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Spain won't help Sacyr financially in Panama canal row
January 6, 2014 / 2:22 PM / 4 years ago

Spain won't help Sacyr financially in Panama canal row

PANAMA CITY (Reuters) - Spain will not provide financial help to a Spanish company leading a consortium locked in a dispute over the costs of expanding the Panama Canal, its ambassador said on Monday as he headed to a meeting with Panamanian officials.

The logo of Spanish builder Sacyr is seen on the company's headquarters in Madrid January 4, 2014. REUTERS/Andrea Comas

Spain’s public works minister, Ana Pastor, began a day full of meetings by holding discussions with officials for building consortium Grupo Unidos por el Canal, which is fronted by Spanish construction company Sacyr (SCYR.MC).

As Pastor entered the meeting, Spanish Ambassador Jesus Silva said his government would provide no financial help to Sacyr in sorting out the row overshadowing one of the world’s most important maritime cargo routes.

“The Spanish government is not a party to this; it is a problem between a contractor and its client,” he said as he accompanied Pastor to the meeting. “Under no circumstances is it contemplated that the Spanish government contribute funds.”

Later in the morning Pastor is due to meet Panamanian President Ricardo Martinelli, who last week accused the GUPC of “great irresponsibility” when it threatened to suspend work on January 20 if the canal operator, the Panama Canal Authority, did not pay for big cost overruns.

The GUPC also includes Italy’s Salini Impregilo (SALI.MI), Belgium’s Jan De Nul and Panama’s Constructora Urbana.

Arguing that the project to build a third set of locks for the canal had suffered unforeseen setbacks, the GUPC said last week it had faced $1.6 billion in added costs. It blamed the Panama Canal Authority for carrying out flawed studies of the geological terrain.

Martinelli has turned on Spain and Italy, saying their governments had given him assurances that they would finish the $3.2 billion project to build the locks, prompting Pastor to fly to Panama to seek an end to the impasse.

PCA head Jorge Quijano has said Panama is prepared to discuss the cost overruns if they prove justified, and a Panamanian official told Reuters the government had considered putting together a bailout with the parties involved.

However, Spain has been coping with a deep economic crisis that has put a strain on the country’s finances.

After her discussions with Martinelli, Pastor is due to meet the canal operators and give a statement to the media at about 5:30 p.m. local time (2230 GMT).


On Sunday, the PCA maintained a firm stance, again rejecting the GUPC’s arguments on the overruns and referred the consortium to the arbitration panels the two sides agreed on when the contract was signed.

    Quijano told Spanish newspaper El Pais that the two-page letter the GUPC had submitted last week did not justify its demands and that the consortium would need to provide more detailed information to make a viable case.

    If work on the project did stop, the authority could take steps to ensure it was completed regardless, “be it by a third party or by the PCA,” Quijano told the paper.

    Sacyr won the canal contract in 2009 with a $3.12 billion offer that was considerably lower than that of at least one rival, as well as below the $3.48 billion reference set by the PCA.

    Less than six months later, Martinelli, Panamanian Vice President Juan Carlos Varela and other top officials were already worried about how the project was progressing, according to U.S. diplomatic cables published by Wikileaks.

    The canal expansion, whose total cost is about $5.3 billion, has been one of the top priorities for the government of Martinelli, whose term in office ends midyear.

    Sacyr, whose debts at the end of September were three times its market capitalization, has also staked a lot on the canal expansion.

    The company made 55 percent of its revenue outside Spain in the first nine months of 2013, and Panama contributed 25 percent of its 1.3 billion euros ($1.78 billion) in international sales, according to its 2013 nine-month earnings statement.

    Additional reporting by David Adams in Miami; Writing by Dave Graham; Editing by Simon Gardner, Eric Walsh and Lisa Von Ahn

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