Panama Canal work stops in $1.6bn row

Panama Canal extension, 5 Feb 2014 The canal extension is expected to take cargo ships carrying up to 12,000 containers

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The Spanish-led consortium working on a project to widen the Panama Canal has said that work at the site has been halted over a disagreement on cost overruns.

The construction group says it is owed $1.6bn (£1bn).

The Panama Canal Authority (ACP) said the demand amounted to blackmail.

The new lock, which was due to be completed next year, would allow the passage of larger cargo ships in one of the world's busiest maritime routes.

Failed talks

On Wednesday, the consortium - officially known as Grupo Unido por el Canal (GUPC) - denied that construction work had been suspended.

It said 10,000 jobs were at risk if there was a stoppage.

But in a statement on Friday, the group blamed the Canal Authority for failing to extend a negotiation protocol.

In the protocol, the building companies agreed to carry on negotiating without threatening to suspend the work, while Panama promised not to cancel the contract signed by both parties

"While awaiting an agreement to enable the finalisation of construction, work has been suspended on the project," announced the consortium in a statement.

Panama Canal extension, 5 Feb 2014 Work at the Panama Canal's third lock began in 2009

The GUPC says the Canal Authority has also failed to pay an outstanding $50m bill, which would allow the companies to carry on the work in the short term.

But the consortium said it would "continue the efforts to find a joint solution and reach an agreement with the ACP".

The Panama Canal, linking the Atlantic Ocean to the Pacific, is celebrating its centenary in August.

More than 13,000 ships use the maritime shortcut every year.

Construction of the canal's expansion was due to be completed in June 2015, nine months behind schedule, with the overall cost of the project estimated at $5.2bn.

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