Panama rejects canal corruption fears

By Adam Thomson in Panama City
Financial Times
March 2, 2009

The head of the Panama Canal Authority has rejected fears that corruption and the global financial crisis could mar ambitious plans to expand capacity of the inter-ocean seaway.

Four consortiums, comprising many of the world's leading engineering and -construction companies, are expected tomorrow to submit bids to design and build a set of locks for the canal.

The estimated $5.25bn (€4.2bn, £3.7bn) project, by far Panama's largest infrastructure endeavour since the canal was completed in 1914, aims to double capacity and is considered vital to accommodate recent global shipping trends.

However, the project's sheer size and ambition have raised concerns in some -circles, given the history of corruption that has been associated with many large state-funded endeavours in Latin America.

In a recent interview with the Financial Times, Alberto Alemán, administrator of the ACP, the autonomous government agency that runs the canal, dismissed such concerns.

"I just don't see it," he said. "The way we have conducted this process is by being transparent and open and I don't expect this [contract] to be any different."

Mr Alemán said that the proposals to be presented tomorrow would consist of two parts: the technical design of the new locks and the costing. He said that cost estimates would be kept in a sealed envelope to ensure transparency until the designs had been fully -evaluated.

As an additional measure, the ACP last month hired Deloitte as contracting auditor to scrutinise the technical side of the proposals, as well as to ensure the ACP's evaluation committee stuck to rigorous analysis of the offers. "They [the consortiums] can feel confident that they are playing on an even field."

On fears that the global financial crisis would cast a cloud over the expansion plans, Mr Alemán pointed to the $2.3bn received in funding in December from five multilateral agencies, with the Japan Bank for International Co-operation putting up $800m of that.

The rest, he said, would come from the canal's operating income, which he expected to remain fairly stable in spite of some recent reduction in volumes.

"We are seeing a dip in the curve but this is a long-term project," Mr Alemán said. "This project continues, it has financing in place and it will be opened in 2014."