Extension of Panama Canal project: More than an apple of discord

By NIDIA DIAZ, Granma International

Remilitarizing the Panama Canal. U.S. warship in Panama Canal, part of Panamax 2005 military exercises, in which the Canadian Forces also participated

HAVANA (May 12, 2006) – ON APRIL 24, Martín Torrijos, president of Panama, announced the official proposal for the extension of the Canal, consisting of the construction of a third lock with a view to the so-called Panamax boats, superior in depth to the current Panamax, transiting that inter-ocean route. From that point and even long before, voices have been raised to renege on that decision, approval of which is to go before Parliament and a national referendum.

Viability studies on the project were undertaken by the ACP (Panama Canal Authority) and its executive, while the president has made the green light conditional on – in the first place – the amplification being self-financing, meaning that the investment would have to be recouped from progressive increases in tolls and not via taxes on the population.

In second place, he warned that the funding must be acquired by the ACP and not by the government, whose budget has to be allocated to the basic needs of Panamanians. And finally, a commitment not to create new reservoirs that would imply the uprooting of campesinos living in the area and far less new flooding that would destroy or damage the environment.

Controversial Project

However, why is the presidential project provoking opposition in Panamanian sectors?

According to information the amplification of the third lock for the transit of the Post Panamax would cost $6 billion and its completion is anticipated for 2014, the year of the Canal’s centenary.

Critics of the project, including figures like former President Jorge E. Illueca, as well as economists, environmentalists, retired personnel from the Canal sector, naval pilots and engineers are pointing out that, according to information available, there are no more than 300 Post Panamax vessels worldwide (less than 7% of the world fleet) and the majority of them are oil tankers that have been used from the outset in the Suez Canal, given that their original cargo comes from the oil-producing countries of that region.

While some 13,000 ships pass through the Panama Canal annually, thus allowing the circulation of more than 90 per cent of the entire world mercantile fleet and its principal users, it is the Panamax vessels that, according to the official project, would raise the tolls. This could lead to the Panamax seeking another less onerous route, given that the publicized expansion could make the Canal less competitive.

On the other hand, the ACP would contribute half of the canal profits to the investment, thus depriving the state of that income, and the remainder would have to be obtained in loans from private-sector banks.

In that context, in a question-and-answer paper on the issue, Roberto N. Méndez affirms that as the investment is in the high-risk category, the interest charged by the private banks would be in the order of 7-8 per cent. Thus the country would also be taking on the sacrifice of directing heavy resources to the construction of a third lock during the seven years that the works would take, or the payment of some $2 billion in interest on the loan between 2007 and 2025.

All the sources consulted confirm that at this point the Post Panamax vessels are used on two main routes: the Asia-U.S. West Coast and the U.S. East Coast-Europe-Asia, for which the Suez Canal is the most appropriate route in both cases.

Those who argue that the Panama Canal could replace those routes should consult a study by Tomás Drohan Ruiz, retired director of the Panama Canal Engineering, Dredging and Construction Department who, from the ranks of critics of the project, assures that Panama cannot offer any advantages to the Post Panamax vessels bearing in mind that the ports of Hong Kong and Singapore are first and second in the annual movement of the abovementioned vessels. That the distance between New York and Singapore is shorter via the Suez Canal (10,140 nautical miles) than if the ships were to take the extended Panama Canal route (12,520 nautical miles). In terms of Hong Kong the distance from either port would be the same, but the former could give itself the luxury of lowering tolls to avoid losing users in a competition that the Canal in the isthmus could not win.

The Social Angle

But, beyond all considerations of a technical nature, one of the fundamental reasons for opposition to the project is related to its social cost.

For those promoting the project, the amplification could give the country a source of employment of 3,000-5,000 jobs while the works are underway and particularly at their peak moment. This figure is contained in a study by the Technical University of Panama and other documents leaked by the ACP itself.

We are talking of a country that has a 25 per cent unemployment or underemployment rate and which, in order to meet the annual growth of those entering the army of the unemployed, 30,000 jobs need to be created every year, according to the Drohan report.

Meanwhile, the so-called Report to the Country, signed by former president Jorge E. Illueca and other specialists like Fernando Manfredo Jr, ex-Canal administrator, assured that with the resources utilized for the extension works during the anticipated time period a highly extensive plan of social and economic development could be executed, as detailed in the document.

For his part, in reference to the subject, Dr. Antonio Aledo Tur, professor of Environmental Sociology at the University of Alicante, has affirmed that the project in question would benefit the large transnational shipping companies rather than Panamanians.

The Aledo Tur study meticulously analyzes the social situation and argues that the fundamental question, in this case, is “if the proposed construction project for a third lock is going to reduce inequality in Panama.”

“It is in the framework of those structures of inequality and poverty, which lead to the marginalization of urban areas and underdevelopment in rural areas, where all the public and social policies of Panama should be directed. This problem is so acute that it should be the center of gravity of any debate in Panama, including the matter of amplification,” states the Spanish sociologist.

Suspicious Influences Exposed

Over and above the good intentions of the some of its promoters, it is a fact that 11 of the 17 members of the ACP’s International Assessment Board are directly or indirectly linked to the large international shipping company consortiums and alliances like the Grand Alliance, Cosco, MSC, etc.

Other Board members such as Joe Reeder, a former U.S. secretary of state, and Admiral William J. Bud Flanagan are also in favor of the amplification.

It is no secret that Reeder is responding to the interests of the Pentagon, which is very keen on these works that would facilitate the transit of its most modern aircraft carriers, which currently cannot move from one ocean to the other via the canal.

Meanwhile, Wayne Madsen, an investigative journalist and ex-official of the U.S. National Security Agency, revealed in a sensational report on March 24 that an influential group of Latinos from the Republican Party and within the center of power in Washington are determining U.S. policy in terms of investment and business in Latin America.

Echoing that information, Panamanian international analyst Julio Yao, adds that – according to Madsen – that group is pressuring the Panamanian government to disassociate itself from the agreement with Venezuela and Colombia that would allow the construction of the Oil Terminals pipeline to end on the Panamanian Pacific coast, thus facilitating the export of Venezuelan oil to China.

Yao formulates one question: “Why are we going for a referendum on the amplification of the Canal if its only object is to approve or reject the engineering project without us being able to decide on the conditions of contract, the implications for our national development?”

The Alternative?

According to the Illueca report, Manfredo and his collaborators, the alternative to the Canal’s expansion needs lies in the construction of the Megaport of the Americas; in other words, a gigantic container transfer port that could receive the abovementioned Post Panamax ships and from there transfer the containers to Panamax or smaller vessels, which would increase the flow of containers passing through the Canal and thus its profitability.

The Megaport would be located in the Farfan-Palo Seco area, west of the Pacific access to the Canal, right where a port and container dock is being constructed. It would cost $600-800 million, financed with state capital by the ACP itself, and its construction would take three to four years, recouping the investment without indebting the country.

For now, the national debate on the way in which the Canal capacities should be amplified – a third lock or a megaport – is growing in political and economic circles and in the media. Specialists in marine transportation and port activities are also expressing their opinions.

Nevertheless, what is clearly at stake is an issue of strategic importance for the future of Panama – much more than an apple of discord – and it is becoming increasingly evident that interests at a far remove from the country’s national development are being moved to utilize the issue against Latin America integration and as a way of recovering influence, domination and money over the inter-oceanic way that the Torrijos-Carter Treaties correctly placed under Panamanian sovereignty.

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Filed under Atlantic Gateway / Atlantica, Caribbean, No Harbour for War (Halifax)

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