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Panama Canal head says solution may be in sight
Panama Canal head says solution may be in sight to $1.6 billion cost overrun dispute
By JUAN ZAMORANO
Associated Press
2014-01-22 03:01 AM

PANAMA CITY (AP) -- The head of the Panama Canal said Tuesday that there may be a solution in sight to the $1.6 billion dispute that has threatened to halt work on the canal's expansion.

Administrator Jorge Luis Quijano said that the consortium expanding the canal has proposed a resolution "with some potential" to resolve the dispute. He offered no details and the consortium, United for the Canal, made no immediate comment.

The two sides and the authority's insurer met Tuesday to negotiate who will pay for cost overruns that led the Spanish-led consortium to threaten to halt work on a third set of locks that would allow far larger ships to pass through the canal.

"It's a proposal that could provide a long-term solution and move the project forward," Quijano said.

The construction group led by Spain's Sacyr Vallehermoso said Sunday that a stoppage was "not a scenario being considered at this moment."

In a statement Monday, the consortium said co-financing of the extra costs with the authority would allow it "to continue the work, which directly employs nearly 10,000 people, and it would achieve the completion of the project by 2015."

The canal authority has said the contract allows the consortium to stop work only if the agreed monthly payments by the authority are not disbursed, which has not happened.

The project, now three-fourths complete, would double the capacity of the 50-mile (80-kilometer) canal, which carries 5 to 6 percent of world commerce.

Officials have said that work on the expansion has declined by 70 percent since November and that hundreds of workers were let go because of the slow pace of the megaproject.

The consortium blames the cost overruns largely on problems with the studies carried out by the Panamanian authority before work began. It says geological obstacles encountered while excavating have prevented it from getting the basalt needed to make the vast amounts of concrete required for the expansion.

Many experts say the root of the conflict lies in the consortium's underestimation of the project's costs when it won the canal expansion contract in 2009 by submitting by far the lowest bid: $3.1 billion for its portion of the job, $1 billion less than a bid led by the U.S. construction giant Bechtel.

U.S. ports have invested billions in dredging, raising bridges and renovating docking infrastructure to accommodate the new generation of larger ships that could pass through the expanded canal.

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