Panama's President Urges Support For Canal Expansion

by Mike Godfrey, Tax-News.com, Washington

26 April 2006

In a televised address to the nation on Monday, Panama's President, Martin Torrijos appealed to voters to back the proposed expansion of the Panama canal, a move which he suggested would represent "a formidable challenge and a gigantic project".

It emerged earlier this month that the Panama Canal Authority (ACP) had approved plans for a $7.5 billion expansion project that will increase the capacity of the famous waterway which, as China and India boom as major exporting nations, is already at full stretch.

Under the 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.

Current projects under development within the program include: the deepening of Gatun Lake and the Atlantic and Pacific entrances, the construction of a second Tie-up station in the Gaillard Cut and the further widening and straightening of the Gaillard Cut. With these projects, the ACP is maximizing the Canal’s resources with the goal to attain 330 million PC/UMS tons over the next two years.

In the years since its construction by the US marine corp in 1914, the canal had dictated the size of ships, so that shipbuilders had built vessels, known as 'Panamax' ships, just large enough to navigate the 60km long canal.

However, since the mid 1990s, a new generation of supertankers and container vessels up to 160 feet wide have been constructed, and these have been too large to negotiate the canal's lock system - meaning that the canal authority has been losing out in revenue terms.

Nonetheless, despite its constraints, the canal has been operating close to full capacity, and it handles some 5% of global trade annually.

Last month, the canal authority announced that two records were broken during the third week of March: one in total Panama Canal/Universal Measurement System (PC/UMS) tonnage and another when 27 “super” vessels, those ships 91 feet or more in beam, transited through the canal, beating the previous record of 26 set in May 2005.

Before being put to a referendum (expected to take place later this year), the plan must be passed by Parliament.

However, speaking to his citizens on Monday, President Torrijos stated that:

"The Panama Canal route is facing competition. If we do not meet the challenge to continue to give a competitive service, other routes will emerge that will replace ours. It would be unforgivable to refuse to improve the capacity of the waterway."

Concerns likely to be raised by critics of the project, according to observers, include the financing of the proposed expansion, and the fact that ordinary Panamanians feel that they have seen little benefit from the increasing revenue brought into the country by the canal.

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