New Criminal Complaint Filed Against Panama Canal Contractor

January 15, 2016, 4:52 PM UTC
A worker is seen as a Post-Panamax ship passes by the pacific side of the Panama Canal in Panama City
A worker is seen as a Post-Panamax ship passes by the pacific side of the Panama Canal in Panama City January 18, 2013. REUTERS/Carlos Jasso (PANAMA - Tags: TRANSPORT MARITIME) - RTXYMQB
Photograph by Carlos Jasso – Reuters

The international consortium working to expand the Panama Canal is the target of a new criminal complaint, reports the EFE news agency. The complaint alleges that Grupo Unidos Por El Canal (GUPC) attempted to defraud the Panamanian public by reporting inflated cost figures to Panama Canal Authority. The complaint was filed with the Panamanian Attorney General’s Office by Juan Carlos Araúz, vice president of its National Bar Association.

This is just the latest in a string of disputes surrounding massive cost overruns in the project. GUPC has previously pursued arbitration with the International Chamber of Commerce, which awarded it $223 million at the end of 2014 on the basis of apparent misinformation from Panamanian authorities regarding availability of materials.

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However, critics allege that the construction was intentionally underbid by GUPC, and cost overruns have totaled more than $1.6 billionmore than half of its original $3.1 billion bid. A national investigation, the new complaint suggests, would give Panama better standing in international arbitration or criminal proceedings on the matter.

The widening of the canal is widely expected to transform global shipping routes by allowing larger ships to transit from Asia directly to Europe and the U.S. East Coast. Its opening has been delayed multiple times from an initial target of October 2014. The most recent delay came in late December after a series of cracks developed in the new locks.

The plan now is to christen the expanded canal in May, and authorities say construction is 96% complete. The criminal filing, though, could further delay that opening. Last month, GUPC’s director said the project could be delayed by as much as six months if the government’s payment authorizations don’t accelerate. Payments could be further delayed if Panama starts an active criminal investigation of GUPC.

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An investigation would also further worsen already-degraded relations between the contractor and government. Panama’s president has personally called on GUPC to tone down its public condemnations of his government and agencies.

Further delays to the opening of the canal would be bad news for ports along the U.S. East Coast, which have made large investments in upgrading infrastructure like cranes to handle larger ships and bigger volumes. Projections have indicated that as much as 10% of Asian shipping traffic could shift east with the opening of the new canal.