Site Meter
Send Us An Email
Panama Guide

Welcome to Panama Guide
Monday, April 22 2019 @ 10:01 PM UTC

View Printable Version

One Last Proposal by the ACP (Before They Give The GUPC The Yuca)

Canal ExpansionTime is running out for the negotiations between the Panama Canal Authority (ACP) and Grupo Unidos por el Canal (GUPC) to find a solution to the crisis that has paralyzed work on the third set of locks.

Last Friday, the consortium composed of the Spanish company Sacyr, Italy's Salini Impregilo, Belgium's Jan de Nul, and the Panamanian company CUSA sent the ACP a proposal, which they said "reflects our continuous efforts to accommodate the ACP's concerns during the negotiations."

The ACP responded with a counter-proposal, that would be their last, in its effort to find a solution to the crisis that has already been dragging on for more than a month, with its origins in cost overruns - not recognized by the ACP - of $1.6 billion dollars in the project to build the third set of locks, the largest single contract of the expansion program.

The ACP's proposal suggests, as requested by the consortium, an extension of the deadlines for repayment of advances, without giving further details on these.

A quick resolution to the conflict is key to the project. Work has stopped since last Wednesday, after a deadline expired and the negotiating parties were unable to reach an agreement.

The administrator of the ACP, Jorge Luis Quijano , said the institution would be willing to take over the project and to complete it by 2015, as currently scheduled, but in order to do it they must act quickly to take advantage of the short dry season. (Prensa)

Editor's Comment: I predicted a long time ago that the ACP would boot the GUPC, hire someone else to finish the job, and then sue the GUPC companies for failure to perform. In that way, the Panamanian people will basically get the $7 billion dollar project for $5.25 billion - and the low ball bid gets turned around and stuffed right up the GUPC's ass. Remember, they were hired by the PRD (for a reason). Can you spell "yuca?" Now do it about 1.6 billion times. Yuca, yuca, yuca, yuca... There's a whole lot of yuca coming down.

Panamanian Spanish Lesson: When someone get's screwed over, Panamanians will say "se le metio la yuca" which literally means "they stuck the yuca in him." As in, they stuffed it up his ass. Yucas typically have a pointy end, but then they get thick at the base, and are about as big as your forearm - perfect for stuffing up someone's ass - and not something normal people would consider enjoyable. This expression is often used when someone thinks they were going to get over because they were going to try to be clever or slick, but then the tables were turned and the person who thought they were going to get over, gets hosed instead. They get in trouble or go to prison or what have you. In this case the ACP is pulling the old yuca trick to the GUPC. Silly Spaniards, thinking they could "out slick" the Panamanians on their home court...

  • Facebook
  • Google Bookmarks
View Printable Version

Exclusive Interview: Panama Canal Project Won't Be Held Hostage By Contractor Shutdown

Canal ExpansionBy C. J. Schexnayder (Engineering News-Record) - For the past six weeks the Panama Canal Authority (ACP) has been negotiating a reported $1.6 billion in cost overruns with the contractor building the locks for the waterway's Third Lane Expansion.

On Feb. 5, the contractor consortium, Grupo Unidos Por el Canal (GUPC), stopped work on the project, citing a breakdown in negotiations that threatens the original mid-2015 completion date of the $5.2 billion project. GUPC consists of Spanish construction firm Sacyr Vallehermoso S.A., Italy’s Impregilo S.p.A., Jan De Nul n.v. of The Netherlands and Panama's Constructora Urbana S.A.

ACP Administrator Jorge Luis Quijano, an industrial engineer who has headed the expansion since it began, spoke at length to ENR about the project status and its current options. He reiterated the intention to complete the project by its planned finishing date next year “with or without the assistance of the contractor.”

ENR: What is the current status of the project?

Quijano: We are at a stage right now where [contractors] have stopped work. They say they have not stopped work, but there is no work happening at all. On Feb. 5, there was maybe 1% of work being done by a few subcontractors, but a day later, work is completely at a standstill. [GUPC is] saying they haven't formally notified us that they have stopped work. For me, that has really zero value since it is a de facto work stoppage. We know for a fact they have told workers to go home. They have told subcontractors to stop work. We even have subcontractors ask us if they are going to be paid or not.

We have left a little window of opportunity for continuing to exchange views with the contractor to see if an amicable resolution is possible. However, the more time that passes, the less likely that is to happen. We sent [the contractor group] a four-page letter on Feb. 5 asking them to substantiate their actions because, to us, this is a hostile act and it needs to be resolved immediately. They have already wasted enough time. They began slowing down in November and they continued to keep slowing it down until now they've brought it to a total halt yesterday.

ENR: Is this action sufficient grounds to break the contract and move forward without GUPC?

Quijano: The contract is very clear that if work is stopped or significantly reduced—or any part of the work is substantially reduced—that is sufficient grounds to take them off of the job. We feel very strongly about their actions, and if they decide not to settle this and not return to work, they leave us very little option but to default them.

We are looking at the next few days that will be critical in our decisionmaking process. As time passes, we have less and less of a chance to have a negotiated solution. We are not closing the door but they are leaving us with very little room to maneuver. But we are not going to be held hostage for their work stoppage; we are going to take action. I'd say we are coming to the end of the road and we not talking about weeks to get this taken care of, let's put it that way.

ENR: How long has this situation been developing?

Quijano: This is not the first time we have been at this juncture with the contractor. This is the first time [GUPC has] taken a hostile position by stopping the work but in December 2012, [the contractor] was having similar cash flow issues. They came to us and requested relief by asking for a moratorium on paying back their lines of credit. They wanted some relief so they could last until the return on some of the claims they had made for cost overruns. We agreed and they did not pay back any of their lines of credit in 2013. They took the whole year and didn't win a single claim they put in to the dispute arbitration board.

They had whole year of non-repayment, which amounts to about $300 million to us, to continue work and have the time to substantiate the claims they felt they could win. The moratorium ended in December 2013 and they have to start repaying—and they have to do so very quickly at the rate of about $39 million a month.

According to the contract, they have to continue to work while these claims are being evaluated. This is costing them more than what they expected and what they want to do is make us pay for all the expenses. This is not a cost-plus project.

What we have put on the table is a further deferral of the repayment program, extending the moratorium significantly so they can continue the work. But even with that, they still have not agreed to continue the work. They did not accept that offer and, instead, asked for a moratorium to 2020.

ENR: Several times you have mentioned a 'Plan B' to complete the job without GUPC; what does that entail?

Quijano: Plan A is to continue working with the contractor and finish the job according to the contract. Plan B is to go ahead with the work without this contractor. We don't see any other alternative. It is either one or the other. Some have suggested that we don't have the construction know-how to handle it, but we're not going to construct it.

What remains to be done? About 30% of the work. What remains to be done in concrete? About 20%. All the designs for the project have been completed. Those designs are ours. The amount of work that remains is backfill and about 900,000 cubic meters of concrete (out of the 4.4 million cubic meters total). Outside of that, it is only the electro-mechanical work. And all of the electro-mechanical work was going to be done with sub-contractors. Even GUPC had planned to do that.

