.

Martinelli said Alberto Aleman Zibieta was "responsible for what has happened," referring to the row over who will cover $1.6 billion in cost overruns in the project to enlarge the 80-kilometer (50-mile) waterway linking the Atlantic and Pacific oceans.

Aleman Zibieta, a Panamanian engineer, was in charge of the independent Panama Canal Authority in 2009 when it awarded the largest contract in the expansion project -- worth some $3.2 billion -- to the GUPC consortium led by Spanish company Sacyr.

The GUPC bid was $363 million lower than budgeted by the canal authority and well below bids from competing companies.

In an interview on Panamanian television, Martinellii suggested Aleman Zibieta and the canal authority should have anticipated the GUPC was underbidding.

"Everyone here knew the state of the company Sacyr, that it was having financial problems," Martinelli said, dubbing the current situation "the chronicle of a death foretold."

The canal authority and the GUPC consortium have locked horns since December over the overruns on widening the canal to accommodate massive cargo ships in the century-old waterway, which handles five percent of global seaborne trade.

GUPC claims unforeseen geological difficulties have forced them to spend much more on cement than expected. They say that they based their estimates on data provided by the Canal Authority that was incorrect.

The canal expansion is one of the world's most ambitious civil engineering projects and was due to be completed next year -- but the builders have said completion may now be delayed up to five years.

The original canal, built by the United States mostly with workers brought in from the Caribbean, was completed in 1914.

The canal generates $960 million a year for Panama, nearly 10 percent of the country's total annual income. (

Editor's Comment: Called it! Martinelli and the CD was courting Zubieta to be their presidential candidate, even though he's a PRD guy. Zubieta said no, and therefore here we are today. If Zubieta had said yes, then there would be no conflict, and Zubieta would have been Panama's next president. Martinelli is one vengeful dude. Now he's going to be blaming the whole mess on Zubieta and the PRD, which is actually accurate.

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