Deal signed to end row over Panama Canal expansion

Expansion works at Panama Canal Work had already resumed at the Canal but authorities say the deal will increase the pace of construction

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The Panama Canal Authority (ACP) has approved a deal to end a dispute over $1.6bn (£1bn) cost overruns that had delayed work to widen the waterway.

The Spanish-led construction consortium and the ACP say each will invest an extra $100m in the project, due to be completed in 2015.

The consortium will also be allowed to claim $400m from the project insurers.

Construction was halted for two weeks in February, but resumed after an initial agreement was reached.

The canal authority says the deal reached late on Thursday should accelerate the construction works, aiming to finish the third lock by December 2015.

It also extends up to 2018 a moratorium for the construction group - officially known as Grupo Unido por el Canal (GUPC) - to repay around $780m worth of cash advances.

The dispute emerged late in 2013, when GUPC claimed it was owed $1.6bn.

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

Expansion works at Panama Canal The construction of the third Panama Canal lock is now due to be finished by December 2015

The new lock was designed to allow the passage of larger cargo ships in one of the world's busiest maritime routes.

In late February, GUPC - headed by the Spanish company Sacyr and the Italian Impregilo - and the Canal Authority announced a temporary deal to resume works.

A stoppage would have risked 10,000 jobs, local media reported.

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.

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

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