Our Plan B is very simple; work with all the subcontractors who were [already] going to perform the electro-mechanical work. We need a small general contractor on the Pacific side. We need a small general contractor on the Atlantic side. These will be needed to continue to provide the general services and construction management activities. But it is not the same size of a project we had in 2009. Taking this job from here onward is not the same as starting from scratch.

ENR: Fabricating new gates for the locks would take longer than a year. What arrangements are there to procure the gates that have already been made?

Quijano: The new locks have 16 gates in total. We already have four gates here along with all the electromechanical elements for them. Four gates have been completed in Italy, and are awaiting transportation. Another four gates are going to be ready in a month's time. And the last four gates will be ready by June at the very latest.

We don't expect Cimolai [the subcontractor in Italy] to give us the gates they have already fabricated for free. Unlike GUPC, Cimolai has done an outstanding job by continuing to work. [The firm is] very professional and we have a very good relationship with [it]. I feel we will continue our working relationship with [Cimolai].

There is very little use for these gates other than in the new locks. They cannot be sold for any other project, and if they are scrapped, it will bring in maybe one-tenth of what they are actually worth.

If the [GUPC] plan is to hold onto those gates and force us to look elsewhere to fabricate [new ones] from scratch, that to me is extortion. And it affects far more than just the Panama Canal. The canal is not being done just for Panama, it is being built for the world. The United States is the number one user. China is number two, and Latin America is the third biggest user. There is a lot of international interest to see this project is completed.

ENR: GUPC won the locks job with a bid of $3.12 billion, more than $1 billion under the next lowest bid submitted by the consortium of Bechtel and Taisei Mitsubishi. Is there reason to believe this was underbid?

Quijano: At the time we fully analyzed this and we fully believed the amount bid was an adequate amount. We had hired consultants who drew up a range of what the bids were expected to be. And we set an estimated range of $3.1 billion and $3.6 billion, which would depend on how each bidder saw the risk.

Many people compare GUPC's bid to Bechtel's bid but forget this was a design-build project; you bid on the basis of your design and the amount of risk you feel comfortable taking. But GUPC is now asking for $1.6 billion, which is far more than the difference in those two bids.

ENR: There were concerns when ACP chose to join both sets of locks into a single contract due to the size and complexity of the job. Was that a factor in the issues you are facing now?

Quijano: Because it was design-build we thought it was much better to have both [sets of locks] done by one general contractor than by two. The design had to be the same for both and by having one contractor do it, you could actually cut down on the time.

We felt [GUPC] could handle it if [it] had done the work with diligence from the very beginning, but, I regret to say, [the contractors] did not. We started to notice that about a year into the program. We started to get the impression they would not be able to complete the job in the allocated time we had allotted.

  • Facebook
  • Google Bookmarks
View Printable Version

ACP Responds With A New Proposal

Canal ExpansionThe Panama Canal Authority (ACP) responded to the latest approach in the press made by the Grupo Unidos por el Canal (GUPC), with a counter offer to continue the construction of the third set of locks, which has been paralyzed for three days.

" As we prepare to take the actions permitted under the contract to reactivate work on the project, we remain open to the possibility of reaching an agreement, and for that we are making this effort," said the administrator of the Panama Canal, Jorge Luis Quijano, in a press release.

According to the ACP, the proposal sent to the consortium does not increase the original contract price of $3.118 billion, nor does it accept or admit any claim (for cost overruns), which, if given, most follow the contract process (to be resolved).

(In the counter-offer) it is also understood that the parties will have to provide additional financial resources so that work on the project can be restarted as soon as possible, but no dates or details of the procedures were offered.

The offer, subject to review and approval by the parties, establishes specific dates for the delivery of the gates, by GUPC, and for the final completion of the work.

The two sets of locks (one on the Pacific side and one on the Atlantic side of the Panama Canal) require a total of 16 lock gates. Of these, four have already been transported to Panama. The remaining 12 are in Italy. Eight are still in different phases of the manufacturing process, and four have been completed and are ready.

The ACP also proposed to further extend the repayment period for the $748 million that the ACP paid in advance to the consortium, "to the extent that GUPC meets the required delivery dates."

Executives from the multilateral financial institutions who provided $2.3 billion dollars for the expansion program visited the ACP and toured the work site during the day yesterday.

The government of the United States, which administered the Panama Canal between 1914 and 1999, also urged the ACP and the GUPC consortium yesterday to reconcile the differences that have disrupted construction of the third set of locks.

"We hope for a rapid resolution of the current work stoppage, and the full resumption of activity in the expansion of the Canal," said a State Department spokesman, quoted by the DPA news agency. (Prensa)

Editor's Comment: The ACP is doing two things at once. They are getting ready to either take over the project or hand it to someone else to finish, while at the same time they have to listen to the GUPC continue to chatter and whine. So they tossed out this "new" counter proposal, which in fact does not contain anything all that new or different. The fundamental facts on the ground remain the same. The GUPC won the contract through a low-ball bid, and they fully intended to try to jack the ACP for the necessary $1.6 billion dollars from day one. The ACP knew what they were doing, and is sticking to their guns by simply saying no, and forcing the GUPC to complete the project as required by the terms of the contract. The GUPC simply can't do that (the money isn't there) so they will walk away. That opens the door for the ACP to sue them for the additional costs of completing the project, the $1.6 billion dollars lacking in GUPC's lowball bid. This all sort of boils down to little more than a game of high stakes chicken - with the Panama Canal in the middle. Not to worry though, because it will be built, albeit with some delay.

  • Facebook
  • Google Bookmarks
View Printable Version

The ACP Has A "Plan B" To Finish Panama Canal Expansion Project

Canal ExpansionJorge Luis Quijano , administrator of the Panama Canal Authority (ACP), said he was confident the project to build a third set of locks as part of the project to expand the Panama Canal would be done in 2015 "with or without the Grupo Unidos por el Canal," the contractor for the project, who stopped working on the project completely on this most important aspect of the expansion program.

Quijano made ​​his first public statements after the deadline imposed by the GUPC expired and the parties were unable to reach a negotiated solution to the problem, to avoid a complete shutdown of work on the project.

Flanked by the Vice Presidents of the ACP, in a packed press room, Quijano said "the project can be saved for 2015."

In order to achieve that, "we have to act fast, because the dry season is ending," said Quijano. Much more work can be done during the months of the dry season (mid December to mid April) than during the rainy season.

While declining to go into details, Quijano said the ACP has a Plan B and there is no fear about the work that is left to be done. Right now the entire expansion project is about 70% completed.

Inside the halls of the ACP it is understood the slowdown of progress on the project and the recent cessation of activity by the GUPC is sufficient reason for termination of contract.

In fact , according to the contract, if the consortium "abandons all or a substantial part of the works, or demonstrates the intention not to continue the execution of their duties," is cause for termination of the contract.

However, Quijano refused to discuss further details of the strategy followed by the entity.

"We are going to observe all of the legal steps to be sure that our decisions, after having made a complete and total analysis of the situation, are correct and within the terms of the contract for us to continue this project."

