THE consortium contracted to expand the Panama Canal and the waterway authority were considering each other's proposals to end the dispute over who pays for rapidly mounting cost overruns, which has brought construction to a halt.

The consortium wants the canal to pay US$1.6 billion in cost overruns it says arose from flawed geological studies done by the canal authority, an allegation denied by the Panamanian authorities.

Grupo Unidos Por El Canal (GUPC), led by Spanish builder Sacyr, said its peace proposal takes into account the concerns of the canal authority "while providing the funding necessary to finish the third set of locks", Reuters reported.

The Panama Canal Authority (ACP) said it had submitted a proposal based "on the parties contributing financial resources to resume work as soon as possible."

ACP's proposal would extend a moratorium on repayment of advances "to the extent that the GUPC meets the required delivery schedule".

GUPC's request for an extension to a moratorium on repaying a US$784 million advance until the end of arbitration is a big obstacle. GUPC wants to delay repayment to free funds to finish the project.

ACP administrator Jorge Quijano told Reuters that the canal was ready to cancel the contract unless a deal is reached quickly.

Experts from development banks, the Inter-American Development Bank (IDB), the European Investment Bank (EIB), Japan Bank for International Cooperation (JBIC), the World Bank's International Finance Corporation (IFC) and the Andean Development Corporation CAF), have arrived and toured the site and received full briefings.

In total, agreements were signed for $800 million with the JBIC, $500 million with the EIB, $400 million with the IDB, $300 million with the IFC and $300 million with the CAF.

A canal official said if no agreement was reached in a "matter of days," the authority could ask insurer Zurich North America (ZURN.VX) to terminate the contract with Grupo Unidos Por El Canal, the consortium led by Spain's Sacyr (SCYR.MC) and Italy's Salini Impregilo (SALI.MI).