3 Jan 2014

Cost overruns hit Panama Canal expansion

10:54 am on 3 January 2014

The consortium constructing a massive expansion to the Panama Canal has threatened to halt work unless $US1.6 billion in cost overruns are paid.

Grupo Unidos por el Canal has given the Panama Canal Authority 21 days to resolve the dispute, before it halts work.

But the Authority says the consortium should respect the existing contract. It argues the cost overruns are due to events that should be "normal" in such a construction project.

"No matter what kind of pressure is exercised against the ACP (Panama Canal Authority), we maintain our demand that Grupo Unidos por el Canal respect the contract that they agreed to and signed," canal administrator Jorge Quijano said in a statement in Panama on Wednesday.

Work on the $US3.2 billion expansion began in 2009 and construction is due to be completed in June 2015, nine months behind schedule.

The BBC reports most of the work involves building a third set of locks that can accommodate ships that can carry 12,000 containers.

At the moment, the biggest ships that can navigate the canal carry 5000 containers.

The consortium comprises companies from Spain, Italy, Belgium and Panama.