About the eventual takeover of the project, Quijano said they would take action "at the appropriate time" and he said "we have to work with a cool head, although we have a warm heart."

The ACP does not want to make any false steps which could cause the loss of the $400 million performance bond held by the Zurich American insurance company.

Yesterday, both Quijano and the GUPC raised the tone their rhetoric, while the two sides exchanged accusations regarding the causes of the crisis.

With the protocol of negotiations having expired, both sides took off the gloves which in recent weeks had left them making diplomatic pronouncements about the good intentions all around.

Quijano, who has been summoned to speak before the National Assembly, spoke of "threats" and "blackmail," and he said because of the "the intentions of the GUPC against the best interests of Panama and the Canal," they were unable to reach an agreement, due to the "inflexible position of the consortium," that "who tried to negotiate exorbitant numbers that were not sustained, outside of the contract."

Meanwhile, the GUPC spoke about the "unreasonably rigid position" of the ACP, and they warned a breakdown in the negotiations would lead to "years of litigation and arbitration" and cause delays on the project of between three to five years, which would leave a "continuous shadow on the ACP and the Panama Canal."

Paradoxically, both sides said they were open to a possible reconsideration, although Quijano acknowledged that confidence has deteriorated. (Prensa)

Editor's Comment: Boy, I called that one. Now they ACP will very carefully and slowly pick their way through the legal minefield. They will find a way to boot the GUPC, take over the project, cash in the $400 million performance bond, and then sue the GUPC for the rest of the cost of the project. Boy, are the lawyers going to feed off of this one. The only thing I don't know yet is what contractor is going to pick it up. It will either be Odebrect or Bechtel, but I don't know which...

  • Facebook
  • Google Bookmarks
View Printable Version

Panama says canal work suspended, company denies

Canal ExpansionA dispute over a $1.6 billion cost overrun in the Panama Canal's expansion took a new twist Wednesday after a Spanish company leading the project denied it halted work over the spat.

The Panama Canal Authority said the consortium led by Spanish builder Sacyr had halted work after negotiations broke down, but the company later announced that it made a "final offer" to prevent a shutdown.

The two sides have locked horns since December over unforeseen expenses in a project to widen the canal to accommodate massive cargo ships in the century-old waterway, which handles five percent of global maritime trade.

Panama Canal Authority administrator Jorge Quijano said the "inflexible position" of the consortium known as Grupos Unidos por el Canal (GUPC) had derailed the negotiations.

"They put a threat on the table, and today (Wednesday) they carried it out," he said.

"We demand the work be restarted immediately," Quijano said, adding that a proposal to cancel the GUPC contract is still on the table.

In a statement, Sacyr said the Panama Canal Authority had decided to "break off negotiations" but company president Manuel Manrique later said that the company would keep the talks alive.

"What happened is that the ACP (canal authority) rejected our last proposal without proposing a viable alternative, and this is why we released the statement," Manrique told Spain's Cadena Ser radio.

"But later we sent a letter proposing to continue and so we will see what happens... We have made a final offer to the canal (authority)," he said, adding that there was "no concrete date" to suspend the work.

"This depends on the response" from the canal authority, Manrique added.

The project to widen the canal, one of the biggest civil engineering operations in the world, is due to be completed next year but GUPC has said that the dispute threatens to delay completion by up to five years.

In its earlier statement, Sacyr said the collapse of the talks "puts in danger the widening of the canal and up to 10,000 jobs."

Sacyr said that if a solution were not found immediately, Panama would face years of litigation before national and international courts "on the events which have brought this project to the edge of failure."

'Bad' for world economy

The European Union's industry commissioner, Antonio Tajani, who has mediated the dispute, warned that "the interruption of the works would be bad news for employment, for the worldwide economy, for the expansion works of the canal."

Spain's Public Works Minister Ana Pastor called for an agreement be found quickly "because what is at stake is infrastructure that has an impact not only on the economy (of Panama) but also the world economy."

The canal facilities are being widened to permit the passage of ships carrying up to 12,000 containers, twice the current limit.

But the disputed contract to build locks, due initially to be completed this year, was already running nine months late and since the beginning of this year work has slowed down further.

GUPC says that unforeseen costs total $1.6 billion (1.2 billion euros) beyond the initial $3.2 billion value of the contract.

GUPC is in dispute with the Panama Canal Authority mainly over who was responsible for the quality of geological information and who should bear the cost of problems and delays arising from unexpected geological difficulties.

The consortium is proposing that the two sides each pay half of the extra costs until the project is completed.

They would then go before an international arbitration court for a decision on who is responsible for the unforeseen costs and who should pay.

Tajani said the breakdown was unexpected as the Panamanian president had said the previous day that the parties were "very close" to an agreement.

The consortium warned at the end of December that it would suspend work in three weeks' time if Panamanian authorities did not provide the extra finance demanded, and the deadline for progress in the talks ended on Tuesday.

The canal, completed in 1914 to offer a short cut and safer journey for maritime traffic travelling between the Pacific and Atlantic oceans, is about 80 kilometers (50 miles) long and is used by 13,000-14,000 ships each year. (

Editor's Comment: Man, this should go into the Business Management textbooks on how not to conduct business. First the GUPC guys win the contract by putting in a low-ball bid. Their management of the project has been crap from day one. Now they are talking about geological studies that were supposedly faulty. What happened to their original argument about the concrete being the cause of them falling behind?

The truth of the matter is GUPC gambled, and lost. The mistakenly calculated the ACP would capitulate to their demands, which they timed to fall just a few months before the upcoming presidential elections. They never thought for a moment the ACP would tell them to pound sand, refuse to hand over the $1.6 billion they were basically trying to extort from them, toss them off of the project, and hire someone else. Yeah, there were lots of surprises in the way this went down for the GUPC.

Oh, and when Martinelli told the press the two sides were about to reach an agreement - in reality the decision to tell them to fuck off had already been reached. That was just a play by Martinelli to put some psychological separation between him and Quijano. In fact, they are consulting about this every day, and making decisions together. Now Martinelli can look right at the television cameras and say "I support the independent decisions being made by the Board of Directors of the Panama Canal Authority." He appointed the majority of them, so they are doing his bidding. Trust me on this one - Martinelli is the hard edged negotiator who is making the big play calls here, from the sidelines. He does the "who, me?" thing better than anyone.

Regarding the jobs in Panama - this will just be a short delay. The GUPC had about 5,000 workers and right now about 70% of them are off the job. The ACP will bring in someone else, and those guys will hire the same workers, who will go back to work. Big deal, carnival is coming up, so they will take a break then go back to work.

Regarding economic impact - instead of spending $5.25 billion to expand the Panama Canal, the government of Panama will now be spending more than $7 billion. Most of that money stays in the country in the form of salaries, services, supplies, logistics, etc. So it's just more money flowing through the washing machine. No big deal.

Regarding the additional expense - the Panama Canal generates its own income. The traffic through the Canal will pay for the expansion. Again, no big deal.

Almost everyone quoted in this article from Spain, Italy, and the European Union don't want the GUPC to be tossed off the project. The governments of Spain, Italy and the EU will not be screaming bloody murder. The ACP will quietly execute clauses in their contract with the GUPC, take over the project, and hire someone else. Then, they will sue the GUPC for about $1.6 billion dollars (the additional expense of finishing the project.)

