- The Washington Times - Monday, September 20, 2004

Panama’s government is considering an $8 billion expansion of the 90-year-old Panama Canal to allow bigger ships to cross to and from the Atlantic and Pacific oceans.

Possible upgrades include adding a third “lane” to make way for a new generation of mammoth, post-Panamax ships spanning 180-feet across that can haul twice as much as the current Panamax ships. “Panamax” is the term for the largest-sized ships that can now pass through the Panama Canal.

The canal now has two “lanes” — one for ships moving from the Atlantic to the Pacific, and the second for traffic in the opposite direction.

A canal expansion would be good news for U.S. companies that rely on cargo shipping, said David Hunt, executive director of the American Chamber of Commerce and Industry of Panama.

“More and more international trade is going to the larger ships because it is more cost-effective,” Mr. Hunt said. “I think what you’ll find in terms of U.S. trade is, it may not mean a real increase in trade, but it may mean a reduction in cost for doing trade.”

Bolstering international trade is not the only reason for a canal makeover. Failing to modernize the canal could lead to its decline as a key trading passage.

“If it [Panama] wants to maintain its ability to be a major gateway for the volumes of trade in the future, they’ve got to do something,” said Chris Koch, president of the World Shipping Council, a D.C.-based trade association representing more than 40 shipping companies.

The canal being a cornerstone of the country’s economy, its continued viability is taken seriously in Panama City.

Martin Torrijos — elected president of Panama in May and sworn in this month — has called for a national referendum early next year on canal expansion. The new president is the son of Gen. Omar Torrijos, who negotiated with President Carter the treaties that turned over control of the waterway to Panama on the last day of the 20th century.

The Panama Canal Authority, which has overseen the canal’s operation since the U.S. turnover in 2000, has hired engineering consultants — including the U.S. Army Corps of Engineers — to design locks for the third, wider “lane.”

Rodolfo Sabonge, director of the canal authority’s planning and marketing, said the canal must be expanded to keep up with the steady growth of international trade owing to globalization.

“The demand is expected to grow to levels we will not be able to handle in 2010,” Mr. Sabonge said.

In addition to the wide, third “lane” to accommodate post-Panamax ships, the project would include deepening the canal an additional 10 feet to allow for the larger vessels. There also has been talk of building a new dam and artificial lake — which would displace some Panamanian farmers.

But Mr. Sabonge said it appears that the dam will not be needed — at least not for the next 20 years.

It has been more than four years since the United States relinquished control of the 50-mile canal to the people of Panama, which declared independence from Colombia in 1903 and immediately was recognized by the United States. President Theodore Roosevelt championed construction of the canal, which began in 1904 as a strategic shortcut between the Atlantic and Pacific oceans.

Panama assumed control of the canal in 2000 under the 1977 treaty signed by Gen. Torrijos and Mr. Carter.

Today, nearly 12,000 ships travel through the canal each year, hauling 243 million tons of goods.

Since the turnover, the canal authority has done a good job of overseeing the canal, said Riordan Roett, director of the Western Hemisphere Program at Johns Hopkins University. But coordinating a multibillion-dollar expansion of the canal, he said, could prove challenging.

“I think the critical issue would be: Does the Panamanian government have a capacity to oversee this major reconstruction of an international waterway and stay within budget?” Mr. Roett said.

If not, the canal could become a bottleneck.

“The canal needs updating, or we need to find an alternative method or process of moving goods back and forth,” Mr. Roett said.

Canal-authority officials say that the government can make the expansion project happen. Since taking control of the canal, Panama has operated the waterway more like a business than a government facility, Mr. Sabonge said. He added that the government expects to fund the multibillion-dollar project with shipping tolls.

“We have devised a scheme to finance this through user fees,” he said. “Big projects are being done where you can establish the fee well in advance so that you are generating the required revenue.”

After instituting a 13 percent toll increase in 2003, the canal generated an estimated $921 million in revenue.

But some say funding the project will require more than shipping tolls.

Mr. Hunt said the canal authority could turn to the shipping companies or the World Bank to help finance the project.

Ultimately, Panama’s economic and strategic future may rest on whether the expansion moves ahead, he said.

If the canal is not upgraded, it “is likely to stagnate into a regional hub, where the larger ships come into port, drop off goods for reshipping to smaller vessels around the region,” he said. “And eventually, it’s not only a loss of opportunity, but also a decrease in the total usage of the canal.”

Top 10 Panama Canal using countries in 2003

RankCountryOriginDestinationIntercoastal

1United States76.4 million tons52 million tons2.2 million

2China18 million tons24.9 million tons__

3Japan5.8 million tons24.9 million tons–

4Chile12.4 million tons4.9 million tons–

5South Korea6.5 million tons7.9 million tons—

6Peru5.7 million tons5.8 million tons—

7Canada8.3 million tons2.4 million tons4,812 tons

8Ecuador5.8 million tons3.7 million tons—

9Colombia5.5 million tons4.2 million tons588,225 tons

10Mexico4 milion tons4 million tons266,488 tons

Source: Panama Canal Authority

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