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Investment and Panama Canal Expansion Delays
In late 2012 we wrote that
seldom has a major construction project had such as wide ranging effect on investment opportunity as the Panama Canal expansion. Panama investment and the Panama Canal expansion are easy to understand. But there are wider ranging connections to investment and the Panama Canal expansion up and down the Atlantic coast of the Americas. Shipping experts expect to see substantial and permanent changes in shipping patterns and trade once the “third lane” addition of substantially larger locks and widened shipping channels is completed in 2015. Whether your interest is to invest in middle class growth in Latin America or a resurging North American economy a close look at the Panama Canal expansion will be useful.
Today we want to look at investment and Panama Canal Expansion delays. A consortium of Spanish, Italian and Panamanian companies won the bid to build the new locks for the Panama Canal with a bid that was a billion dollars lower than that of the next higher bidder. That bidder, led by Bechtel, was quoted as saying that the consortium that won the bid could not pour the cement for $3 billion while they bid the entire project for $3.25 billion. Today the chickens have come home to roost as the Spanish led consortium is asking for $1.6 billion extra to continue the project and use of European Union negotiators to arbitrate. The Panama Canal Authority notes that the contract has provisions for contract disputes and none of those provisions include bringing in a third party! As the Panama Canal Authority re-negotiates with the consortium we concern ourselves with investment and Panama Canal Expansion delays. The project was originally to be finished in 2014. Then 2015 became the end date and now it may be much later.
The Panama Canal
The United States built the Panama Canal and used it as a military asset. When Panama took over the operation of the canal at the very end of 1999 it upgraded the canal for commercial shipping and ran the canal for a profit. Today the canal pays a billion dollars a year directly into the Panama treasury and is the center piece of ports, container terminals, and the second largest free trade zone in the world. Panama decided to build a new set of locks to accommodate larger ships which is the start of our fundamental analysis of investment and the Panama Canal expansion.