by Mark Scheinbaum
May 29, 2012
PANAMA CANAL EXPANSION: THE REWARDS ARE OUTPACING RISKS
COCOLI, Panama, May 29, 2012 -- Just the fourth and final phase remains to complete the gigantic expansion of the Panama Canal by the Panama Canal Authority (ACP), and the entire nation is feeling optimistic that the rewards in commerce and revenue will outstrip the huge financial risks the cpountry has taken.
Last week, along with members of the American Society of Panama, we got to see from the Cocoli side of the Canal - across from the Pedro Miguel Locks - areas which by the end of 2014 are expected to be underwater, perhaps for eternity. It was my first comprehensive look behind the scenes of the project since a similar visit in the early days of the "third system of locks," expansion more than two years ago.
Below this article, there are links to information about the millions of metric yards of earth, billions of dollars spent, and some specifics about the contractors from United States, Panama, Brazil, Canada, Italy, France, Costa Rica, Germany and many other countries. But it might be more productive, for those not following all the details of the world's largest public works project in decades, the overall scheme of things in which this historic expansion occurs.
First, I am gun-shy about naming a price tag, although I have seen reliable numbers that say this is a $5- to $7-billion project. From a more inclusive business perspective, the actual ACP project cannot and should not be separated from several simultaneous Panamanian projects, all of which are reaping huge sales for two U.S. heavy-equipment manufacturers, Caterpillar and John Deere, and many more construction equipment makers. Just the same, risking that much money in a time when a global recession has crippled economies around the world and one of the leading shippers, China, says its economy is quickly slowing down, requires courage and not a small amount of faith - and Panama has both.
The ancient, crumbling highway from the Atlantic port of Colon to the Pacific metropolis of Panama City has been renovated; next to it, the high-speed toll road from Panama to Colon has been completed and now again expanded. A spur is being completed all the way to Tocumen International Airport.
Also, the traffic-mangling and ear-bursting construction of the first-ever Panama Metro - both underground and elevated commuter trains - is 20 percent finished. Two new international airports are being built ... and on it goes.
So, let's say the Panama Canal Expansion is a $12-14 billion, long-term upgrade and renovation consortium for the Republic of Panama, which has successfully resisted most of the current global recession.
Today, the typical "Panamax" ship (the largest ships designed specifically to traverse the Panama Canal) carry approximately 4,500 20-foot shipping containers when fully loaded. The longer and wider locks in the "third generation" of locks will allow "Post-Panamax" ships, already sailing the seas, to cross the Isthmus of Panama with 12,500 containers.
Today's average toll for a ship traveling through the Panama Canal of $250,000 will jump to nearly $1 million for these leviathan ships. That's a big reward for the ACP.
And a big risk?
"Frankly, we know there will be bigger and larger ships in the future. They are already out there now," said ACP spokesman Luis Ferreire, my guide on the inspection tour.
"You can't say we would never have to expand again, and we are using designs which allow for that contingency," he quickly added, "but we think the revenue stream will be solid because - let's face it, these super, super gigantic vessels were never designed to use the Panama Canal anyway... . They stay at sea longer, and go further than ever before. With such huge cargo capacity, particularly for non-perishables, their costs to the end users stay down."
Even with those limitations, many expert believe that just the 12,500 vs. 4,500 TEU-per-load container factor will cut shipping costs, and hopefully prices to the consumer - from customers of Wal-Mart to Japanese and European cars, even after higher tolls are absorbed.
The United States and many of its aging port facilities have also been part of specific ACP information tours, seminars, friendship visits, trade missions, and projected expansion schemes with promises that a bigger Panama Canal means more money.
Since neither the attractive cruise ship ports of Miami and Port Everglades (Fort Lauderdale) or Palm Beach are huge container players compared to say Jacksonville or New Orleans, Port Manatee at the lower mouth entrance to lucrative rail-head Tampa Bay is positioning for more Panama induced trade.
Port Manatee believes it actually becomes the closest viable transshipment point to the expanded Panama Canal, and also to renewed trade with Cuba if and when embargos are lifted, and its Port Authority has geared up for the 2014 new Canal completion by digging a deepwater channel to 42 feet Berth 12, and expanding that berth to 1,600 feet in length. That will allow container ships to cut eight hours off the round-trip journey to the nearby Port of Tampa. At a cost of well over $40 million, and help from the state and federal government, Port Manatee is also upgrading highway crossings and storage and indutsrial infrastructure to accommodate the anticipated traffic from the expanded Canal.
An estimated $750 million is being spent as part of a Master Plan for the Manatee area to improve shipping and harbor and connecting road and resource infrastructure. What's good for Panama could be good for Florida and Manatee County.
In Houston, shipping interests have been big promoters of the Canal Expansion not only for its potential as an oil and gas customer - a role being expanded monthly - but because of the large confluence of rail lines, which bring air freight, rail, truck, and Houston Shipping Channel cargo into play in the fourth largest metropolitan area in the United States.
The projected 2014 completion date for the canal expansion is a bit iffy, but politically it is important to the ACP and its arms-length civilian surroundings of Panama to complete the project within the 100th anniversary year of the completion of the Panama Canal by the United States in 1914. As of now it looks as if the "official" rededication will occur in December, 2014, even if all the new areas are not yet completely functional..
Planners believe that environmental issues have been addresed in ways never anticipated a century ago. Three "holding ponds" will successively re-use and filter water in each new lock three times before releasing it into the next chamber, until pristine water is released and allowed to flow into the Pacific Ocean. Dredging and anti erosion projects along Lake Gatun and to the Atlantic Coast are also considering the welfare iof wildlife, the threat of water pollution, and are aiming for sustainable environments at all levels of planning.
Historically, ACP scholars are trying to map, photograph and restore as much of the old "Canal Zone" heritage as possible, within the limitations of entire mountains (but they call them "hills") having been leveled, blasted, and chopped to silt and sand. Even the old Borinquin (Puerto Rican) Highway which wound along the west side of the Canal, and villages such as Cocoli will be retained - at least in the name given to an overflow spillway and reservoir system.
Perhaps most surprising to many of the non-VIP tourists going to the Miraflores Panama Canal Visitors Center, with its restaurants, interactive displays and simulators and gift shops, is the lasting durability of the portions of the Canal from a century ago. Many of the redundant systems, floating steel lock doors, pumps and hydroelectric generators are still functioning.
Indeed, many have been modified and upgraded, but even with the current construction, it is largely "business as usual" along the Panama Canal.
Resources:: Additional data, news releases, photo sites, and engineering notes are available at: