Leigh Miller for GlobalAtlanta
Georgia companies will be able to ship products more quickly and cheaply to Asia and Latin America if Panamanians approve a $5.25 billion expansion of the Panama Canal in an Oct. 22 referendum, said Panama Canal Authority Administrator Alberto Aleman.
Mr. Aleman spoke about the proposed expansion during the 2006 Pan American Union of Engineering Societies (UPADI) Conference, a bi-annual meeting of engineers from Spain and 25 countries in the Americas, Sept. 19–22, at the Westin Peachtree Plaza Hotel and the Georgia Tech Global Learning & Conference Center.
“If we don’t expand the canal, we will not have the capacity to meet the demand for ships carrying products from the Atlantic Ocean to Chile or to China,” Mr. Aleman told GlobalAtlanta in an interview during the conference. “The only alternative route is all the way around Cape Horn.”
The expansion, which must be approved by a popular referendum on Oct. 22, will double the canal’s capacity, plus allow the world’s largest ships, the Postpanamax container ships, to pass through the canal.
The expansion would benefit the maritime industry because by allowing larger vessels, shipping companies’ cumulative fees for traversing the canal decrease, Mr. Aleman said.
Georgia exporters would also reap the benefits, he added, because the cost per unit shipped decreases when using larger ships that hold more containers.
Georgia companies could ship products to Panama by air or sea, have them assembled or finished in the country’s duty-free zone, a distribution center located near the canal, and then forward them by ship to their final destination across the Pacific Ocean, Mr. Aleman said.
The expansion would double the canal’s current average of 38 ships per day, he said. Without the expansion, ship traffic will back up, resulting in long wait times for transit through the locks, especially for vessels without booking slots, he added. Ships currently expect an average of 10 days’ delay to transit the canal.
If the canal exceeds maximum capacity, which is expected by 2014, it will have to increase tolls, possibly driving clients away, Mr. Aleman said.
Backlogs of ships in recent months have led to shippers paying exorbitant prices for an auction slot, a concept begun in April that allows a shipper to jump ahead in line to cross through the canal. The canal authority has 23 reservation slots and one transit slot sold at auction per day. BP Shipping Ltd. paid a record high of $220,300 for the express transit of an oil tanker during a vessel backlog in August.
Initiatives in other Central American countries could compete with the Panama Canal if the expansion is not completed, Mr. Aleman noted. Nicaragua has been promoting the idea of building a canal, and Guatemala plans to modernize its highway and railroad systems to better transport containers from the Atlantic to the Pacific.
Recent polls show that some 64 percent of the Panamanian people support the expansion of the canal. But the project is not without controversy, Mr. Aleman said, noting that criticism has come from environmental groups and from citizens concerned that monies collected to pay for the expansion will wind up in the wrong hands. The $5.25 billion price tag on the project is also equal to half of the country’s external debt of some $10 billion, which has caused some concern, he added.
But the proposal includes demands on the Panama Canal Authority to strictly regulate the expansion project, which would be completed in 2013, Mr. Aleman said. Every six months, the authority will have to submit a report to the Panamanian House of Deputies on the status of the project. The canal authority must pledge to not build any lakes, and must build a bridge across the Atlantic side of the canal locks by 2013.
The authority, which governs all operations of the canal, will also guarantee that it allocate no less than the value of fiscal year 2006 taxes to the federal government each year for the duration of the expansion project. During the construction, which adds a third set of locks to the canal, the canal authority’s contributions to the national treasury will be more than $750 million per year, and in 2015, could be more than three times those made in 2005. By 2025, total contributions by the canal to the treasury could be more than eight times those of 2005.
The expansion project would also create jobs in Panama, Mr. Aleman said. An estimated 35,000-40,000 new jobs will be created during the construction of the third set of locks. Some 150,000-250,000 additional jobs would be created by 2025.
Tolls collected from passing ships already comprise some 7 percent of the country’s gross domestic product, he noted, adding that the canal’s indirect impact on Panama’s economy is “huge.”
Logistics is a major industry in Panama, Mr. Aleman said, adding that the country is a “gateway of the Americas” because it is at the intersection of the world’s north-south and east-west shipping routes. It is the only port with terminals in two oceans that are 50 miles apart.
The 90-year-old canal locks and facilities are already undergoing a renovation and maximization project that is to be completed in 2009, but the third set of locks planned in the expansion is necessary, Mr. Aleman added.
Visit www.pancanal.com for information about the canal expansion.