MADRID, (Reuters) – A planned extension of the Panama Canal, one of the world’s most important shipping routes, was thrown into doubt yesterday 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 yesterday’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.
