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Expanding the Panama Canal

by LAWRENCE REICHARD

Imagine a government-funded public works project in the US with a price tag of $1.9 trillion, half the federal budget and 11.3 percent of GDP.  The project is to widen a coast-to-coast canal, which, along with related industries, accounts for about 30 percent of GDP.  Imagine that no domestic company can handle the job and the contract is awarded to a foreign conglomerate with a history of considerable delays and cost overrruns.  Imagine the president´s family is connected to a conglomerate subcontractor employed to provide at least some of the 600 million tons of cement needed for the job (91 times the concrete in the Hoover Dam).

Imagine that the project has big implications for global trade, and US trade in particular.

Imagine that with 70 percent of the work done, project workers start to complain about unpaid wages.  Soon thereafter the contactor announces that it needs another $950 billion – a 50 percent hike – to finish the job, and when talks between the foreign conglomerate and the project authority break down the conglomerate halts construction, throwing thousands of workers out of work and costing the government millions of dollars a day.  And to top it all off, winter is on the way, and vital good-weather construction days are screaming by.

That – on a US scale – is exactly what is facing Panama in its effort to expand the Panama Canal so that it can accept oil supertankers and other massive ships that can´t transit the current canal.

But it goes beyond that.  It took Panama 85 years and bloodily-suppressed riots to shake the yoke of US ownership of the canal and a broad swath of former national territory on either side of the waterway, and now this country of 3.6 million is going right up against another foreign behemoth, United for the Panama Canal (UPC), a group of corporations led by the Spanish construction conglomerate SACYR.  But as big as it is, this fight is but a microcosm of a world struggle in which huge corporations have largely supplanted nations as the bullies of the block, pushing around small nations, particularly dark-skinned ones.  There´s Texaco in Ecuador, and Canadian mining companies in Guatemala, Honduras, El Salvador.  The list goes on and on.  According to Panama Canal Authority Administrator Jorge Luis Quijano, other small countries are calling Panama and watching closely how Panama stands up to SACYR´s might.  Clearly Panama´s refusal to be pushed around on this has implications well beyond Panama´s borders.

I arrived here in Panama on the fateful day of February 5, the day the canal work stopped, and the entire country has been riveted by the story since then, and longer.  It´s never far from anyone´s mind or lips.  The other night I had dinner in a veritable museum in one of the high-rise condo buildings sprouting up like mushrooms all over Panama City in a firestorm of economic growth fueled by the canal expansion, the city´s new metro, but most of all by drug money that is pouring from neighboring Colombia straight into the bulging coffers of Panama´s very discreet banks.  If one needed detergent to launder money, Tide would make a killing in this place.

But back to the dinner.  The guests were beseeching my well-connected retired canal engineer friend to immediately tell all he knew about latest developments.  “The whole thing makes me cry on a daily basis,” one guest said.

On February 12 Canal Authority Administrator Quijano addressed the situation in testimony to the National Assembly that was televised throughout the country.  The country was glued to the hours-long spectacle that Quijano braved on his feet with nothing but water to sustain him as puffed-up asamblistas lined up for their moment in the sun, replete with gesticulations that would make Il Duce proud.

Quijano is a story in himself.  Distinguished, clear, unwavering, articulate, eloquent – and yes, even handsome – he commands attention and respect.  The man´s got Presidential Material written all over him, and should he fail at that, he´d be just right to host Jeopardy or a reborn Fantasy Island.

Referring to the old colonial Spanish monetary unit, Quijano, in oratorical flare, railed that Panama would not pay one real outside the terms of the contract with UPC, and that Panama would under no circumstances submit to blackmail.  Strong words.  If only Robert Byrd were around to grill Halliburton in such fashion on national tv.  I´d call in sick and watch it.

Quijano sought to quell rumors louder and more numerous than the army of dengue-laden mosquitos that scream at my ears as I try to sleep at night.  Among the biggest and most persistent of the rumors is that SACYR´s bid was fully one third less than the only other bid, thus calling into dire question the legitimacy of the bid and the bidding process.  Not so, said Quijano, the bids were only a few percentage points off each other.  What is more, he said, the winning design was much better, and simpler, and by its simplicity promised less environmental damage and lower maintenance costs.

But for all the asamblista breast beating, no one asked Quijano why SACYR´s well-known history of considerable delays and cost overruns didn´t affect its bid.  Recently the former head of SACYR scorched his former paymasters for its dealings, and word on the street here is that SACYR´s less-than-stellar record was common knowledge before it won the Canal contract.

So Canal Administrator Quijano dodged a bullet when that whole aspect of the story didn´t pop up in his Asamblea Q&A.  But then again he wasn´t El Administrador when the deal went down.  That prize goes to the previous administrator, who some think was eased out of office, at least in part, by President Martinelli, whose family has presumably benefited handsomely by supplying substandard concrete that must now be fixed and reinforced, and now constitutes perhaps SACYR´s primary justification for its very considerable cost overruns.  In the original contract UPC said it would deliver concrete, to spec, at $9 a ton.  Now UPC says it needs $21 a ton; but Quijano says Panama can deliver the needed concrete, to spec, at $6.50 a ton.  Panamanians love to talk politics, and I haven’t talked politics with a single Panamanian who so much as drew breath before describing Martinelli as corrupt.

In his Asamblea address and Q&A, Quijano gave no quarter to UPC or Panama Canal Authority (PCA) critics.  The Authority, he said, spent five years and $14 million studying the legitimacy of the bid and the design; and the contract, he said, is exhaustive and airtight.  The contract sets up an arbitration board to handle disputes.  So far three disputes have been lodged.  Two were decided in favor of the PCA and the third is still pending.  As if exhorting Moses to come down from the mountain, Quijano invited UPC to bring this dispute before the panel.

Pressed by asamblistas, Quijano first said an agreement would have to be printed and signed by the end of the workweek or Panama would set out on its own and restart construction next week.  But pressed again he pushed the deadline back to February 18.  The widened canal was initially scheduled to open in July 2015, but Quijano said construction would have to resume next week in order to salvage any kind of 2015 finish date.  Quijano went on to say it would be difficult, painful and risky for Panama to strike out on its own, but he expressed confidence that ultimately Panama would succeed on its own, and he said the cost of further delay was fast catching up with the risk of going alone.

And looming over the whole thing is the possibility of a $40 billion Chinese-financed and perhaps Chinese-constructed canal through Nicaragua, an idea that has caused much salivating and lost sleep in that woeful land since before Anastasio “Tachito” Somoza and his dad Tacho, with US blessing, accumulated no less than ten percent of the country’s national territory.  My retired canal engineer friend says it´s practically a done deal, take it to the bank, it’s just a matter of time, maybe ten years.  Yet another reason 3.6 million Panamanians, scraping by on $9,500 a year, are anxious to resume work on a project that´s gonna devour at least 11.3 percent of their GDP.

Lawrence Reichard is a freelance writer currently residing in Panama.  He can be reached at lreichard@gmail.com.

Lawrence Reichard lives in Belfast, Maine, and can be reached at lreichard@gmail.com.

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