Sacyr said the ACP "rejected our last proposal without proposing a viable alternative." Yup, that's officially the end of negotiations. They were due to fail at some point anyway, and that failure came today. I expect there are phones ringing at Bechtel right now, and there are other companies sharpening up their pencils to take over this project - which will still have about $1.6 billion dollars left of juice in it. That's billion. With a "B".

So now Sacyr is saying "no wait, we're not done yet." Yes, you are. Pack your bags and get out. Game, set, and match.

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal officials say work on major expansion halted by financial dispute

Canal ExpansionPANAMA CITY (AP) — Panama Canal officials say work on major expansion halted by financial dispute.

Editor's Comment: That's it. That's the end of the story. It's appearing on practically every news outlet, all over the place. The talks between ACP and the GUPC have broken down, as in done, over, not going to talk any more. And now the ACP has announced that work on the third set of locks has stopped (completely.) Prior to this the GUPC had already laid off most of their workforce at the end of December 2013 (for lack of money to pay them) so work on the project had already fallen to a snail's pace. And now work has stopped.

So, that's it. As I have been predicting for weeks, the GUPC is now toast. The next thing you will hear out of the ACP is a press release about how they are going to be executing or exercising several protective clauses in their contract with the GUPC, which allow them to take over the project in the event something like this happens.

Of course, the ACP will be very careful to stay within the framework of their contract - because they know eventually they will be suing the companies participating in the GUPC for the additional costs associated with their failure to build the project for the price they submitted.

  • Facebook
  • Google Bookmarks
View Printable Version

Talks Break Down in Panama Canal Contract Dispute

Canal ExpansionBy Sonya Dowsett (Reuters) - A planned extension of the Panama Canal, one of the world's most important shipping routes, was thrown into doubt on Wednesday after a group of companies said its talks with Panama's government over how to expand the canal had fallen apart.

Group United for the Canal, a consortium led by Spanish builder Sacyr, said in a statement that the government's canal authority had broken off talks on who will pay some $1.6 billion needed to complete the ambitious project. The Panama Canal Authority said it would hold a news conference at 9 a.m. local time.

The breakdown in talks is the latest setback to a project mired in disputes since the consortium, which also includes Italy's Salini Impregilo as well as a Belgian and Panamanian firm, won a bid to double the capacity of the near 50-mile (80 km) transoceanic cargo route.

Disagreements over cost overruns have already reached international courts and talks between the two sides over how to find the additional cash to finish the project had already been extended twice.

It was unclear whether Wednesday's breakdown was final. In its statement, GUPC - the Spanish acronym by which the consortium is known - said the failure of the talks meant the expansion and up to 10,000 local jobs were at immediate risk.

But the company said it was still seeking a solution for completion of the project, which had been scheduled for 2015.

If the partnership between Panama and the builders is indeed abandoned, it would likely mean further delays while Panama seeks financing and a new construction group.

That in turn, would be a setback for companies worldwide eager to move larger ships through the Panama Canal, including liquefied natural gas (LNG) producers who want to ship exports from the U.S. Gulf Coast to Asian Markets. Delays could also cost Panama millions of dollars in projected revenue from toll charges.

Last month, Panama President Ricardo Martinelli said that Panama had the resources to complete the expansion of the Canal even if talks with GUPC ended.

"We will finish the Canal in 2015 no matter what happens, rain, thunder or lightening," Martinelli told an audience of international investors and executives gathered in Davos, Switzerland. He did not give details as to who would pick up the work or the tab.

Shares in Sacyr plunged over 8 percent on the news before recovering some lost ground while Salini Impregilo fell 1.9 percent.

"I wouldn't be surprised if Panama already had a plan B," said a Madrid-based trader who asked not to be named. "As for Sacyr...they'll push forward with new contracts, but everything they do will be looked at with a magnifying glass from now on."


Disputes over the expansion of the Canal set in almost immediately after GUPC won the bid in 2009. At the time, officials and diplomats expressed concerns over the consortium's ability to complete the project since its requested tab was $1 billion lower than the nearest competitor.

Over the past months, the two sides had been discussing how to fund the $1.6 billion needed to complete the project through a co-financing deal. Disputes about liabilities for the cost overruns, which tally with the amount the consortium say it will cost to finish the work, are being fought out within the terms of the contract and may end up in international arbitration courts.

Spain's public works minister flew out to Panama earlier in the year to mediate talks while the European Commissioner for Industry Antonio Tajani had also offered to mediate negotiations, an offer rejected by the Panamanians.

In its Wednesday statement, the Spanish-led consortium said the Panama Canal Authority had broken off the latest talks, but it did not spell out why. The GUPC said that, in its latest proposal, it had offered $800 million in new and existing funds, while asking the Panama Canal to put in $100 million in funds. It also asked the Canal to extend the deadline by which the consortium needs to return $785 million in advance payments made by the Canal in order to free up cash.

"It is unjust and impossible for the PCA and Panama to expect that private companies will finance $1.6 billion in costs on a project that was to be fully funded by PCA," the consortium said in the statement. It said the Panama Canal had not paid a pending $50 million invoice that had meant to cover salaries this week for subcontractors and workers.

"Without an immediate resolution, Panama and the PCA face years of disputes before national and international tribunals over their steps that have pushed the project to the brink of failure," the consortium added.

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

Sacyr has provided 476 million euros in cash advances and guarantees to the project. One analyst said this was the worst-case scenario in terms of what losing the project would mean for the builder.

"But the actual impact will only be determined after several years in the courts if there is no final agreement," said Juan Carlos Calvo, analyst at Espirito Santo, adding that losing the contract would not represent a cash outflow for Sacyr as it affected cash advances already paid.

Any loss of the contract would also affect insurer Zurich , which had been involved with discussions. The insurer had proposed converting $600 million of surety bonds into a loan that would free up money to help complete the project a source with knowledge of the matter had said.

Editor's Comment: As predicted. The Panama Canal Authority had all (100%) of the negotiating power, while the GUPC had almost none. Their threats to walk off of the job (originally on 20 Jan, twice extended) fell on deaf ears, because they had, in fact, already laid off most of their work force at the end of the year. So, in fact, they had already stopped working.

Now the ACP can simply hire someone else. They can now spend the $1.5 billion (or more) needed to finish the Panama Canal expansion project. They also have the GUPC companies by the balls - one in each hand - because of the contract they signed. The ACP will be able to argue in international courts that the GUPC should have been able to build the project according to the contract they signed, and they should be able to squeeze the companies for the money necessary to actually build the damn thing. So, who's fucking who now, bitch? Welcome to Panama, where screwing over foreigners is a favorite pastime...

  • Facebook
  • Google Bookmarks
View Printable Version

Deadline looms in Panama Canal dispute talks

Canal ExpansionBy Marcus Hand - The deadline is looming in negotiations between the Panama Canal Authority (ACP) and lock gate contractor Grupo Unidos por el Canal (GUPC) with the Panamanian president Ricardo Martinelli saying they are very close to an agreement.

