Panama Appoints Canal Advisor, Hikes Tolls

by Mike Godfrey, for LawAndTax-News.com, New York

09 February 2007

The Panama Canal Authority said this week that it has appointed Japan's Mizuho Corporate Bank as its financial adviser during the financing process for the expansion plan which was approved in a referendum last autumn.

The cost of the expansion is expected to total US$5.25 billion, and construction is expected to be completed in 2014. Mizuho's contract includes a review of the Authority's Master Plan and expansion proposal, the provision of strategic counsel on financing structures and strategies, and the creation and implementation of an integrated financial model.

Under the expansion plans, two 3-chamber locks will be constructed at both ends of the canal. This will create a third lane of traffic wide enough to handle the largest of modern container ships and tankers. New approach channels will also be prepared, whilst existing channels will be dredged to ensure large craft can enter the system.

The project will take about seven years and employ up to 8,000 people. Nearly five percent of total world trade transits the Panama Canal. Of this trade, 88% flows between the United States and Asia.

Canal users were shocked earlier earlier this week when the Authority announced swingeing toll increases:

• Tolls on laden container vessels will rise from the present $49/TEU to $54 as of May, then to $63 in 2008 and to $72 in 2009.
• Laden tanker tolls will increase from the current $2.96 per PC/UMS ton to $3.29 (May), $3.70 (2008) and $3.98 (2009).
• Reefer tolls will rise from $2.96 per PC/UMS to $3.39 (October) and $3.80 (2008 and 2009).
• Dry bulk tolls will rise from $2.96 per PC/UMS ton to $3.20 (May), $3.50 (2008) and $3.73 (2009).
• Vehicle carrier tolls will increase from $2.96 per PC/UMS to $3.24 (May), $3.60 (2008) and $3.87 (2009).
• General cargo vessel tolls will rise from $2.96 per PC/UMS to $3.26 (May), $3.63 (2008) and to $3.90 (2009).
• Passenger tolls (based on maximum passenger capacity) will be charged at $100/berth (October) then $115 (2008) and $120 (2009).

The assessment of tolls based on maximum berth capacity represents a change of policy; in general, under this change, large vessels will be charged tolls on a per berth basis, and smaller ships will continue under the Canal tonnage system.

The Authority plans to hold a public hearing on its proposal on 14 March. According to Canal Administrator Alberto Aleman, the new prices are necessary to provide additional finance for the proposed expansion of the Canal.

It was also reported this week that London & Regional Properties, a privately owned British developer, has been appointed as preferred bidder for a US$700m commercial development alongside the canal near Panama City, covering 2,750 acres.

Recommended