Panama Needs ‘Plan B’ in Case Canal Talks Fail, Ambassador Says

Panama needs a fallback plan to ensure an expansion of the Panama Canal is completed even if negotiations fail to resolve a dispute about mounting costs with the builders, the country’s ambassador to Spain said.

“It’s important to send a message that Panama has to finish the canal and will finish the canal,” Ambassador Roberto Eduardo Arango said today in Madrid. “The Panama Canal and its administrators that are responsible to the nation have to have clear options on the table to go in the case of Plan B.”

A building group including Spain’s Sacyr SA (SCYR) and Milan-based Salini Impregilo SpA (SAL) threatened on Dec. 31 to halt work if it wasn’t paid for an estimated $1.6 billion in cost overruns. Panama’s President Ricardo Martinelli said last month that the $5.25 billion expansion would be completed even if the dispute with the building companies couldn’t be resolved.

Shares in Sacyr climbed 5.7 percent to 3.86 euros at 3:37 p.m. in Madrid while Salini Impregilo shares fell 1 percent to 4.38 euros in Milan.

The Panama Canal Authority said Jan. 31 that it would extend negotiations with the group known as GUPC until today. A spokesman for Sacyr said by phone today it was too early to speak about the outcome of the negotiations.

Panama is counting on the expansion to help it recapture trade lost as shipping companies switch to vessels too wide for the century-old canal connecting the Atlantic and Pacific oceans. The project is 71 percent complete and is supposed to be finished by 2015.

To contact the reporter on this story: Nick Leiber in Madrid at nleiber@bloomberg.net

To contact the editor responsible for this story: Emma Ross-Thomas at erossthomas@bloomberg.net

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