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Monday, September 23 2019 @ 02:52 am EDT

Expansion of the Panama Canal: A Primer

Canal ExpansionThe Panamanian government has now reformed their tax laws and their social security system. Now, they will be gearing up to pass a national referendum on the expansion of the Panama Canal. Since this issue will be dominating the local news for the next few months, it's a good time to take a look at the basic issues. The first question should be, is it necessary to expand the Panama Canal? The short answer is "yes."

Here's the long answer. Take a look at this article: At the time of its completion, the huge locks of the Panama Canal were large enough to accommodate any ship in the world. However, this is no longer the case. Many ships today are too large to fit through the canal and the number of these so-called ‘post-Panamax’ vessels is increasing every year. Approximately 60% of ships on order for construction in 1999 were post-Panamax and 30% of the global fleet is projected to be post-Panamax size by 2020. The canal is also approaching its daily transit capacity limit. The current canal capacity constraint of approximately 47 transits per day and 17,000 per year is expected to be reached by 2012. For these reasons, a construction of a third set of larger locks is being considered by the Autoridad del Canal de Panamá (ACP), the government agency responsible for the canal’s administration and operations. Despite the expected social and environmental impacts, canal expansion has been deemed essential by the ACP in order to remain competitive and foster continuing economic growth for Panama. Without expansion, the Panama Canal will lose its importance to global shipping and become obsolete within a few years according to the ACP. With expansion, commercial growth of the canal is projected to increase 400% between 1990 and 2060.

The Panama Canal Authority (ACP) have been developing plans to expand the canal for years. This article dates back to 2001: "The Panama Canal Authority had been working on canal expansion studies for several years and came to a preliminary conclusion that new locks should be designed for large 12,500 TEU´s container vessels. Actually, only 4,500 TEU´s container ships can transit the waterway. ACP officials say that the dimensions of post-panamax locks would be 61m width by 427m length and by 18.3metres of clearance (compared to the existing 33.5m by 305m by 12.5m) but depending on the results of marketing investigation, post-panamax locks dimensions might be adjusted."

Did you know that the US started to build a third set of locks in 1939, but was forced to abandon the project because of WWII? So, the idea to make the Panama Canal bigger and better is not a new idea at all.

OK. The ships are getting bigger, it's time to expand the canal, and let's assume for a minute that it makes all the economic sense in the world. But, there is the problem of the perception of corruption. The Torrijos government has taken steps to improve transparency, reduce corruption, and clean house. In face, Torrijos was elected largely on an anti-corruption platform. The common perception on the street, however, is that things are just the same as they always have been, and that the "new guys are just as bad or worse as the old guys." It seems that people think all politicians are alike.

With all of that having been said, take a look at this website:

The government of Panama is starting to try to get bidders interested in the expansion project, but they know they have to get past the national referendum first: "However, he added the Panamanian government will put the project to the vote asking whether its people are in favor of expanding the Panama Canal or not. After a nationwide referendum, we will begin to receive international bidders who are interested in participating in the canal expansion project,'' he said. The ambassador said the expansion plan is part of his government's efforts to conduct reforms in the public sector, including tax reform and infrastructure improvement. In fact, when Panamanian President Martin Torrijos took office last year, he promised to hold the referendum, which will determine the fate of the canal project."

Maybe the Panamanian government is pushing forward with their over reaching strategic plan because the general public appears to be in favor of an expansion of the canal. There was a poll taken by La Prensa between 6-8 May 2005 which indicated that (at the time) 73.2% of Panamanians would support an expansion:

Expansion of Panama Canal Backed by Public

(Angus Reid Global Scan) – Many Panamanian adults believe further development is necessary for their vital waterway, according to a poll by Dichter & Neira published in La Prensa. 73.2 per cent of respondents support expanding the Panama Canal.

In 1999, Panama regained full control of the all-important Canal, the source of 10 per cent of the country’s Gross Domestic Product (GDP). Last year, the Canal’s board of directors developed a $5 billion U.S. proposal to add a parallel set of locks, to allow giant cargo ships to pass through the waterway.

The expansion plans will be presented to Panamanian president Martín Torrijos this year, and a nationwide referendum is expected by November.

On Apr. 22, Torrijos vowed to change existing perceptions about the canal, saying, "Many Panamanians believe its benefits do not reach the majority." The president has proposed devoting a portion of waterway’s proceeds to a special fund "to aid the poorest areas of the country."

Polling Data

Do you support or oppose expanding the Panama Canal?

Support 73.2%
Oppose 18.5%

Source: Dichter & Neira / La Prensa Methodology: Interviews to 1,216 Panamanian adults, conducted from May 6 to May 8, 2005. Margin of error is 2.9 per cent.

So, get ready for more talk and discussion about the referendum. Expect the vote in about November or so of 2005. Expect the same guys who were out there protesting the change to the social security system to be out there again. And, expect the referendum by a fair margin (like 60% plus). This whole social security thing might shave off a few points, but probably not more than 15%, which still makes for an easy victory.

Then you want to talk about corruption, scandals, and under the table money? Watch what happens when they start to spend the $12 billion or so it will take to complete the project. The numbers are not finalized, but it will probably be projected at about $6 billion and actually come in at about $10 billion when it's all said and done.

Hopefully, the current regime will recognize the importance of the project, and continue efforts to improve transparency with regards to government spending, and continue anti corruption efforts. They still have not turned the corner of public opinion regarding corruption, and the "little guy" feels like he was sold out by Martin Torrijos. He will have to regain their trust.

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