$5-Billion Expansion of Panama Canal Is Considered

Prodded by possible competition, the Panama Canal’s board of directors will probably propose a $5-billion expansion that would add a parallel set of locks so the waterway could accommodate giant container cargo ships.

Top executives of the Panama Canal Authority said in interviews that the administration saw a real threat that a competing project might be built in Central America or Mexico. As a defensive measure, they said, the 90-year-old waterway must be expanded or eventually it will become just a “regional canal.”

The expansion would enhance the canal as a major transit route for Asian cargo destined for southern and eastern U.S. ports such as New Orleans, Houston, Tampa, Fla., Savannah, Ga., and Norfolk, Va., the officials said. The elimination of the global textile quota system this year is likely to increase Chinese cargo traffic to the United States, canal officials believe.

Two top officials spoke about the proposal but requested anonymity, saying public comment by canal staff was restricted until the board had made a final decision on the plan and sent it to Panamanian President Martin Torrijos.

Currently, the canal is bypassed by “post-Panamax” ships, which are as much as 30% longer than the maximum 965-foot vessels that transit the waterway. The oversized ships each can carry up to 8,000 standard 20-foot containers or their equivalent, double the canal’s current capacity of containers per ship. The canal is also losing westbound ships transporting grain and oil to Asia from Brazil and Venezuela.

The expansion would increase the maximum ship length to 1,265 feet and the ship draft -- the depth of water the vessel needs in order to float -- to 50 feet from 39 feet, the officials said.

The 51-mile-long canal system was completed in 1914 by the United States, which retained control until it turned over the facility to Panama in December 1999.

The expansion project would be a massive undertaking requiring 10 years of labor and about 10,000 workers, one canal official said. The project probably would include a five-mile bypass of the current canal route on its Pacific side, a feature designed for the larger ships.

The expanded canal would accommodate not only bigger ships but also more of them. As it is, traffic is expected to top out at 42 ships a day in the next decade.

The expansion proposal soon will be formally presented to the board of directors and then to Torrijos, who would have to obtain Congress’ approval. Finally, the project would be submitted to a nationwide referendum in November.

The project would be financed mostly with revenue from the canal’s shipping customers, who would pay a surcharge that would pay off bonds issued to underwrite the cost of the construction, an official said.

Canal executives are concerned about proposals to build canals or “multimodal” systems, which include both canals and other means of moving cargo, in Mexico’s Tehuantepec isthmus or through Nicaragua, El Salvador or Honduras.

Pressure for an alternative route is rising because the Long Beach and Los Angeles ports, which receive much of Asia’s U.S.-bound container cargo, are approaching capacity.

Another mega-project being discussed is the construction of a new Mexican port facility near the town of Colonet, about 60 miles south of Ensenada. The port would be connected to the U.S. rail grid by a new 125-mile railroad to the U.S.-Mexico border.

Officially, the canal authority has kept mum on details of a possible expansion, which has been the subject of $50 million in studies initiated in 2000. And that has drawn fire from critics -- such as Jorge Giannareas, former newspaper editor and now university professor -- who say the process should be more transparent.

Environmentalists worry that the expansion would harm ecosystems, displace thousands of peasant farmers and require too much water.

Currently the water used in the canal locks is flushed out to the Pacific and Caribbean.

One of the officials speaking off the record said the authority was leaning toward using a system that would recycle water used to fill up the locks, similar to systems used in some European ports.

Some critics say a lack of transparency is hurting the Torrijos government, which recently proposed a broad fiscal reform to raise up to $500 million in additional taxes.

Finance Minister Ricaurte Vasquez was quoted in the local media as saying the reforms were crucial to the feasibility of the canal expansion, but he did not provide details.