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Panama Canal and Sacyr-led consortium, closer to a deal

World economy

The Corner Team | The Panama Canal Authority and the  building consortium Grupo Unidos por el Canal (GUPC), led by Spanish construction company Sacyr, have both agreed to put up at at least $100 million each to keep the canal work running. The big question remains who should pay for $1.6 billion in cost overruns. GUPC has asked the canal administrator for a $400 million advance. Some Spanish analysts believe they’ll reach an intermediate agreement, in which the Panamanian Government covers half of the costs (circa $800 million), although the consortium would have to sacrifice some profit margin. The Spanish government insists they will not give money “in any case”.

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The meeting comes after Panamanian President Ricardo Martinelli held talks with Spain’s Public Works Minister, Ana Pastor, in Panama City which resulted in a “preliminary agreement”: builders agreed to channel all their claims through the routes set out in the contract. It was the first encounter between both parties since December 30. That day Spanish-led consortium (GUPC), which besides Sacyr includes Italy’s Salini Impregilo, Belgium’s Jan De Nul and Panama’s Constructora Urbana, notified canal managers in a letter that they would suspend work after Jan. 20 if their demands for an additional payment of $1.63 billion weren’t met.

“This means good news for Sacyr, since this negotiation could save the project and eliminate the uncertainties. The most likely scenario is that they’ll reach an intermediate agreement, in which the Panamanian Government covers half of the costs (circa $800 million). On the other hand, the consortium would have to sacrifice some profit margin,” says Juan Moreno, analysts from Ahorro Corporación.

Sabadell Analysts believe this will cause a big damage to Sacyr’s image indeed.

“This [situation] damages the image of the company, since we don’t exactly know the economic impact that the stoppage of the works could have,” they say.

The Spanish government insists they will not provide funds to resume the expansion of the Canal works “in any case”, and its role is limited to a “mediation”.

The Consortium won the project in July 2009 at a cost of $3,12 bn million, a figure that was considerably lower than the cost stipulated by the other two competitors in the bid.

 

 

 

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