The Panama Canal is a 77 kilometre long shipping channel that was completed in 1914 and connects the Atlantic and Pacific Oceans. It remains one of the largest and most difficult engineering project to ever be completed. Currently there are major civil works being done to expand the canal which will double the canal’s capacity. The $5.25 billion project began in 2007 and is expected to be completed in 2015, although that date is now in question.
The current builders of the new locks are threatening to halt work due to a dispute of $1.6 billion of cost overruns. The Panama Canal Authority, a semi-autonomous organisation responsible for the Panama Canal, are refusing to pay the money and have stated that they are following the contract and so should the builders.
The builders are a consortium of contractors from Spain, Italy, Belgium, and Panama called the Grupo Unidos por el Canal (GUPC). Sacry, a Spanish company, heads the consortium and have argued that the Canal Authority’s geological studies were faulty and have forced them to go over budget.
The GUPC won the contract to build a third set of locks, which is just one part of the overall expansion project, in 2009 for $3.2 billion. This was considerably lower than any other bid and lower than the reference figure of $3.48 billion set by the Panama Canal Authority.
Months ago correspondences were released by Wikileaks between the US Embassy in Panama and the American contractor that bid for the job: Bechtel. Bechtel warned that the bid from the GUPC wasn’t enough to even pay for pouring the concrete and that the GUPC would be forced to renegotiate the contract.
There are some suspicions that in Spain; Sacry secures contracts by bidding at a low price and then making up the money with addendum and unexpected cost overruns. It is possible that is what is being done here.
The Panama Canal Authority have stated that if the GUPC decide to halt work and break the contract that they will be able to use the surety bonds they would receive to pay for another contractor to complete the works.
The referendum for the expansion project was approved by the Panamanian people with 77% of the vote. The Panama Canal Authority is financially independent of the government of Panama and is paying for the project.
Five per cent of the world’s trade goes through the Panama Canal every year, and the expansion will likely see that number increase as global trade routes will shift. This is because the expansion will double the maximum allowable size of ships to pass which would allow the world’s largest cargo-carrying vessels access to the Canal. The Panama Canal Authority made $2.2 billion in tolls in 2012. The expansion should see that number more than double.
Two-thirds of the traffic through the canal is either going from or going to the US. The expansion will allow not only more ships to go through but also allow much larger ships to pass. This is expected to have a large impact on US ports and US port authorities are expected to spend $46 billion in the next few years to improve infrastructure in order to meet the new demand. Liverpool has even been contemplating an upgrade in expectation of the new demand.
The Panama Canal has been named one of the seven wonders of the modern world by the American Society of Civil Engineers. It is one of the greatest civil engineering triumphs and by far the largest American engineering project to ever be completed at the time. Work began in 1881 by the French. In 1889 the French company went bankrupt spending $287 million (equivalent to $6.7 billion now) and losing 22 000 lives to accidents and disease. In 1903 the US obtained the lease to the area and began construction which would last for 10 more years and claim 5 600 more lives.
Initially the canal was to be built at sea level just as the Suez Canal was, and this was how the French began the project. Further geological surveying, though, made a system of locks more feasible than a sea level canal. This would lead to the creation of the largest man-made lake and largest dam in the world at the time.
Construction of the canal not only saw the creation of an engineering marvel but also the birth of a nation. During the year the Americans began construction the then-Province of Panama revolted from Colombia and declared independence. During the revolt US Warships stationed at the canal blocked and delayed Colombian troop ships sent to put down the rebellion. The United States were the first country to recognize the Republic of Panama in 1903. The US remained in control of the canal until December 31, 1999 when control was handed to the Republic of Panama.
It took 37 years for the Canal to be built; from the beginning of construction by the French to the completion by the Americans. The Panama Canal represents not only a 12 600 kilometre saving shortcut but also a symbol of American civil engineering. By completing the monstrous undertaking that the French had failed at, the US showed the world that at that time they were the leaders in the engineering world.
This year marks the 100 year anniversary of the completion of the canal. The expansion project is 72% complete but unless the GUPC and the Panama Canal Authority can come to agreement, the project will come to a grinding halt. The GUPC set an ultimatum date of January 20 which will come to pass before this article is released so by the time you read this either the expansion will be stopped at the cost of thousands of jobs and millions in unseen tolls, or construction will continue as planned and the 100th anniversary of the Panama Canal can be marked with a brand new set of locks.
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