4 Jan 2014

Spain and Panama in talks over canal project

6:37 am on 4 January 2014

The Spanish government is in talks with Panama to try and resolve a row over the expansion of the Panama Canal.

The public works minister and the chairman of Sacyr will fly to Panama this weekend, following a meeting between diplomats on Friday.

Work began on the expansion of the shipping hub in 2009, but the BBC reports the the project is over-budget by $US1.6 billion.

Panama Canal locks under construction in August.

Panama Canal locks under construction in August. Photo: AFP (file)

The Grupo Unidos por el Canal consortium, which is led by Sacyr, has threatened to halt work unless the extra money is paid.

The GUPC is building a third lock which will allow bigger ships to pass through. A deadline of 21 days was given on 30 December to the Panama Canal Authority to make the extra $US1.6 billion payment. If it does not, the group said it will stop work on the expansion plans.

The group is made up of SpainSacyr, Salini Impreglio of Italy, Jan De Nul of Belgium and Constructora Urbana of Panama.

A spokesperson for Spain's foreign ministry said: "Panama is a country that is close and friendly towards Spain, and we share the desire and interest to find a solution as soon as possible".

Spain's Ambassador to Panama Jose Silva added that all stand to lose out if the contract fell through.

On Thursday, President Richard Martinelli of Panama threatened to demand that the building consortium fulfil its contract to expand the canal.

The BBC reprots construction is due to be completed in June 2015, nine months behind schedule. The overall cost of the project now expected to be $US5.2 billion.