Panama upgrade plan approved

25 April 2008

Almost 80% of Panama’s citizens approved the US$ 5.4 billion widening of the Panama Canal, which connects the Pacific and Atlantic oceans, in a referendum held in the country on 22 October 2006.

The canal was opened in 1914 - and until 1999 was operated by the US - but is no longer wider enough to accommodate modern container ships and the route is already operating at 90% capacity. According to Panama Canal Authority planning and marketing director Rodolpho Sabonge, traffic on the route has grown significantly since China joined the World Trade Organisation.

It has been predicted that if transpacific trade grows at +8% annually, which is below the double digit growth seen in recent years, the canal will reach maximum capacity within two to three years. Currently, vessels that have not pre-booked their passage several months in advance often have to wait up to four days to enter the canal.

The canal upgrade involves constructing a third set of locks, which will be 427 m long and 55 m wide, alongside the existing 295 m long and 33 m wide locks, deepening of the 14 km long Culebra Cut and dredging on other parts of the route. This will not only allow the latest generation of Super Panamax container ships to use the canal but it will also increase capacity. Construction work is expected to start next year and is scheduled for completion in 2015.

The Panama Canal Authority expects the route to generate US$ 1.4 billion this year. Completion of the upgrade will double the canal’s capacity and the authority expects revenues on the widened route to reach US$ 6 billion a year by 2025. Construction costs will be met by raising tolls on the route.

Critics of the scheme voiced concern about ballooning costs and suggest that the real beneficiaries of the work will be the users, rather than the people of Panama. However, a significant proportion of revenues raised by the canal are used to fund education and other social programmes in Panama and it has been suggested that this will rise in line with increases in revenues.

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