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Monday 'crucial' for Panama Canal

| Friday, Jan. 17, 2014, 6:21 p.m.
In this Jan. 11, 2014 photo, cargo ships wait to pass through the Gatun locks at the Panama Canal in Gatun, north of Panama City. The Panama Canal is being expanded to accommodate a new generation of larger ships, known as post-Panamax, which have more than twice the carrying capacity of those able to pass through the canal today. But cost overruns are threatening a work stoppage. (AP Photo/Arnulfo Franco)

PANAMA CITY — On a hot September morning, a powerful explosion demolished a rocky slope on the banks of the Panama Canal, announcing to the world a gigantic expansion that the canal's managers promised would transform global trade when it was completed in 2014, on time and under budget.

U.S. ports invested billions of dollars in dredging, raising bridges and renovating docking infrastructure to accommodate the new generation of larger ships that could pass through the expanded canal.

Now more than four years after construction began, these ports and the Panama Canal Authority are facing the prospect of a work stoppage on the $5.25 billion expansion over a financial dispute — an unexpected blow to a project long seen by many as the epitome of competent management in a region where major infrastructure initiatives tend to be marred by cost overruns, delays and shoddy workmanship.

The Spanish-led consortium hired to handle the biggest part of the canal expansion says it will halt work by Monday if the canal authority does not come up with the funds to cover $1.6 billion in cost overruns, while the authority insists the consortium live up to the terms of the original contract.

The expansion project, now 72 percent complete, would double the capacity of the 50-mile canal, which carries between 5 and 6 percent of world commerce.

“Monday will be a crucial day in the history of the Panama Canal and for us as a country that wants to carry out projects of great size,” Jose L. Ford, president of the Panamanian Chamber of Commerce, Industry and Agriculture, said after meeting with canal authority directors this week.

A stop-and-restart of the canal expansion, one of the largest construction efforts in the world, could mean a delay of months or even years, setting back the arrival of bigger ships and higher fees to ports along the entire U.S. East Coast, some of which have been carrying out their own improvements.

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