Talks over resolving a dispute over $1.6bn in cost overruns on the Panama Canal expansion project were extended until 4 February.

"They are very close to arriving at a happy conclusion ... But I prefer for us to give time to the parties, who have set tomorrow as the final day, so that it may be they (who announce results), but I'm sure that they are close to arriving at an agreement," the president told reporters on Monday.

"I'm sure that the parties, before tomorrow, can arrive at an agreement that will be satisfactory for (them all). I understand that they are on the verge of getting there."

As the deadline approaches neither party has yet made a public statement on the outcome of the talks. (

  • Facebook
  • Google Bookmarks
View Printable Version

' There is a window of understanding '

Canal ExpansionThe administration of the Panama Canal and its largest contractor have engaged in what is expected to be the last and final attempt to not break the $3.1 billion dollar contract signed in 2009.

Yesterday, the Grupo Unidos por el Canal (GUPC) and the Panama Canal Authority (ACP) agreed to extend until Tuesday, the negotiation process to find a solution to the problems of insolvency faced by the consortium, and to complete construction of the third set of locks.

Jorge Luis Quijano, ACP Administrator, was optimistic in what could be the outcome of the process of conversation.

"There is a small window of understanding and we must seize it. We are willing to listen, and there is an opportunity to approach," said Quijano, who avoided revealing details due to a confidentiality agreement entered by the parties.

This newspaper (La Prensa) learned that the negotiation focuses on two aspects. The ACP would be willing to extend the moratorium (grace period) for prepayments of $783 million the consortium has received. However, the point in question would be how much time to give the GUPC for the grace period.

Furthermore, they are exploring the possibility that the GUPC might get $400 million from international banks, to use as a financial security support - for the same amount - from the insurance company Zurich American. (Prensa)

Editor's Comment: Who knows. Work in progress. I still won't be surprised if they can't reach a deal and the GUPC is eventually gone for good...

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal, Contractors Extend Talks On Dispute

Canal Expansion(Fox News Latino) PANAMA CITY, PANAMA – The Panama Canal Authority, or ACP, said Friday that talks aimed at resolving a dispute with the contractors building a third set of locks for the waterway will continue through Feb. 4.

Though the parties set a deadline of Feb. 1 to reach agreement, they have now decided to continue negotiations through the weekend, the ACP said in a statement.

Discussions between the ACP and the GUPC consortium began Jan. 7.

Zurich Insurance Group, the guarantor of the expansion project, joined the process last week and will be part of the extended dialogue, the ACP said.

GUPC, which is led by Spanish construction giant Sacyr and Italy's Impregilo, confirmed Friday that talks would continue and that a threatened work stoppage would be delayed until at least Feb. 5.

The consortium formally notified the ACP on Dec. 30 that it would suspend work Jan. 20 if the canal authority did not agree to pay the contractors an additional $1.6 billion to cover cost overruns.

Since then, the date of the possible shutdown has been postponed twice.

"The objective of the negotiations has been, and continues to be, to reach an a long-term accord for the realization of the Panama Canal expansion project in the shortest time and at the lowest cost, within the contract and the law," GUPC said Friday.

Talks "center on a plan of co-financing the costs for the completion of the project. The ultimate responsibility for the additional costs will be decided through international arbitration proceedings," the consortium said.

Both the ACP and GUPC want to complete the third set of locks and the most convenient way would be "to finish together," but only within the terms of the original contract, canal administrator Jorge Quijano has said.

The ACP said on Jan. 7 it would advance the GUPC $100 million and give the consortium a grace period of two months to repay a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

The consortium countered by proposing the ACP fork out an additional advance of $400 million while also pledging to contribute $100 million of GUPC funds to keep the project running.

Another proposal, presented unilaterally by Impregilo and made public on Jan. 9, called for the canal authority to make an additional payment of between $500 million and $1 billion to the GUPC to cover cost overruns.

Quijano rejected both of those formulas as "outside the contract."

The contract for the locks, which is the centerpiece of a $5.25 billion canal expansion, was awarded to GUPC in 2009 and calls for the ACP to pay the consortium 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 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.

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal says extends talks with consortium to February 4

Canal ExpansionBy Lomi Kriel (Panama City) (Reuters) - The Panama Canal Authority said on Friday it had extended a window for talks with a Spanish-led consortium expanding the waterway aimed at ensuring work continues on the project, which faces huge cost overruns.

The authority said it had agreed to continue talks until February 4 with the consortium, which had threatened to stop work on the project unless the canal foots the bill for $1.6 billion in unforeseen additional costs.

Earlier this month, the consortium, which is led by Spanish builder Sacyr, announced it could stop work by January 20. But it later said it would not call a halt on the project before at least the end of January.

"The parties agreed to continue meeting over the weekend to further evaluate the options aimed at reaching an agreement," the Canal Authority said in a statement.

Italy and Spain are both committed to finding a rapid solution to the dispute, Italian Prime Minister Enrico Letta and his Spanish counterpart Mariano Rajoy said on Monday.

The consortium also includes Italian builder Salini Impregilo, Belgium's Jan De Nul and Panama's Constructora Urbana.

Halting construction on the expansion 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.

The canal and the consortium have traded proposals and counter-proposals to find ways to raise financing to keep work going while they deal with the cost overruns via arbitration.

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

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

Editor's Comment: Overall, the project is 72% complete. The progress on the largest contract to build the third set of locks - which is at the center of this conflict - is currently 65% complete. The GUPC has practically stopped working already, having laid off the majority of their employees. This is the second time they have agreed to extend their threat to stop working on the project. They clearly overplayed their hand, and now if they walk off the job they will be facing legal actions by the ACP for breach of contract. They keep talking, but in the end of the day there's no way in hell the ACP is just going to hand them (anywhere near) $1.6 billion dollars. My prediction remains. I think the GUPC will eventually be gone, and the ACP will hire someone else to finish construction.

  • Facebook
  • Google Bookmarks
View Printable Version

GUPC and ACP Continue To Negotiate As Deadline Approaches

Canal ExpansionNow with only two days remaining before the deadline set by the consortium Grupo Unidos por el Canal (GUPC) and their threat given to the Panama Canal Authority to walk off the job, representatives from both sides met today to continue efforts to negotiate a deal.

On Thursday, 29 January 2014, representatives from consortium - led by the Spanish company Sacyr - resumed negotiations with the insurance company Zurich American and the ACP.

The GUPC extended their original deadline of 20 January 2014 until 1 February 2014, of a threat to stop work on the project unless the ACP recognizes their demand for $1.6 billion dollars in cost overruns they are claiming.

Roberto Roy, Panama's Minister for Canal Affairs, said the best option continues to be for the consortium to finish the project.

He said they are making their last efforts for the original plan under the contract, to be that which takes place.

