| PANAMA CITY/MADRID
PANAMA CITY/MADRID Jan 19 A consortium of
construction companies, led by Spain's Sacyr, backed
down on Sunday from a threat to immediately halt work expanding
the Panama Canal in a dispute over cost overruns, but said it
could still do so at a later date.
The consortium, known as Grupo Unidos por el Canal (GUPC),
had threatened to suspend work by Monday, Jan. 20 unless the
Panama Canal Authority (PCA) paid $1.6 billion in cost overruns.
The authority has rejected that demand and asked GUPC to
withdraw the threat of suspension.
But with neither side backing down, and with Monday's
deadline looming, it had seemed a hiatus in one of the world's
largest construction projects was inevitable, until the
consortium clarified its position on Sunday.
"GUPC does not necessarily have to make any change in the
status of the project tomorrow," the consortium said in a
However, the threat that construction could stop has not yet
dissipated, with the consortium adding that a letter sent on
Dec. 30 demanding payment for cost overruns gave it the right to
suspend work at any time from Jan. 21 onwards.
The consortium is set to meet with the PCA and insurers
Zurich North America on Tuesday to discuss the status of the
work, including its $600 million bond on the $3.12 billion locks
project, the most difficult part of the expansion.
Canal Administrator Jorge Quijano has said the PCA is
already in discussions with other third-party contractors in
case it cannot resolve its dispute with the GUPC. He estimated
the remaining work would cost about $1.5 billion.
GUPC - which also includes Italy's Salini Impregilo SpA
, Belgium's Jan De Nul and Constructora Urbana from
Panama - won the contract to build a third set of locks for the
century-old canal in 2009.
The canal authority has said it is willing to consider
detailed claims for the overruns through arbitration.
Sacyr's chairman, Manuel Manrique, said at a press
conference last week in Madrid that the dispute will not have a
significant impact on the company's earnings and is not putting
its solvency at risk.
The canal is one of the world's most important shipping
routes. The entire project was due to cost about $5.25 billion,
but the overruns could bump that up to nearly $7 billion.