VZCZCXYZ0023
RR RUEHWEB

DE RUEHZP #1236/01 2041237
ZNR UUUUU ZZH
R 231237Z JUL 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0854
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHEFDIA/DIA WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RHMFIUU/COMDT COGARD WASHINGTON DC

UNCLAS PANAMA 001236 
 
SIPDIS 
 
SIPDIS 
 
FOR STATE WHA/CEN - TELLO 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EWWT FCSC PM
SUBJECT: PANAMANIAN FIRM WINS FIRST CANAL EXPANSION CONTRACT 
 
¶1. (U) SUMMARY. On July 6, 2007, the Panamanian company, 
Constructora Urbana S.A. (CUSA), presented the lowest bid on 
the Panama Canal expansion project's first construction 
contract, and was awarded the contract on July 16.  CUSA is 
Panama's largest highway/heavy construction contractor.  The 
company is a private, family-run business operated by Panama 
Canal Authority (ACP) Administrator Alberto Aleman Zubieta's 
cousin, Rogelio Aleman.  ACP and GOP officials, as well as 
certain business leaders, assert the contract bidding process 
was transparent.  Post is unaware of any improprieties in the 
bidding process for this first contract.  CUSA is a 
well-regarded company which has previously rendered services 
to the ACP.  The project is the first of five separate 
contracts to perform dry excavation work to link the Pacific 
entrance of the new locks with the Gaillard Cut (the 
narrowest stretch of the Panama Canal).  END SUMMARY. 
 
--------------------------------------- 
ACP Administrator Linked to Winning Bid 
--------------------------------------- 
 
¶2. (U)  On July 6, 2007, CUSA presented the lowest bid on the 
Panama Canal expansion project's first construction contract. 
 On July 16, the ACP awarded the contract to CUSA after 
concluding CUSA met all ACP contracting requirements.  CUSA 
is Panama's largest highway/heavy construction contractor. 
The contract is to begin the dry excavation work for the new 
third set of locks on the Pacific coast.  Of the ten bidders, 
CUSA's almost $41.1 million bid was $2.4 million less than 
the second lowest bid from the Mexican-Panamanian consortium 
MS Internacional-Meco Santa Fe (MS).  The sole U.S. bidder, 
Jay Cashman, Inc. (Cashman), was the highest bidder at $89.9 
million. 
 
¶3. (U)  The bidders and their respective bids, other than 
CUSA, were MS ($43.5 million), the Mexican-Panamanian 
consortium controlled by Mexican billionaire Carlos Slim, 
Cilsa Panama-Minera Maria ($44.4 million); the Panamanian 
company, International Underground Corp. ($47.6 million); the 
Colombian-Panamanian consortium, Coresa ($48.2 million); the 
Colombian-Brazilian consortium, Epsa Masering Murica ($55.2 
million); the Italian company, Astaldi-Ghella Spa ($61.9 
million); the Mexican-Panamanian consortium, Grupica ($73.1 
million), the Colombian-Panamanian consortium, Condor 
Proimpetrol Panama ($79.9 million); and Cashman ($89.9 
million) 
 
¶4. (U)  CUSA was founded in 1955 and is staffed primarily 
with former Texas A&M engineering graduates.  It is a 
private, family-run business operated by Aleman Zubieta's 
cousin, Rogelio Aleman.  Zubieta joined CUSA in 1973 after 
graduating from Texas A&M.  He eventually became CUSA's 
president and CEO before joining the ACP in 1996.  Zubieta 
had a 15% equity stake in CUSA which he claims to have sold 
in June 2005. 
 
¶5. (U)  CUSA has won prior ACP contract solicitations.  CUSA 
won the 2005 contract solicitation to perform excavation work 
as part of the ACP modernization plans. 
 
¶6. (U)  In response to inevitable criticism, on July 10, 
Minister for Canal Affairs, Dani Kuzniecky, defended the 
bidding process, saying that none of the other nine bidders 
had complained.  In a June 8, 2007 press release, business 
and labor representatives on the ACP Ad Hoc Committee, 
created by law to oversee the canal expansion project, 
asserted that the bidding for this first contract was 
transparent. 
 
¶7. (U)  On July 13, 2007, U.S. port operator, Manzanillo 
International Terminal's (MIT) General Manager, Carlos 
Urriola, and Managing Director, David Michou, told EconOff 
that they felt the best company won and that the bidding 
process was transparent.  They said MIT has hired CUSA on 
various occasions and believe CUSA to be the best earthmoving 
company in Panama.  They believe Zubieta has no business 
relationship with CUSA and that he would not have interceded 
on CUSA's behalf.  They said any claims of favoritism are 
untrue and unfair. 
 
-------------------------------------------- 
Background on the First Construction Project 
-------------------------------------------- 
 
¶8. (U)  The project is the first of five separate contracts 
to perform dry excavation work to link the Pacific entrance 
of the new locks with the Gaillard Cut (the narrowest stretch 
of the Panama Canal).  The project calls for the excavation 
of a 6.7 kilometer by 218 meter canal on the Pacific Coast. 
It would involve excavating approximately 7.4 million square 
meters of material, approximately 16% of the total excavation 
for the new Pacific Locks access channels. 
 
¶9. (U)  CUSA must present a 30% performance bond by July 26 
before the ACP can order the excavation to begin.  Once the 
ACP gives such order, CUSA has 945 days to complete the 
project.  The ACP expects this first project would be 
completed in March 2010.  On July 3, 2007, the Panamanian 
National Environmental Authority approved the environmental 
impact study for this portion of the canal expansion project. 
 
----------------------- 
ACP Credibility Sliding 
----------------------- 
 
¶10. (U)  According to a poll conducted in May 2007 by the 
Panamanian firm Dichter & Neira, 48.1% of Panamanians 
believed the ACP was a transparent institution as of May 
2007, down from 53.9%.  An informal, non-scientific Internet 
poll conducted by local newspaper La Prensa over the July 7-8 
weekend following the announcement of CUSA's winning bid 
found that 63.6% of those responding said they do not have 
confidence that the funds to be spent on the canal expansion 
will be handled transparently. 
 
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Comment 
------- 
 
¶11. (SBU)  Post is unaware of any improprieties in the 
bidding process for this first contract.  The ACP follows 
U.S. federal contract bidding procedures.  The award to CUSA 
is permissible under the ACP internal regulations, which 
includes provisions to avoid conflict of interests.  CUSA is 
an established, well-regarded company with experience 
providing excavation services to the ACP.  As such, CUSA has 
an informational advantage which allows it to more precisely 
estimates its costs than other firms.  Nonetheless, awarding 
the first construction contract to a company operated by 
Zubieta's family members damages the ACP's image as a 
transparent institution.  Any damage to the ACP's image now 
will only serve to magnify any future criticism of the 
expansion project. 
 
¶12. (SBU)  To date, the key determinant in winning a canal 
expansion contract has been price.  To date, the lowest 
bidder has won each public solicitation.  The ACP is very 
concerned with keeping costs low.  As such, firms that have a 
high cost structure will find it difficult to compete with 
low cost structure firms.  Firms who believe their expertise 
and experience will compensate for their higher bids will 
most likely be disappointed.  For European firms this is of 
particular concern since they will be paid in U.S. dollars 
but many of their expenses will be in Euros.  The lack of U.S 
and European interest in this contract solicitation (only one 
firm from U.S. and Europe each) may foreshadow lack of 
interest by such companies in the remaining excavation 
contracts. 
 
Eaton