For his part, the President of the Republic, Ricardo Martinelli, said as the government he supports all decisions made by the Board of Directors of the Panama Canal. (Panama America)

Editor's Comment: Let's see what happens on Saturday, 1 February 2014. I think the ACP is just going to sit there and look at their watch, to see what the GUPC does when their "deadline" arrives. If they keep working, then all of this was just unnecessary drama. If they actually do walk off of the job, then they violated the contract and they open themselves up to a whole bunch of really expensive legal ramifications. In short, GUPC doesn't have any negotiating position to speak of. The ACP is holding all of the cards. What poor business practices by the GUPC members...

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Authority hit with second cost dispute

Canal ExpansionBy Rebecca Conan - A US$44mn claim against the Panama Canal Authority (ACP) filed by a consortium led by Mexican construction company ICA has gone to arbitration.

The claim is for supposed cost overruns in relation to the group's excavation contract as part of the US$5.25bn Panama Canal expansion, according to a report from the ACP.

The claim is due to what the consortium calls "different site conditions, modifications to the contract, work interruptions and late responses from the ACP."

The consortium, consisting of ICA, Costa Rican company MECO and Spain's Fomento de Construcciones y Contratas (FCC), was awarded a US$290mn contract to excavate the canal's Pacific entrance in January 2010.

Works were meant to wrap on January 31, 2015 but the consortium is seeking an extension, in addition to payment of the extra costs.

Following attempts to resolve the dispute, the case was referred to arbitration in October last year.

This is the second cost dispute to hit the canal expansion, with the ACP currently locked in negotiations with Grupo Unidos por el Canal (GUPC) in relation to a US$1.6bn overrun on construction of the third set of locks.

GUPC and the ACP have until February 1 to reach an agreement, after which GUPC said it will halt work. (Business News Americas)

Editor's Comment: However this article fails to point out the major - significantly important - difference in these two disputes. This complaint filed by ICA is being done within the framework of their contract with the ACP. The GUPC tried basically blackmail the ACP by demanding payment of $1.6 billion for "cost overruns," and it was done outside of the previsions allowed for in their contract. This tells me the ICA probably has a pretty good case, and the GUPC probably has a relatively weak case. I suspect the GUPC knows if they go through the normal channels as specified in the contract, they will lose their case.

So the fact that the ACP was "hit with" another claim really doesn't mean all that much. Compare the $44 million dollar ICA claim to the $1.6 billion dollar GUPC claim, which is much (much) larger. This one is small potatoes, comparatively speaking. And in the end the decision (if there is one) in favor of ICA will probably be less than the $44 million claimed.

  • Facebook
  • Google Bookmarks
View Printable Version

Italy, Spain say want rapid end to Panama Canal dispute

Canal Expansion(Reuters) - Italy and Spain are both committed to finding a rapid solution to a dispute which is threatening to halt work on widening the Panama canal, Italian Prime Minister Enrico Letta and his Spanish counterpart Mariano Rajoy said on Monday.

"We think it is absolutely fundamental that we manage to solve this controversy, this is a primary interest for Italy and Spain," Letta said at a joint news conference with Rajoy in Rome.

A consortium of construction companies, led by Spain's Sacyr, has threatened to halt work on expanding the Panama Canal unless a dispute over cost overruns is resolved.

Rajoy echoed Letta's words, adding that a halt in the works would cause "serious damage."

Editor's Comment: Yeah, serious damage to the economies of Italy and Spain. The largest two companies in the GUPC consortium hold a 96% stake in the project. When those companies make money, they pay taxes to these two governments. So yeah, if the ACP tosses them off of the job then it would be very bad for both Italy and Spain...

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Expansion Delays Will Slow Flow Of New Money To Government Coffers

Canal ExpansionThe delay in the construction of the third set of locks has caused the postponement for at least a year of the entry of additional revenues from the ACP to the state coffers of the Panamanian Government.

The newly expanded Panama Canal was supposed to go into operation this year (in 2014) meaning in 2015 the government of Panama would have started to receive the benefits of the project, thanks to increases in tolls and additional traffic.

But thanks to a delay of at least eight months caused by faulty concrete pourings by the Grupo Unidos por el Canal (GUPC), the country would end up seeing the first $1.5 billion in estimated revenue during 2016.

This would be an optimistic projection, according maritime industry sources, because there might be additional delays caused by the most recent crisis due to a liquidity for the GUPC consortium.

The consortium responsible for the construction of the third set of locks is currently working only at 25% capacity, after declaring serious cash flow problems, leading to a process of negotiation with the Panama Canal Authority (ACP) and the insurer for the project, Zurich American .

The three sides are participating in talks with an eye towards finding a funding mechanism that will allow for construction on the project to continue.

This week will be crucial in this process.

The ACP said they can take over the project and complete the work by 2015, if the GUPC walks off the job. (Prensa)

Editor's Comment: Currently the Panama Canal - before the expansion - receives a total of about $3 billion per year from all sources, tolls, services, selling water and electricity, etc. Of that total, $2 billion is spent on operations and maintenance. The vast majority of the money stays in Panama, so the benefit to the country of Panama is indirect. The remaining $1 billion or so is turned over to the government of Panama to be spent as part of the general budget. Again, these are the numbers right now, before the expansion. 3-2-1.

After the expansion those number will increase to 5-3-2. Meaning, the Panama Canal will be receiving a total of about $5 billion per year from all sources. They will be spending about $3 billion per year on operations and maintenance, and the remaining $2 billion or so will be turned over to the Panamanian government. So yeah (obviously) the sooner the newly expanded Panama Canal is opened, the better it will be for the government of Panama, and in turn all Panamanian citizens.

$2 billion dollars per year is a whole lot of money for a small little country like Panama. Look at it like this - that's enough money to pay for the entire (new) Metro Subway system project ($1.8 billion) - generated by the newly expanded Panama Canal in only one year. So every year they could take that same money and expand the system with Phase II, Phase III, Phase IV, etc. And all the while, most of the money being spent on the Metro subway system will be plowed right back into the Panamanian economy, where it will around and around like water in a washing machine.

These are some of the reasons why everyone is so bullish on Panama. They own a massive money making machine...

  • Facebook
  • Google Bookmarks
View Printable Version

Panama eyes long-term solution to financial dispute with multinational consortium

Canal ExpansionPANAMA CITY (Xinhua) -- The Panama Canal Authority (ACP) and a multinational construction consortium in charge of canal expansion agreed Thursday on a negotiation protocol for a long-term solution to their financial dispute threatening to stall the expansion.

In a statement released in Panama City, Grupo Unidos por el Canal de Panama (GUPC), which includes Spain's Sacyr Vallehermoso, Italy's Impregilo, and Belgium's Jan de Nul and Panama's CUSA, said an agreement was reached on an integral commitment to finish the expansion after two days of talks.

In the statement, the Spanish-led consortium said both parties agreed to hold talks until Feb. 1 to find a long-term solution to the dispute.

According to the statement, the proposal for a negotiation mechanism was initially made on Tuesday during a meeting at ACP's headquarters in Panama City, along with an initiative to devise a new joint financing scheme.

"The protocol also includes talks for complete solutions, including a co-financing proposal involving ACP, GUPC and Zurich Insurance Group," said the statement.

At the end of 2013, GUPC threatened to halt expansion work on Jan. 20, unless the ACP paid an additional 1.6 billion U.S. dollars to cover cost overruns.

