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Proposal offered in Panama Canal row

PANAMA CITY--A consortium working on expanding the Panama Canal proposed Monday that local authorities co-finance a huge budget shortfall that sparked a bitter dispute threatening the project.

The Grupo Unidos por el Canal (GUPC) consortium, led by Spanish builder Sacyr, had warned it would suspend work on the major waterway by Monday unless Panama paid for the US$1.6 billion in cost overruns.

But as the deadline passed, GUPC issued a statement saying the “co-financing of unforeseen costs” would enable continuation of work and completion of the project by 2015.

This, it added, would “allow for revenues totaling billions of dollars annually for Panama.”

But canal authorities said there would be no negotiating outside the existing contract. And analysts said GUPC likely underbid to get the job knowing full well it would be short.

Meanwhile, canal administrator Jorge Quijano told AFP that construction was continuing at “low intensity,” much as it had over the past week.

Union and government officials have said less than half the project's workers were still on the job as of last week.

Quijano also has stressed that construction would go ahead with or without GUPC.

GUPC, which includes Impreglio of Italy, Belgium's Jan de Nul and Constructora Urbana of Panama, has agreed to negotiate with the canal authority within the contract.

The overall canal upgrade was supposed to cost US$5.2 billion, including GUPC's US$3.2 billion contract to build a third set of locks for the century-old canal, which currently welcomes ships that carry up to 5,000 containers.

Already facing delays, the project aims to make the 80-kilometer waterway, which handles five percent of global maritime trade, big enough to handle new cargo ships that can carry 12,000 containers.

Work on the canal began in 2009 with the goal of being done by 2014 to coincide with the waterway's 100th birthday.

But completion was pushed back to 2015 after a first disagreement between the canal authority and GUPC over cement quality.

In the current dispute, GUPC says it ran into costly overruns because the canal authority gave the builders the wrong information regarding the area's geology.

On Dec. 30, the consortium threatened to halt work on the third set of locks, the most important part of the project, giving the canal authority 21 days to agree to pay the US$1.6 billion in unanticipated costs.

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The Panama Canal locks in Colon, 110 kilometers northwest of Panama City, are seen under construction on Friday, Jan. 17.

(AFP)

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