Panama rallies behind engineer in fight over canal
PANAMA CITY (AP) — He has the weight of Panama's pride and a good chunk of global commerce on his shoulders.
Yet weeks of acrimonious, late night negotiations to rescue the Panama Canal's $5.25 billion expansion haven't taken a toll on Jorge Quijano. The canal's top administrator wakes up at 5 a.m. each day for a brisk 40-minute walk along the bluff atop which sits the century-old plantation home where he resides as successor to the 17 American governors who lorded over the canal zone until 1979.
"I wish there were more crises like this," jokes Quijano, who claims to be growing more fit even as he struggles to find a way out of a dispute over $1.6 billion in cost overruns. "I've never felt healthier, stronger or more confident."
The extra mettle is needed. Last week, work on the construction of a third set of locks, already nine months behind schedule, was stopped after talks broke down on how to finance the charges. A consortium led by Spain's Sacyr SA and Italy's Salini Impreglio blames Quijano's poor planning and is demanding payment, while the canal says the companies are responsible for the unforeseen costs.
With a lengthy legal battle looming, ports around the world that have spent billions on upgrades in anticipation of a quicker route for giant container ships and tankers between Asia and the Eastern U.S. seaboard are bracing for further delays.
While both sides say they're still open to an agreement, the window for a deal is closing fast, Quijano said in an interview at the canal's office. Meanwhile, he says a plan B that he and his staff have been working quietly on since October is being readied, though he's not disclosing any details.
Panamanians are cheering Quijano on. Since the crisis erupted, the nation of 3.4 million has rallied almost unanimously behind the 61-year-old engineer, thrusting him into the media spotlight to defend the canal, which is almost synonymous with the nation's identity. They applaud him for standing up to public attacks by contractors that he likens to "extortion" and "terrorism."
Quijano likes to point out that the talks broke down on Feb. 4 — 125 years to the day after another European digger from France went bust and declared bankruptcy while working on the canal.
U.S. engineers, riding on the coattails of a military invasion ordered by President Theodore Roosevelt, were then left to complete the work. Washington ran the 50-mile (80-kilometer) waterway and adjacent areas as an overseas territory until President Jimmy Carter agreed in 1977 to cede control gradually.
Ironically, given the resentment the decades-long occupation still stirs here, Americans may have another chance to step in.
That's because U.S. firms have expressed the most interest among international companies in completing the 30 percent of work that remains, Quijano said. One candidate is Englewood, Colorado-based CH2M Hill, the canal's main project consultant and which Quijano says has the know-how and resources to finish the job according to its original design. Tellingly, as talks stalled last month, Quijano gave the U.S. ambassador to Panama a personal tour of the construction.
What's not in doubt is Panama's determination to finish the job in 2015, he said.
"If necessary I'll get down there with you holding a pick and shovel," Quijano, the son of a diplomat who has spent part of his childhood in Japan and Malaysia, recently told a group of workers to celebrate the canal's centennial anniversary.
Quijano joined the canal in 1975 shortly after graduating from Lamar University near the Texas Gulf Coast, an area whose booming natural gas industry stands to be one of the biggest beneficiaries of an expanded canal. He climbed through the ranks, earning a reputation as a hard-charging engineer who held his American managers accountable to their commitment to hand it over in tip-top shape.
"He's an engineer's engineer," said Joe Reeder, a former US Under Secretary of the Army who served as the canal's American chairman in the 1990s. "He's a good listener, very studious and drills down to operate based on the facts."
Reeder says that Quijano shies away from the cameras and would have preferred to manage the dispute quietly through the arbitration mechanisms set forth in the contract. But the same cool and collected temperament serves him well in the media dogfight the dispute has become.
"You want someone who can throw a body blow when it's been richly earned as is the case here," said Reeder, who believes the European consortium's aggressive stance against the canal in the media belies the shakiness of its claims.
Appointed to a seven-year term in 2012, Quijano runs a business that has blossomed since the Americans handed over full control of the canal at noon on December 31, 1999.
Average time to cross the canal has fallen below 24 hours, a feat the Americans, who managed the canal more like a break-even utility, tried but were never able to achieve, Reeder said. The safety record has also improved and revenues have more than tripled under Panamanian management to $2.4 billion last year.
The canal is the linchpin of Panama's economy, providing almost $1 billion in direct contributions to the government and related activities generate nearly 20 percent of the nation's gross domestic product. Almost 6 percent of global commerce passes through the canal.
But not everyone has praise for Quijano, least of all the consortium, which blamed his "inflexibly rigid" position for an impasse that put at risk 10,000 jobs and threaten to blemish Panama's reputation as a magnet for international investment.
It says the extra costs resulted largely from problems with studies conducted by the Panamanian authority before work began and says geological obstacles encountered while excavating have prevented it from getting the basalt needed to make the vast amounts of concrete required. The canal says all bidders had access and ample time to study the canal's preliminary work before the auction.
In the absence of a deal, the consortium is promising years of litigation and can assert some powerful leverage by withholding delivery of massive lock gates made in Italy that would be costly to build from scratch.
Even supportive Panamanians question whether Quijano, who as the top engineering executive oversaw the expansion program's design, doesn't share part of the blame for the selection of a consortium that raised eyebrows when it was awarded the contract by the canal's board of directors in 2009 with a bid $1 billion below that of its nearest rival, San Francisco's Bechtel Group Inc.
"This is a very delicate moment for Panama," Juan Carlos Navarro, one of three front-runners in May's presidential race, told the AP. "Later there will be time to do a complete analysis of what went wrong and assign responsibilities. But right now everyone needs to support Quijano and demand that the expansion is completed."
Part of Quijano's popularity stems from the canal's track record of not wading too deeply into Panama's messy politics. Panama's constitution guarantees the canal financial and operational autonomy, and a string of canal administrators, all of them trained by the Americans, has built a reputation for above-the-fray decision making that Panamanians jealously safeguard.
Even Panama's President Ricardo Martinelli, a billionaire businessman not known for ceding the spotlight easily, had to back down after meeting with Spanish officials in the early days of the crisis, a move that was widely criticized. Last week he called on Panamanians to "close ranks" behind Quijano.
"Too bad our politicians don't have the same integrity" as Quijano, said Leonel Martinez, a 58-year-old taxi driver who worked as a stevedore in the canal until the Americans pulled out. "Whatever happens we can't let them defraud us."
Follow Joshua Goodman on Twitter: @APjoshgoodman. Juan Zamorano contributed to this report from Panama City.