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Panama Canal Expansion No “Disaster”

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Several experts refute the notion that the Panama Canal expansion is a 'disaster" and praise its transparency and on-time schedule.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue 

In mid-December, Wikileaks cables came to light from various Panamanian officials expressing serious concern about the multi-billion-dollar project to expand the Panama Canal. President Ricardo Martinelli was quoted saying he was worried about the project, while Vice President Juan Carlos Varela called it a "disaster" and questioned the consortium's ability to perform adequately. Martinelli has since denied the reported troubles and said he has total confidence in the project. What is the state of the Panama Canal's expansion project? Will the cables' exposure have long-term effects on the project or on the Martinelli administration?    

Robert McMillan, of counsel to Bee Ready Fishbein Hatter & Donovan and former chairman of the Panama Canal Commission: The Wikileaks cables dealing with the construction of a third set of locks at the Panama Canal were blown out of proportion by the media. Assuming procedures at the canal were followed, the awarding of the $3.2 billion contract to build the third set of locks to the Spanish Sacyr coalition was not out of line. It was probably more about the failure of Bechtel's efforts to put together a competitive bid. The Panama Canal Authority has made every effort to ensure the most transparent process possible. Set procedures were laid out by the authority to deal with the selection of the 'consortia' which was to undertake the construction of the third set of locks-the largest contract to be awarded in the expansion project. One of the world's largest accounting firms was scheduled to work closely with the authority's staff to be sure that the Third Set of Locks Evaluation Committee followed closely the vigorous guidelines for the selection process. In addition, two world-class law firms were selected to oversee construction contracts and loan agreements. One other effort made by the authority to be prepared to handle the massive expansion effort was to have the University of Texas at Dallas provide training for canal executives and staff. Some 145 authority employees received extensive training by the university in Panama. Finally, let me say there is nothing wrong with examining the transparency of the expansion project. So long as transparency and democracy remain as the focal points for Panama, I am sure the nation will continue to prosper and develop.

Heather Berkman, Latin America analyst at the Eurasia Group: There is clearly more than meets the eye with respect to the expansion of the Panama Canal and the maneuverings behind the contract bidding process. In 2009, a consortium comprised of Spanish company Sacyr Vallehermoso and Italian company Impregilo won the contract to construct a third set of locks with a bid worth $3.12 billion, though eyebrows were raised given that the bid was at least $1 billion less than the next competing bid (offered by a group led by U.S.-based Bechtel), and that the president of one of Sacyr's partners-Panamanian construction company Constructora Urbana SA-is a relative of Panama Canal administrator Alberto Alemán Zubieta. The Wikileaks cables revealed a (clear though unsurprisingly) strong U.S. government lobbying effort on behalf of Bechtel's bid, and recent articles in Spanish leading daily El Pais have lambasted the United States for spreading 'rumors' about the Sacyr consortium's ability to undertake the project. It is certainly true that Sacyr Vallehermoso's stock price has plummeted in recent years-though it's less clear whether its high debt levels and the company's projected future earnings will impede its ability to undertake the project. While we don't know why Vice President Juan Carlos Varela has reportedly called the project a 'disaster,' we do know that the canal's importance for international trade (5 percent of international trade flows pass through it), Panama's economic growth and the government's financial situation mean that a smooth construction process is essential. Meanwhile, the cables' exposure probably won't further damage already tense U.S.-Panamanian relations in the long term, but they have certainly exposed how politics and behind-the-door lobbying efforts have raised doubts regarding the transparency and integrity of public works bidding processes.

Juan Sosa, president of the U.S.-Panama Business Council and former Panamanian ambassador to the United States: The Panama Canal, under Panamanian administration, has performed admirably for 11 years. This speaks very highly for its board of directors, administration and workers. The expansion project was decided after numerous studies and analyses that confirmed beyond the shadow of a doubt the need for such an expansion. The international shipping community is aware of the excellence in the administration of the canal, has repeatedly shown confidence in it and wholeheartedly supported the expansion program. The bidding process in selecting firms engaged in the expansion has been an example of fairness, professionalism and transparency. The U.S.-Panama Business Council has been engaged in the process since its inception and is pleased by the way that it has developed. We are also pleased that the project is on-time and on-budget, something that is extremely rare in infrastructure projects of this magnitude. Our council has scheduled its biannual transportation conference, ExpoTrans, for June, at which time an update of the project will be presented. We are confident that the international shipping community will not be distracted by publications that do not reflect the true nature of the excellent work that is being performed in the execution of the expansion project.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter. 

 

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