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by Larry

May, 2013

The New Panama Canal

100 years ago, in 1913, engineers completed the original Panama Canal, a dual waterway across a narrow strip of land separating the world's largest seas. That accomplishment was thanks to a multitude of people from primarily three countries, France, the United States, and Panama. France actually had begun the canal in 1881. After huge outlays, its efforts failed. However, much of the first construction was built upon by the U.S. using both American and Panamanian workers. Many of these laborers, estimated at over 30,000, including both the French and U.S. efforts, were killed by dangerous conditions, not least from yellow fever, malaria, and landslides, before the canal was finished and open for ship transit. Though, thanks to advances in medicine and mosquito control during the early 20th Century, the American effort dealt far better with the disease potential than had the French, Blacks, a majority of the U.S. canal workers, unfortunately were forced to subsist in conditions far more harsh than for White U.S. citizens, and died is disproportionately higher numbers.

The Panama Canal's successful completion allowed for shipping between Pacific and Atlantic by this much shorter, less hazardous route than in the frigid, often stormy waters around the southern tip of South America. These days, though, the canal's capacity is significantly less than what is needed for many large oceangoing vessels, especially as commerce has markedly increased between the U.S. and Asia. Optimistic that such enhanced shipping will persist, in 2007 Panama embarked upon an ambitious project intended to double the overall tonnage that may pass each way through the canal. Concerns over the canal's limited capacity had already motivated the U.S., which had controlled the Panama Canal for its first several decades, to embark on an expansion of its lock dimensions only about 20-30 years after their completion. World War II intervened, though, and our country devoted its energies instead into becoming the world's greatest industrial colossus, manufacturing so many ships, bombs, tanks, planes, jeeps, rifles, artillery shells, C-rations, etc. that they would easily swamp the output of the Axis Powers, hopefully assuring eventual victory.

Panama Canal in 1915 (Wikipedia)
Today's new Panama Canal project is expected to be ready for full use by 2015. If all goes as planned, the new locks will permit the passage of massively bigger ships than before, and the costs of the improvements will be paid for in the next several years, after which Panama may see great enhancement of its economic situation. Many are hopeful of these outcomes and onboard, so to speak. A few U.S. eastern ports are ramping up to be able to handle the huge vessels that may soon be going to or arriving from Asia via the canal. Liverpool, in Britain, is also expanding to accommodate the larger ships. Asian exporters are eager for increased trade the larger canal locks and channels may permit. Folks concerned with pollution around Pacific coastal harbors hope the change will decrease the smog and other downsides of heavy ship, truck, and rail port traffic in their areas. The Nature Conservancy has endorsed the proposed changes. Panama itself is seeking a stimulated financial system plus lower unemployment and poverty rates.

The plan calls for a third waterway for ships' transit, the new one roughly parallel to the first two. Its sets of entry and exit locks will be 1400 feet long, 180 feet wide, and 60 feet deep, compared with 1050 feet by 110 feet by 41 feet for the old lock systems. Other improvements include: creation of new access channels to the larger locks; construction of three chambers each with water-saving basins for the new entry and exit lock systems; deepening of the channels, and raising of the max operating level for the Gatun Lake portion of the canal complex.

What proponents of the new Panama Canal intend is that, just as the U.S. highway system, begun in the 1950s as a way to help assure military preparedness in case of attack on our homeland, resulted in upsurges in auto purchases, commercial and residential building, trade, employment, manufacturing, consumer spending, new communities, expansion of old cities and towns, etc., an "If you build it, they will come" inevitability will ensue, spurring not merely Panamanian but global growth.

Yet skeptics question that sanguine view. Some were against the development from the outset. Among reservations about the project are the following:

  • Will shippers be willing to fork over the higher toll fees required to pay off the high expansion project costs?

  • Will rising sea levels associated with global warming reduce the viability of the old and new canals sooner than projected?

  • Will competition by the rail and truck traffic movements of goods from Pacific ports or by shipping via an increasingly available "northwest passage" (above mainland Canada), as sea lanes there are increasingly ice free, reduce the use and profitability of the Panama Canal system?

  • Might the benefit to Panama's unemployment/poverty situations be only temporary, most noticeable during the construction phase, so forecasts of their sustained lowering would turn out to be unrealistic?

  • Will U.S. demand for Asian goods stay high, as those who supported the project maintained, or might the rising relative price tags of materials from the western Pacific region, as the cost of living increases overseas, and greater self-reliance in the U.S. make imports less attractive or necessary and so curtail an earlier American dependence on foreign trade?

  • Have the environmental impacts been adequately addressed? For instance, an unintended consequence of global-warming-associated climate change, combined with the new Panama Canal system activities, may be that salt water replaces fresh in Gatun Lake, a key source of potable water for human and agricultural consumption in Panama.

  • Will there be adequate separation of Pacific vs. Atlantic species to preserve the uncontaminated biodiversity of each ocean?

  • Will delays and cost overruns for completion of the new locks, lake, and channels system mean it may require many more years than planned before Panama can see significant profits?

  • Will Gatun Lake levels fall, due to lowered precipitation in the area as weather patterns shift, resulting in substantially less capacity and profitability for the new Panama Canal than envisioned by the planners?

  • Might an enhanced Panama Canal be seen as more crucial to global trade and strategic military deployments, making it a greater target for terrorism?

If some of the above issues do result in lowered returns for the big bucks being spent, Panama, a third world country with significant poverty, could see its fiscal circumstances getting worse.

The die has been cast. Things are well underway, so we might just be positive. The overall results will probably be neither as dire as the pessimists would have us believe nor as rosy as the pictures painted by optimists appear. For the world economy as a whole, there is likely to be some benefit, an increase in the ease and options for overall commerce, even if certain local expectations go unmet.

Primary source:

Panama Canal Expansion Project. Wikipedia; as last updated 7 May, 2013.

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