Academic Backs Panama Canal Expansion
New York, April 27: A leading academic has told the Institue that he thinks the government of Panama is likely to succeed in its bid to expand the Panama Canal.
We have reported this week on the announcement on Monday, 24 April by President Martín Torrijos that his government and the Panama Canal Authority intended to press ahead with its bid to build a third set of locks on the 77-kilometre canal, making it navegable for larger cargo vessels, known as post-Panamax ships.
There is serious opposition to the project — which the government has said will cost around $5.5 billion, with the funding coming from increased fees paid by the carriers who use the canal — inside the Central American country, and there will be a referendum on the issue in the autumn.
Speaking to the Global Institute of Logistics, Dr Jean-Paul Rodrigue, a specialist in the links between economics and geography at Hofstra University in New York, said he thought expansion of the canal was "a very likely possibility".
He explained: "Hutchison already operates both ports on each facade (see image), so there are already strong vested interests in Panama from one of the world's leading port operators, and all the linkages with maritime shippers this implies."
Another plus, as far as Dr Rodrigue could see, was the "revitalisation" of the Panama Canal Railway, which should be in a position to help shippers move containers from one ocean to the other while work is going on on the expansion project, or at busy times.
He was less optimistic about some of the mooted alternatives to the canal. One such is a proposal from the government of El Salvador to develop a mega-port on its coast on the Pacific, and develop road links to the Honduran Atlantic coast so that goods may continue from there by sea to the North American market.
"In my opinion this is a venture bound to fail," the academic said. "First, there would be a lot of volume that the local trucks and the projected highway would be stressed to handle. Try to make a caulculations about the amount of trucks and the resulting tonnes-per-kilometre they have to carry just to handle a third of the daily TEU traffic of the Panama canal. I would not be surprised if the volume of just a single daily post-Panamax container ship could cripple the road network of any Central American country, even with a level of highway expansion."
A further problem he pointed to for competitors who want to include road-based logistics solutions to win business from the Panama Canal was the high price of oil. Growing energy prices are here to stay, he insisted, and in any case, relying on such a short road landbridge implied trans-shipments on both sides, involving costs and delays. "It goes against basic transport economics concerning trans-shipment costs and haul distances," Dr Rodrigue said.
Finally, he said he did not think corruption was as serious a problem in Panama as it was elsewhere in Central America. "As a shipper or a terminal operator I would be very reluctant to engage in ventures in those countries when significant capital accumulation is required," he explained. "For instance, imagine this classic scenario:a mega-port could be built with foreign investment coming from a port operator, based on a promise that a new highway will be built. The government could easily change its mind (or be overthrown in an election) and the promise of the highway just vanishes. And while 'international aid' is mustered to bring up the road capacity, the mega-port goes bankrupt."