Clash Over $1.6B Could Sink Panama Canal Project
Neither builders nor Canal Authority want to give up the funds
By Arden Dier, Newser Staff
Posted Jan 3, 2014 6:17 AM CST
Panama Canal's administrator Jorge Quijano speaks during a press conference in Panama City, Thursday, Jan. 2, 2014.   (AP Photo/Arnulfo Franco)

(Newser) – An ambitious plan to expand the Panama Canal may soon run aground—two-thirds of the way into the project. The $3.2 billion undertaking is supposed to see a third set of locks installed in order to allow larger vessels to pass through the canal by mid-2015. But that price tag has become the issue. The Spanish builder heading the four-nation consortium Grupo Unidos por el Canal that was awarded the project in 2009 now says that due to "unforeseen circumstances," $1.6 billion more will be needed to fund the project, and it wants canal officials to pony up the money.

But the Panama Canal Authority has another idea: Builders can pay the extra costs themselves, the New York Times reports. It maintains that such overruns are a "normal" construction occurrence and that the consortium should foot the bill. And things are getting heated. Panama's president says he'll go so far as to travel to Spain and Italy "to demand these governments take moral responsibility," reports the BBC. Spanish builder Sacyr—a company that's struggled to refinance its debt in the wake of Spain's financial crisis—warned that work would be suspended if the canal authority didn't agree to pay within 21 days.

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Showing 3 of 8 comments
Ezekiel 25:17
Jan 10, 2014 8:00 PM CST
Just wait a couple more years and China will have their canal operating in Nicaragua. Planned by the USA in 1895 and then proposed through time but nobody could come up with the financing. Enter China flush with all that US cash and they are bankrolling it with a Korean construction company.
ohiodude
Jan 4, 2014 8:25 AM CST
You are supposed to quote low then raise the price! That is the democratic way. Just like Obamacare, or any other government bidding process! Duh!
mingju
Jan 3, 2014 1:43 PM CST
The company guaranteed they would do the work for a set price, but a guarantee is only as good as the company backing it. Due diligence on the part of the Panamanian's would have required that they look at the construction record of the company as well as their ability to financially do what they said they would do in the event their construction ability fell short. I am guessing Panama took the lowest bid without doing their due diligence, or they took a calculated risk and lost. That said, this doesn't relieve the company of their legal and moral obligation to do what they said they would do. Perhaps Panama should pay the money needed to finish the project, making a deal with the company whereby Panama takes ownership of the company sufficient to pay for the cost overruns.