IDB loan for Panama Canal expansion

The Inter-American Development Bank (IDB) has approved a US$ 400 million loan for the Panama Canal expansion, the largest infrastructure project underway in Latin America.

The loan is for Autoridad del Canal de Panamá (ACP), the autonomous government-owned entity that manages and operates the 77 km canal linking the Atlantic and the Pacific oceans.

ACP plans to raise about US$ 2.3 billion in loans to finance the expansion program, which has an estimated cost of US$ 5.25 billion. The remainder will be covered with cash flow generated by the operation of the canal, through which about 5% of the world's seaborne freight passes annually.

The Panama Canal, which has been in operation since 1914, is approaching its maximum capacity. The expansion program, scheduled to be completed by 2014, will ensure the long-term competitiveness of the canal, which plays a crucial role in global maritime transportation, serving trade among economies around the world.

The program has four main components:

• the construction of a third set of locks, including two lock complexes and water-saving basins at each end of the canal,
• the dredging of the canal entrances on the Atlantic and the Pacific,
• the deepening and widening of the existing navigation channels,
• the raising to the maximum operational level of the Gatun Lake, which provides fresh water for the waterway.

The Panama Canal's current lock chambers are sized for container ships with a maximum capacity of 4500 TEU (20-foot equivalent units). The new lock chambers, roughly the length of four football or soccer fields, will fit 12600 TEU container ships. These locks will also use less water, as large volumes will be recycled through the adjacent basins.

During the construction phase, which started in 2007, the expansion program is expected to create up to 7000 direct jobs and around 35000 indirect jobs.

Commenting on the loan agreement, IDB president Luis Alberto Moreno, said, "The IDB has been a steadfast partner for Panama for nearly 50 years. We are proud to assist in this key investment in the future of Panama's greatest national asset, especially when conditions in international financial markets are so uncertain."

The IDB has been an integral partner for Panama since before the country took over control of the canal in 1999. The IDB supported the Panamanian government in the evaluation of expansion alternatives and in the preparation of a sustainable development strategy for the canal watershed. It also helped finance studies to quantify the benefits of the expansion program.