The International Information Center for Structural Engineers

Monday, 06 January 2014 00:00cat

Panama Canal Expansion May Face Delays

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Rendering of the third sets of locks for the canal expansion project Rendering of the third sets of locks for the canal expansion project MWH Global

Spanish construction company Sacyr Vallehermoso announced Wednesday that the Panama Canal Authority has 21 days to pay for the nearly $1.6 billion in cost overruns on the canal expansion project.  Pananma’s President, Ricardo Martinelli, tweeted that he will reject the company’s ultimatum, and he plans to travel to Spain on Thursday to demand that Sacyr and Impregilo (Italian construction company) honor the original terms of the contract.  If the two sides cannot reach an agreement by January 20, the canal expansion contract states that the two parties must head to a Paris-based arbitration court.

The Panama Canal expansion project began on September 3, 2007.  Once completed in 2015, it will double the capacity of the original canal and allow for larger ships to cross the 50-mile route connecting the Pacific and Atlantic Oceans.  The canal is currently 72 percent completed.  Sacyr and the other companies that were awarded the project signed contract in 2009 and negotiated a price for the expansion with the Panamanian Government.  However, in 2012 Panama’s technicians demanded that Sacyr use higher quality and more expansive type of concrete than the plans originally called for.  U.S. company Bechtel, who was outbid by Sacyr for the project, claims that the Spanish company’s bid was unrealistic and would barely pay for the price of the concrete needed to construct the locks.

Sacyr’s shares fell on the Madrid stock exchange on Thursday and finished the day down 8 percent.  Meanwhile, Panama’s economy depends on the canal to bring in over $1 billion annually.  When the project is finished, this figure is expected to rise to $4 billion annually.  The construction of the canal is responsible for 10,000 jobs and Panamanians fill many of those positions.  Also, many ports along the Eastern Seaboard of the United States have already expanded in order to accommodate larger ships passing through the canal once completed.  Any lengthy delays to the project could have wide reaching economic effects.  Labor strikes and bad weather have already pushed back the completion date from 2014 to 2015.

Sources: ABC NewsWall Street Journal

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