Work has slowed down the past month on the construction of massive new entrances to the Panama Canal, but if the consortium in charge follows through on its threat to suspend activity because of a contract dispute, the project could take several more years to build, according to arbitrators helping to oversee the project.
The Panama Canal expansion project's Dispute Adjudication Board said in a December letter
to the Panama Canal Authority (ACP) and international contractor Grupo Unidos por el Canal that any pause in construction would add considerable time to the schedule, according to Reuters
The news agency said it saw a copy of the letter.
GUPC is claiming an additional $1.6 billion in cost overruns for what it says were unforeseen circumstances, including ACP's rejection of the initial concrete mix almost two years ago for supposedly failing to meet specifications. It has relaxed a Jan. 21 deadline for resolving the issue as talks continue. The ACP has offered a cash infusion to ensure GUPC can pay subcontractors and keep work going, but so far has refused to reimburse the consortium for any of the expenses in dispute.
"If GUPC was to stop work now, the Canal would be finished, but not in 2015 — more likely in 2018, 2019, or 2020," the panel of independent advisers wrote.
The planned completion date has already slipped from October 2014 to mid-2015, barring further delays. Canal officials say the new locks should open for business in the fourth quarter of 2015. They insist the project will be completed by another contractor, if necessary, but ACP statements of ongoing commitment have only left the impression that the work will be completed in 2015, without clearly specifying whether that will be possible.
However, Panamanian President Ricardo Martinelli, speaking at the World Economic Forum in Davos, Switzerland, insisted that the job would be finished in 2015.
Earlier this month, GUPC member Salini Impregilo of Italy said a breakdown in negotiations would delay the expansion project by at least three years, in large measure because the massive locks in Italy would not be delivered and would have to be manufactured again by another firm even if a replacement contractor was found for the on-site construction.
The wider locks and channel improvements are designed to handle much larger cargo vessels being deployed by shipping lines. U.S. ports are also investing to upgrade channels, berths and land-side infrastructure to accommodate larger vessels, but most ports are far behind in improvements, especially harbor deepening, because of federal budgetary and regulatory constraints.
Port officials gathered in Tampa, Fla., last week for a trade workshop organized by the American Association of Port Authorities said any delays to the Panama Canal expansion would give U.S. ports more time to catch up on investments so they don't miss out on business from northeast Asia and South America.