VZCZCXYZ0020
PP RUEHWEB

DE RUEHZP #0624/01 2111222
ZNR UUUUU ZZH
P 291222Z JUL 08
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 2348
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEHZP/USMILGP PANAMA CITY PM PRIORITY

UNCLAS PANAMA 000624 
 
SIPDIS 
 
DEPT OF COMMERCE - MATTHEW GAISFORD 
DEPT OF TREASURY - SARA GREY 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EWWT MARR PM EINV AA
SUBJECT: UPDATE ON OPERATIONS AND EXPANSION OF PANAMA CANAL 
 
¶1. (U) Summary. The Panama Canal Authority (ACP) has not yet 
determined the exact financing method for the third set of 
locks for the Panama Canal.  However, a recent agreement with 
the Andean Development Corporation could provide 500 million 
USD of the 5.25 billion USD needed. The deadline for the 
design-build lock contract has been delayed to December 10 
and a major insurance contact for new locks and other 
operations was awarded to Willis Ltd of England.  For the 
past three quarters, tonnage through the canal was down 1.2%, 
but profits were up 10.8%. Despite the decrease in tonnage 
and the fact that the primary contract for the third locks 
has not been award, an ACP official raised the idea of a 
fourth set of locks. End Summary. 
 
--------------- 
CANAL FINANCING 
--------------- 
 
¶2. (U) Administrator of the Panama Canal Authority (ACP), 
Alberto Aleman Zubieta, confirmed that the financing plan for 
the canal expansion has not been decided.  While the ACP 
Board is considering various combinations of private and 
multilateral financing, it has not made any decisions.  The 
ACP is being advised by Mizuho, a Japanese Bank.  On a 
related topic, the Andean Development Corporation (La 
Corporacion Andina de Fomento - CAF), a multi-lateral 
financial institution that promotes sustainable development, 
signed an agreement with President Torrijos to grant full 
membership to Panama.  As a result, CAF agreed to open an 
office in Panama to support 170 million USD in private and 
public sector projects.  After the signing ceremony, 
President Torrijos stated to the press that CAF offered to 
finance 500 million USD of the estimated 5.25 billion USD 
expansion of the canal.  The ACP FY2009 budget of 2.1 billion 
USD also contains 836 million USD designated for the canal 
expansion. 
 
--------------------------------------------- -- 
DEADLINE FOR DESIGN-BUILD LOCK CONTRACT DELAYED 
--------------------------------------------- -- 
 
¶3. (U) The four pre-qualified consortia for the design-build 
lock contract now have until December 10 to submit their 
bids.  The original deadline was August 22 and that was 
previously delayed to October 8. The reason for the latest 
delay is that the ACP reports that the consortia requested 
more time to fully develop the technical and price proposals. 
 The ACP is mitigating the delay by having the bidders submit 
bids on standardized ACP forms.  Also, the ACP is considering 
bringing in outside technical experts to review the 
information, which should speed the ACP's review of the bids. 
 While the ACP assures that canal expansion is still on 
schedule to be completed in 2014, the schedule is already 
being compressed during the bidding process. (Comment. Post 
received second hand information that the new deadline is the 
result of the French-led consortium requesting more time, 
which is in an indication of problems.  The other three 
consortia indicate they do not need the extra time and that 
this delay will increase their bidding expenses.  FCS 
Counselor scheduled meetings to gather first hand 
information.  End Comment.) 
 
------------------------------------ 
INSURANCE BROKERAGE CONTRACT AWARDED 
------------------------------------ 
 
¶4. (U) Willis Ltd, an English firm, won the contract to 
provide insurance advisory services for a construction risk 
policy and general liability coverage for the new locks and 
for two excavation projects for the channel access on the 
Pacific side.  Willis Ltd was the lowest bidder at 695,000 
USD.  The other bidders along with the country of origin and 
their bid price follow: 1) Jardine Lloyd Thompson Ltd, 
England, 1,860,000 USD 2) Arthur Gallagher & Co., United 
States, 3,660,000 3) Marsh USA Inc, United States, 825,585 
USD 4) AON Global, Mexico, 1,167,250. 
 
----------------------------------- 
TRAFFIC BY TONNAGE DOWN; PROFITS UP 
----------------------------------- 
 
¶5. (U) For the three quarters from October 2007 through June 
2008, tonnage carried through the canal is down 1.2%. 
However, revenue for the same period is up 10.8% due to 
different tariffs for different types of ships and cargo. 
The ACP attributes the decrease in tonnage to the weakening 
American economy.  The U.S. is the number one origin and 
destination of Panama Canal traffic. 
 
-------------------- 
FOURTH SET OF LOCKS? 
-------------------- 
 
¶6. (U) Despite a recent decrease in canal traffic, Rodolfo 
Sabonge, Vice-President of Analysis and Marketing for the 
ACP, believes long term demand for canal passages supports a 
feasibility study on a fourth set of locks. Sabonge expects 
canal traffic to increase by 3% per year for three decades 
due to increased traffic between China and the East Coast of 
the U.S.  Post will monitor the situation to see if the idea 
gains traction. 
MESA