Panamanian President Ricardo Martinelli said Friday the canal authority and the consortium building a third set of locks for the waterway were still trying to resolve a dispute that threatens to bring the project to a halt.

"Panama will only negotiate on the basis of what's stated in the contract," he said, insisting that the expansion of the interoceanic canal will be completed "come hail, rain or snow."

The GUPC consortium said last week that it would suspend work on the third set of locks Jan. 20 if the canal authority, known as the ACP, did not agree to pay an extra $1.6 billion to cover cost overruns.

GUPC is made up of Spanish construction giant Sacyr Vallehermoso and Italy's Impregilo, each with a 48 percent stake, as well as Belgium-based Jan de Nul and Panama's CUSA.

"The ACP and GUPC are still talking," Martinelli told reporters on Friday after a test ride on Line One of the Panama Metro, which is being built by Spain's FCC and Brazil's Odebrecht.

"There have been differences and discrepancies" in the talks thus far," the president noted, but expectations are that "they come to an agreement" within the terms of the contract.

The ACP and GUCP held talks this week at the urging of Spanish Development Minister Ana Pastor, who traveled to Panama as part of Madrid's efforts to mediate the dispute.

But there was a considerable gulf between the financial proposals the two sides presented after Tuesday's meeting.

The ACP said it would advance the GUPC $100 million and give the consortium a grace period of two months to repay a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

GUPC proposed that the ACP fork out an additional advance of $400 million while also pledging to contribute $100 million of its own funds to keep the project running.

Impregilo, meanwhile, unilaterally proposed as a "definitive solution" that the ACP pay the consortium an additional $1 billion to guarantee completion at some point during the first half of 2015.

The contract for the locks, which is the centerpiece of the canal expansion, calls for the ACP to pay GUPC a total of $3.12 billion.

So far, the ACP has paid GUPC $2.83 billion, including repayable advances, plus an additional $180 million for cost overruns.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential. EFE