Friday, February 28, 2014

Deal reached resolving Panama Canal row

A row over $1.6 billion in cost overruns on construction to widen the Panama Canal has been resolved, the parties said Friday, ensuring completion of the massive project.

The Panama Canal Authority and the consortium "Grupo Unidos por el Canal" (GUPC) announced "a final agreement in principle" after intense talks to resolve a two-month-long standoff.

"The plan here is that we would enter into commercial operations in January 2016," said Jorge Quijano, the canal administrator.

Under the original schedule, the canal expansion was supposed to have been ready this year.

The agreement offers co-financing of the construction, while awaiting the result of arbitration to assign final responsibility for the cost overruns, the consortium said.

In their deal, both sides agreed to make an immediate payment of 100 million dollars to the project, a cash infusion that will permit "the normal rhythm of work" to resume, the canal authority said.

The accord also extends until 2018 a moratorium on payment of a $784 million loan which the canal authority had advanced to GUPC. Paperwork was being drawn up for the agreement and was to be signed "shortly," the parties said in a statement said.

"GUPC expects the prompt conclusion of the agreement and the financing with the aim of executing the works and completing the project efficiently," it said.

Quijano said the agreement was not perfect, but "it has the advantage that we can resume work rapidly and with the injection (of funds) we could be talking about completion of the projection in 2015."

Seen as one of the world's engineering marvels, the century old waterway handles five percent of the world's maritime trade.

The construction to add wider locks and channels capable of handling much larger container ships is one of the world's most ambitious civil engineering projects.

But in early February, a financial row led to a complete two-week suspension of the project by GUPC, which includes Sacyr, Italy's Salini Impregilo, Belgium's Jan De Nul and Constructora Urbana of Panama.

Work resumed on the massive construction project on February 20, and completion on the project is now assured following Friday's deal.

Relief over the agreement was palpable on both continents Friday.

Voice of Russia, AFP

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