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Panama unveils canal expansion

April 24, 2006

By Mike Power

PANAMA CITY (Reuters) – Panama unveiled an ambitious $5.25
billion plan on Monday to expand its famous canal to handle a
new generation of mammoth cargo ships and oil tankers.

Opened in 1914 at a cost of 25,000 lives, the Panama canal
was considered a masterpiece of engineering. It makes a
shortcut between the Pacific and Atlantic Oceans, saving ships
the long trip around South America and the treacherous Cape
Horn.

While much of the canal is made up of roomy lakes, modern
large-bulk ships are too wide and too long to fit in its narrow
lock systems, meaning Panama needs to expand it or risk losing
business.

President Martin Torrijos and Panama Canal Authority
executives said the expansion centers on building a second lane
and a new set of locks to double its capacity. Construction
should be complete by 2014, exactly a century after the canal
was opened.

“Without doubt, it is a formidable challenge and a gigantic
project,” Torrijos said as the plan was announced.

It calls for up to $2.3 billion in loans or bond issues to
be paid back with the revenues from higher tolls on the canal.
There will be no increase in Panama’s sovereign debt.

The expansion has been Torrijos’ main goal since he took
office in 2004, and he urged Congress and ordinary Panamanians
to back it.

“If we do not confront the challenge of expanding the canal
and improving its capacity to continue providing an efficient
and competitive service, other routes will inevitably emerge to
replace ours,” Torrijos said.

About 38 to 40 ships pass through the 50-mile (80-km) canal
every day.

SATURATION

Without an expansion, experts say the waterway could hit
saturation point in as little as three years, forcing shippers
to use different routes.

Mexico and some Central American nations have suggested
they might dig their own canals.

The planned expansion must be approved by Panama’s
Congress, where Torrijos’ party has a majority. A national
referendum will follow, possibly before the end of this year,
and polls show most Panamanians support it.

France’s Ferdinand de Lesseps, builder of the Suez Canal,
started the Panama Canal in 1880, but abandoned it nine years
later amid bankruptcy and construction problems as well as
malaria and yellow fever, which claimed most of the lost lives.

The U.S. government under President Theodore Roosevelt
bought the canal in 1904 and 10 years later, after a Herculean
effort by 75,000 workers from 50 countries, opened the
inter-oceanic waterway dividing North and South America.

The United States, which saw the canal as key to naval
supremacy, then ran the canal for most of last century.

In treaties signed in 1977 by U.S. President Jimmy Carter
and Panama’s populist dictator Gen. Omar Torrijos, father of
the current elected president, the United States agreed to hand
the canal over to Panama in 1999.

In 2005 the canal contributed $489 million to Panama’s
government, its largest source of income.


Source: reuters



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