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Panama's Parliament Approves Canal Expansion Plan

by Mike Godfrey, Tax-News.com, Washington

17 July 2006


The Panamanian legislature has approved the government's plan to widen the Panama Canal, but has made it subject to a binding nationwide referendum which is set to take place later this year. The cabinet approved the plan two weeks ago.

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 $7.5 billion 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 percent flows between the United States and Asia.

The canal is already operating near full capacity and forecasts are for increased demand from ever-larger vessels.

Captain Wei Jiafu, President and CEO of China Ocean Shipping Company (COSCO), has endorsed the plan, saying that the move will benefit the global economy and world trade. In a speech given in Panama last month, Captain Wei stated that with the rapid development of China’s economy, the Panama Canal becomes more important as a vital link for China to import and export goods to and from the East Coast of the United States, the Caribbean and the East Coast of South America.

“I fully support this expansion plan. It will not only strengthen Panama financially by bringing considerable revenues, promote development of Panama’s maritime industry, and ensure Panama’s position as the regional maritime center, but it will also benefit the growth of regional and world trade,” stated Captain Wei.

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 June, the Panama Canal Authority announced second quarter operational metrics for fiscal year 2006. During Q2, there was an increase in net tonnage, total transits and transits of Panamax vessels. Total Canal transits increased 3.5% – to 3,862 transits from 3,730. Moreover, transits of Panamax vessels (100 feet or more in beam and the largest vessels that can pass through the Canal) increased 7.5% – to 1,501 transits from 1,396.


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