At least two versions of the waterway's expansion prospects dominated headlines Wednesday. Officials from the Panama Canal Authority said talks with the GUPC consortium, led by Spanish interests, weren't getting anywhere.
Consortium leaders said a deadlock would put the jobs of about 10,000 workers at risk but denied it had stopped work, as reported by officials.
Quijano accused consortium negotiators of blackmail with their work stoppage. He told reporters the consortium had ordered its employees to stop work.
An agreement is "now no longer possible," Quijano said, Investors.com reported.
Panama Canal Authority Administrator Jorge Quijano insisted at a news conference work was at a standstill. But the pause, he said, will give officials time to decide what to do next.
Both sides blame each other for the cost overruns. Supporters for rival bidders, including U.S. giant Bechtel, say the consortium's underbidding led to the discrepancy between the contracted amount and actual spending.
The authority wants the consortium to foot the bill for the extra spending on the project that began in 2009 and is scheduled to be completed in June 2015, nine months behind schedule. The overall cost is now estimated to exceed $5.2 billion.
The consortium is made up of Spanish firm Sacyr, Impregilo of Italy, Belgian firm Jan De Nul and Panama firm Constructora Urbana.
Expansion will allow canal traffic between the Atlantic via the Caribbean Sea and the Pacific to accommodate ships able to carry up to 12,000 containers -- more than double the present capacity of ships carrying up to 5,000 containers.
English-language Panama News online accused the consortium of "trying to stick Panama up for an extra $1.6 billion" which it called "a low ball."
Opinion in Panama is fraught over the consortium's performance. and U.S. companies' failure to secure the contract has divided Panama, news media reported. U.S. ports in Florida and other adjoining states have invested heavily in preparing their facilities for larger ships transiting Panama Canal.
The BBC said the 100th anniversary of the canal's opening this year was "tarnished by this international spat, and a stoppage is not in anyone's interest."
It said the current dispute appeared to vindicate early arguments that U.S. firms were best placed to carry out the work, citing Wikileaks diplomatic cables that indicated anger and frustration over the contract going to European contractors.
The 48-mile canal was built by the United States, which controlled its operation till 1999. Annual transit traffic has increased from about 1,000 ships in 1914 to more than 14,000 vessels.