Panama Canal's ex-administrator to blame for dispute: President

PANAMA CITY Mon Feb 10, 2014 9:26pm EST

Parked machinery are seen at the construction site of the Panama Canal Expansion project on the Pacific side in Panama City February 5, 2014. REUTERS/Carlos Jasso

Parked machinery are seen at the construction site of the Panama Canal Expansion project on the Pacific side in Panama City February 5, 2014.

Credit: Reuters/Carlos Jasso

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PANAMA CITY (Reuters) - The Panama Canal's former administrator is largely to blame for a dispute that threatens a multibillion-dollar expansion of the waterway and should have flagged doubts about Spanish builder Sacyr, President Ricardo Martinelli said on Monday.

The Panama Canal Authority and a consortium led by Sacyr have been locked in a bitter feud over costs for weeks that has thrown the project into doubt. The consortium wants the Canal to pay for $1.6 billion in cost overruns, and the two sides are seeking ways to keep finances flowing in the meantime.

Martinelli, who took office days before the contract was awarded in July 2009, said former canal administrator Alberto Aleman, who headed the canal authority from 1999 to 2012, shouldered much of the blame for the dispute, which he called "a chronicle of a death foretold."

"He is very responsible for everything that is happening. Everyone here knew the state Sacyr was in, that it had financial problems," Martinelli told local television when asked about Aleman.

"European companies in general and particularly those in construction, many of them are having problems," he added. "I think he knew and should have said it."

Aleman told local television he was proud of his work, and has previously said that claims and cost overruns are common in large-scale infrastructure projects. He says the consortium won for technical prowess.

Disputes over the expansion of the Canal began soon after the consortium won the bid. At the time, officials and diplomats expressed concerns over the consortium's ability to complete the project since its bid was $1 billion lower than that of the nearest competitor.

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

Less than six months after the canal authority published its evaluation of the bids, the U.S. embassy cabled Washington that Panamanian vice president Juan Carlos Varela had expressed grave misgivings about the winning offer, according to cables published by WikiLeaks.

The consortium and the canal authority on Friday each made new proposals aimed at reviving the project, though it was not immediately clear if the sides were any closer to a deal.

Current canal authority head Jorge Quijano said last week he was ready to pull the plug on the contract if the sides fail to reach a deal soon.

(Editing by Simon Gardner and Eric Walsh)

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