The consortium blamed the overruns on faulty geotechnical studies carried out by the APC prior to the expansion.

The ACP offered to add more money to keep the project going, but both sides have so far failed to agree on the amount.

Editor's Comment: Nothing new here, just a new editorial take on the same press release from the GUPC. In reality, the GUPC is stalling for time. The ACP is not going to budge, they are not going to pay the GUPC $1.6 billion dollars. The GUPC has painted themselves into a corner, and they will run out of time (again) next Friday. I don't expect for anything much to happen next week. My prediction remains - I think eventually the GUPC will end up off of the job. The ACP will pay someone else to take over. And the project to expand the Panama Canal will be completed, albeit for more money and somewhat more of a delay. Look for late 2015 or early 2016 at the soonest. Total price above $7 billion. Share price on the GUPC participants will likely tank...

  • Facebook
  • Google Bookmarks
View Printable Version

ACP Inspectors Finding Deficiencies In The Work Being Done By GUPC

Canal ExpansionInspectors from the Panama Canal Authority have observed deficiencies in the pouring of concrete in some areas of the construction of the work to build the new third set of locks for the most recent quarter completed (October - December 2013), according to a report on the progress being made on the project, released yesterday.

However, this is not a massive problem, and it occurred only in a few areas of the project being conducted by the Grupo Unidos por el Canal (GUPC).

The ACP has about 150 employees devoted exclusively to overseeing the construction of the third set of locks, to ensure the contractor complies with the quality required by the contract, so it lasts at least 100 years.

The construction of the third set of locks requires the pouring of 4.4 million cubic meters of concrete, of which, as of 31 December 2013, a total of 3.4 million cubic meters has been poured.

According to the report, which was submitted to the supervisory authorities, the GUPC committed to improving the quality of the work, and to conduct certain difficult pourings only during daylight hours.

Currently only about 25% of the work force is working on the construction of the new third set of locks, and the expectation focuses on negotiations between the ACP and GUPC, which will run until February 1st.

On Tuesday, the parties met with the insurer Zurich American. (Prensa)

Editor's Comment: And now we're simply biding time until the next artificial deadline created by the GUPC consortium - 1 February 2014. They now say they will walk off the job on that date if they don't get at total of $1.6 billion from the APC. The original "deadline" was 20 January, which came and passed as the ACP basically told them to pound sand. They still want more money, and it does not seem like either side is willing to move towards the middle, even though they were able to come up with about half of the sum being demanded through the participation of the Zurich American insurance company. Still remaining to be resolved is the repayment of $783 million dollars which has been "fronted" or advanced to the GUPC to get this far, money they will have to pay back to the ACP. I still don't see this getting worked out with the GUPC remaining on the job. Lots of companies out there can mix and pour concrete. These knuckleheads have not demonstrated their ability to do the job at the price they bid in the contract. So, bye...

  • Facebook
  • Google Bookmarks
View Printable Version

Threat of Panama Canal halt put off

Canal ExpansionPANAMA CITY (AP)—The Spanish-led construction consortium leading the expansion of the Panama Canal has formally extended its deadline for a work stoppage until Feb. 1 while it negotiates a $1.6 billion cost overrun with the canal administrator.

The group known as United for the Canal said Thursday that it will continue negotiating until at least the start of February in an attempt to resolve the fight over who should pay for the cost overruns. The consortium and the Panama Canal Authority each blames the other for the overruns and wants it to assume the costs of continuing the expansion.

The construction group, led by Sacyr of Spain, had set a Monday deadline for resolving the crisis and avoiding a halt in the work, but it has continued negotiating under international pressure.

Editor's Comment: What? "... but it has continued negotiating under international pressure?" No, that's BS. Sacyr simply overplayed their hand, and they though the ACP would cave in to their demand for $1.6 billion dollars almost immediately. Never in a million years did Sacyr think the ACP would respond by saying "screw you, pound sand" and begin to explore their options to replace the GUPC. When that happened, the GUPC and Sacyr all of a sudden went "uh oh" and realized they were screwed. If they had, in fact, simply walked off of the job when their first "deadline" ran out last Monday, then the ACP would have declared they had violated the contract, and replaced them. Then they would get sued. So now the GUPC is playing for time and hoping to find a way to stay on the job, and to negotiate for as much money as they can possibly get out of the APC and the Zurich American insurance company. But this article is written in such a way as to make it sound like the GUPC was all set and ready to walk off the job, and they only kept working in response to some sort of "international pressure" - and that simply did not happen...

  • Facebook
  • Google Bookmarks
View Printable Version

New Deadline For Negotiations On The Canal

Canal ExpansionThe Panama Canal Authority (ACP) and the Grupo Unidos por el Canal (GUPC ) agreed to a protocol yesterday to extend negotiations "in principle" until 1 February.

According to a statement released yesterday by the contractor of the third set of locks, which is facing liquidity problems due to cost overruns incurred in the work, "the protocol provides for the development of discussions about complete solutions, including the proposal involving co-financing between the ACP, GUPC, and the Zurich American insurance company."

Under this alternative, proposed last Tuesday at a meeting between the three parties, $400 million will be injected into the project from the performance bond, $100 million from the ACP, and another $100 million from the GUPC.

One of the main differences is the mechanism for the repayment $783 million anticipated by the ACP from the contractor.

The companies are seeking to extend the repayment until after the arbitration authorities have resolved the claims they have presented for the amount of $1.6 billion, while the ACP requires the payments be made starting this year.

The EC as "Mediator"

Antonio Tajani , Vice-President of the European Commission and who figures as a political "mediator" in the conflict the European companies have with the Panama Canal, called for a "spirit of constructive negotiations."

The old friend of the three time former Italian Prime Minister Silvio Berlusconi called a meeting in Brussels to make a call for unity.

"The European players must speak with one voice in the exterior," he said.

Tajani, whose mediation has not been accepted by the ACP, met with representatives of the Spanish company Sacyr, Italy's Impregilo and Salini, and Belgium's Jan de Nul, all members of the GUPC consortium.

The meeting was also attended by members of the Spanish, Italian and Belgian governments, and a representative of the European Investment Bank (EIB).

In Brussels, they said the reason for the meeting was "to objectively establish the facts and identify ways to resolve differences between the parties."

"I make a call so that the spirit of constructive negotiation that has recently been created is maintained, and that the recent differences be resolved. I have asked in this regard for a special effort by the consortium of European companies, and I hope it will be reciprocated by all stakeholders, " said Tajani to the media who attended a press conference to discuss the matter.

His interventions occur at a decisive moment in the process of conversation between the Canal and the GUPC.

The consortium announced on January 1 they would not continue with the construction of the third set of locks due to the alleged overruns reaching $1.6 billion.

But the Panama Canal Administration says these apparent additional costs have not been justified as stipulated in the contract, so it is impossible to manage a payment for this amount as requested by the consortium.

The parties have since tried to agree to a plan which would inject liquidity into the consortium, but they have failed to reach a point of equilibrium.

