January 6, 2014 / 11:07 PM / 4 years ago

Panama Canal proposes joint financing to end cost row

PANAMA CITY (Reuters) - The head of the Panama Canal on Monday proposed that it and a Spanish-led consortium expanding the major maritime cargo artery plug a financing gap between them, and said the sides had agreed to talks on Tuesday to defuse a row over huge cost overruns.

The governments of Spain and Panama distanced themselves from the dispute on Monday, saying it was up to the Panama Canal Authority and the consortium led by Spanish construction company Sacyr to solve the dispute.

Halting work on the $5.25 billion project to widen and deepen the canal would be a setback for companies eager to increase cargo volumes passing through the century-old waterway, especially the first-ever liquefied natural gas (LNG) exports from the U.S. Gulf coast to Asian markets as well as other bulk commodity shipments.

“We are talking about some additional funding that they would have to put up and we could also provide,” Jorge Quijano, the head of the Panama Canal Authority which administers the waterway, told reporters after meeting with visiting Spanish public works minister, Ana Pastor, who is mediating.

“We have set out what we can do to contribute, as long as they also contribute,” he added.

There was no immediate word from building consortium Grupo Unidos por el Canal (GUPC) on the proposal.

Spain’s ambassador to Panama, Jesus Silva, said earlier on Monday 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.

Last week, Panamanian President Ricardo Martinelli accused the consortium of “great irresponsibility” when it threatened to suspend work on January 20 if the Panama Canal Authority did not pay for big cost overruns.

The GUPC also includes Italy’s Salini Impregilo, 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 had earlier 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.

On Monday, both he and Pastor said their governments would stay out of the spat.

Additional reporting by David Adams in Miami, Fiona Ortiz in Madrid and Gabriel Stargardter in Mexico City; Writing by Dave Graham and Simon Gardner; Editing by Nick Zieminski and David Gregorio

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