Panama Canal Expansion: Cables Reveal US Efforts to Prevent Sacyr From Winning the Bid

Cablegrams released by WikiLeaks reveal that the US State Department tried to prevent the Spanish construction company Sacyr from winning a contract to extend the Panama Canal. The cables reveal the State Department's efforts to secure the project for the US bidder, Bechtel.

In documents leaked December 18, the US embassy in Panama City is seen working hard on Bechtel’s behalf. The leaked cables show that the embassies contacted other companies bidding for the work to find out what they’re bid would be, and kept in close contact with the Panama Canal Authority.

In a cable dated June 30, 2009, from Ambassador Stephenson, Panama Embassy to the US State Department, Sacyr is described as “bankrupt” and being “propped up by the Spanish government.” In addition Bechtel’s technical proposal is described as exceeding technical requirements while doubt is placed on whether Sacyr’s even met the Panama Canal Authority’s technical compliance. The cable notes that a Sacyr through a consortium member, Impregilo, leaked to the press that Sacyr’s bid was $3.7 million hinted that both Bechtel and ACS’s bids started with a “4.” The State Department believed that Sacyr might win the bid based on price alone despite questionable technical and financial strength.

According to the cable, “a bid would be financially non-compliant if a consortium failed a health audit, which will be conducted on the winner.” All of the bidders were found to be financially healthy during an audit in November 2007, during the pre-qualification process.

The competing consortia claim that Sacyr’s $50 million performance bond is backed by government export agencies of Spain, France, and Italy. The backing allowed them to secure the money at no additional cost and with no scrutiny to their financial records. While the other consortia’s gained their bonds on the free market where they were subject to the evaluation of their financial records. The embassy says, “if a consortium could not provide the $50 million performance bond, then the consortium was probably not financially healthy.” They also note that if Sacyr wins, litigation from the competing consortia’s is likely.

In his final comments, Ambassador Stephenson says, “post will continue to monitor the bidding process closely to ensure fairness. Post maintains frequent communication with Bechtel representatives in order to coordinate actions to assure Bechtel is not unfairly disadvantaged.”

In a later cable dated July 7, the Secretary of State requests that the Embassy Action officers of Madrid, Rome and, Brussels immediately contact proper authority to see whether the suspected agencies in Rome, Madrid and Brussels back or in any way insured a bond to Sacyr. The cable also states that Sacyr’s financial situation made it impossible for them to secure the required $50 million bond on an open market and they had to utilize three European credit agencies to make it happen.

Despite the State Departments clear distaste with Sacyr winning the bid, the company did not appear to violate the ACP bidding rules. There is nothing prohibiting a consortium from obtaining a bond on credit.

The Panama Embassy, in an additional cable, expressed their shock that Sacyr scored so high on their technical proposal, beating out Bechtel and ACS by far. Final price proposals set the same tone with $3.1 billion for Sacyr, $4.2 billion for Bechtel, and $6.0 billion for ACS. The embassy says they expect that Sacyr will try to renegotiate the price with the ACP during construction.

The embassy also states that Sacyr’s win marks an increase of Spanish influence in Panama despite the U.S. history in the area and U.S. traffic to the canal.