The talks will resume on Monday in search of that agreement. (Prensa)

  • Facebook
  • Google Bookmarks
View Printable Version

GUPC Sets Conditions On Zurich's Plan

Canal ExpansionThe Grupo Unidos por el Canal (GUPC) set conditions on the proposal made by the insurer Zurich American through which they seek to create liquidity for the consortium so they can complete the third set of locks.

Zurich presented a financing package totaling $850 million, but GUPC called for the figure to be almost doubled, returning to insist on the $1.6 billion they supposedly need.

The insurer's offer included a loan of $400 million, after the remission of their collateral, as well as the disbursement of $100 million by the ACP in advance payments, and another $100 million to be paid by the members of the consortium.

Added to this would be payments for pending work which has yet to be done. When all items are added up it would come to a total of $850 in disbursements to be paid to GUPC.

According to sources connected with the negotiation, the largest contractor hired to work on the expansion of the Panama Canal had unofficially expressed their satisfaction with the scheme presented by Zurich, but at the meeting last Tuesday they asked for much more than anticipated by the ACP and the insurer.

The consortium insisted they should be paid the full $1.6 billion.

$800 million would come from a loan requested from the Panama Canal, and another $800 million through a loan from Zurich, plus prepaid expenses and disbursements for the remaining work to be done.

GUPC's request would increase the cost of the project from $3.3 billion - including adjustments for increases in the cost of materials - to $4.9 billion.

Neither party would confirm the details of the proposals, until they reach a final agreement.

For now, they said, any number would not be definitive or correct. (Prensa)

  • Facebook
  • Google Bookmarks
View Printable Version

EU calls on Panama to "honour" contracts in canal expansion row

Canal ExpansionBrussels/Panama City (dpa) - The European Union‘s top industry official called Thursday on Panama to uphold its commitments toward European companies working to expand the Panama Canal, in a row over spiraling costs.

"Contracts should be honored," said EU Industry Commissioner Antonio Tajani, who has been asked to mediate on behalf of the three European companies working on the mega-project, and their governments. "The Europeans are speaking with one voice," he said.

The companies - Sacyr Vallehermoso of Spain, Impregilo of Italy and Belgium‘s Jan de Nul - are installing a third set of locks, to increase the capacity of one the world‘s key maritime passages.

But the works ran into difficulties when the consortium, GUPC, told the canal authorities that the project would cost an additional 1.6 billion dollars due to unforeseen costs.

The row intensified in recent weeks, with the building companies threatening to lay down their tools if they are not granted the extra financing - a move that could cause large delays to the project.

The canal authorities have in turn talked of ending GUPC‘s contract for failing to complete the project on time.

On Thursday, GUPC announced it had agreed in principle with the canal authorities on a mediation framework to seek a solution in the next 10 days.

"With a project of this type, of this quality, ... and at this level of completion, since we are beyond 70 per cent (finished), it would be totally unreasonable to stop the works," Mario Giro, a senior Italian foreign office official, said in Brussels.

"Us Europeans have taken a step. We are waiting now for Panama‘s step," Giro said after meeting with Tajani, along with his Spanish and Belgian counterparts. He expressed faith that Panamanian President Ricardo Martinelli could broker a solution.

Martinelli had said on Wednesday, in remarks quoted by Tajani, that he hoped for an agreement, since it would be best if the project were completed by the companies that had started the work.

The president, who has been attending the World Economic Forum in Davos, had promised in an interview with Spanish daily El Mundo that work on the canal would be completed, "come rain, shine or lightning."

Editor's Comment: Absolutely friggin' hilarious! The Panama Canal Authority simply wants the GUPC to honor the contract, and to do the work they agreed to do, for the price they bid. And if there are any conflicts or claims, they should present those claims through the mechanisms as specified in the contract.

This EU idiot - speaking as the lead and representative idiot (apparently) for all Europeans - fails to recognize two important things. First of all, the GUPC low-ball bid this contract with a plan to jack the price later, which they are now doing. When the ACP told them to pound sand, they ran to the EU (this guy) and asked them to mediate on their behalf. And obviously, there's a reason why this idiot is not the mediator as specified in the contract. Because he's 100% biased in favor of the three European companies participating in the GUPC consortium.

So sure, "the Europeans are speaking with one voice." They are also drooling down their chin, and it's dripping on their pants. The GUPC was caught completely flat footed by the ACP's simple response - "no." Now, they are throwing a temper tantrum, and looking for sympathetic ears. So let this be a lesson to all you low balling contract bidders out there in the world. Sometimes, if you try to be the wise guy in the land of "juega vivos," you just end up getting the yuca instead...

  • Facebook
  • Google Bookmarks
View Printable Version

"Come Rain, Thunder, or Lightning - The Panama Canal Expansion Will Be Finished" - Martinelli

Canal ExpansionPanamanian President Ricardo Martinelli said today "rain or shine the work to expand the Panama Canal will be completed," and they will wait until 29 January for the conflicting parties to come together and reach a successful conclusion.

Martinelli said he believes "everybody wants the canal to be completed" in reference to the benefits derived from the enlargement project.

Therefore, he said, he hopes they reach an early agreement to avoid the problems that have arisen which are generating "a lot of stress on a global level."

"What has to be done here is to finish the expansion, within the terms of the contract, because without that then all all of the guarantees would be lost," said Martinelli in an exclusive interview with CNN in Spanish from Davos, where he is attending the World Economic Forum.

He urged the companies involved to "comply with the contract as agreed when it was signed," when the contract was awarded to build the third set of locks as part of the project to expand the Panama Canal.

The contract, according to Martinelli, stipulates how all disputes should be settled, but he said if there is no successful conclusion the parties will have to continue to negotiate to reach an agreement.

"If this does not happen, the Panama Canal Authority has full authority to go to Plan B - meaning we finish the construction and expansion work," he said.

The work on the expansion of the Panama Canal continued on Monday, albeit with a lower intensity.

Monday, 20 January 2014, was the original deadline given by the GUPC consortium responsible for the administration of the construction project for the payment of $1.6 billion dollars in cost overruns for them to continue working on the project. (Critica)

Editor's Comment: Two things here. First of all, Martinelli taking the international stage to give assurances the expansion project will be completed - no matter what. Secondly, take notice when he was talking about Plan B - "we" finish the project. Make no mistake, Quijano and Martinelli are completely on the same page here. They are going to let the GUPC flop around in the bottom of the boat for awhile, then they will take the project over. My prediction remains. GUPC is toast.

  • Facebook
  • Google Bookmarks
View Printable Version

Is There A Conspiracy To Topple Quijano?

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal, consortium discuss new financing proposal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Zurich American Insurance Company Enters Conflict Between ACP and GUPC

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Work To Expand Panama Canal Almost Totally Shut Down

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Announces Proposed possible solution to crises

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Expansion Slows Sharply as Deal Remains Elusive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

Panama Canal Authority Has $1.148 Billion In The Bank

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

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

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

ACP Rejects Mediation Offer

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

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

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

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

  • Facebook
  • Google Bookmarks
View Printable Version

ACP Refuses Offer - Accuses GUPC Of Violating Contract

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

  • Facebook
  • Google Bookmarks