Wednesday, October 25, 2006

Panama votes to widen canal

Voters in Panama have approved a massive expansion to the Panama Canal. The $5.25 billion dollar project will open up the canal to post-panamax shipping. The government run Panama Canal Authority expects the modernisation to complete by 2014 - the 100th anniversary of its initial opening. It will be a massive engineering project which will create 40,000 jobs in the area. The project will be financed by increasing tolls to raise more than $6bn by 2025. The canal is Panama’s primary economic earner. About 80 per cent of Panama's gross domestic product, $16 billion in 2005, is linked to canal activity.

The dream of a short cut from the Atlantic to the Pacific has inspired sailors ever since Magellan first had round the dangerous Cape Horn at the tip of South America on the maiden circumnavigation of the globe. In 1534 Charles V King of Spain suggested a canal would ease transport to from Spanish possessions in Peru. Scotland launched the farsighted but madcap Darien scheme in 1698 to colonise Panama in the hope of establishing trade with Asia. They sent a thousand settlers to settle a fort and build a canal. But the colony was short-lived due to poor agriculture and the threat of tropical disease. It wasn’t helped by an English decision to refuse help from their colony in Virginia. Darien was abandoned a year later after 700 colonists had succumbed to the inhospitable conditions. The Scottish debt incurred as a result of the scheme was a major factor in the 1707 Act of Union with England.

It took the California Gold Rush of 1849 to inspire the next Panamanian infrastructure project. A consortium of US businessmen led by William Aspinall sponsored a railway line through mountains and swamps across the isthmus. It was a massive engineering project and hugely expensive but the Panamanian Railway Company quickly made vast profits. Panama enjoyed a period of affluence and importance. Its creation also re-awoke the long held desire to build a canal from ocean to ocean. The canal-to-be would closely follow the railway line in its short but perilous journey across the continental divide. The railway was important but the canal was still the preferred long-term option so that two ships weren’t needed to complete the voyage.

The Frenchman Ferdinand de Lesseps (a diplomat not an engineer) imitated the pyramid builders when used forced Egyptian labour for a decade to open up the Suez Canal in 1869. Enthused by the success of Suez, he turned his attention to Panama. Because Suez is a lockless sea level canal, de Lesseps thought he could build it the same way in Panama. The plan required an 8km tunnel through the Continental Divide. But unlike Egypt, there was no ready supply of cheap labour. Disease, bankruptcy and the sheer engineering folly of building a sea-level waterway in a mountainous country caused the French operation to go bust after 13 fruitless years.

US President Theodore Roosevelt bought out the French operation and the Canal Zone in 1904 in return for helping Panama gain independence from Colombia. They first launched a program to eradicate mosquitos from the area. They painstakingly fumigated houses, drained the swamps and removed stagnant water pools to stop mosquitos from breeding. As a result, both malaria and yellow fever were eliminated. The work of doctors in Panama proved the mosquito theory as the cause of both diseases and also introduced a vaccine for yellow fever.

Finally the canal opened in August 1914 just prior to the start of World War I in Europe. The Americans built Madden Dam to assure water supply. Completed in 1935, the dam created Alajuela Lake. The US started to widen the canal to aid its World War II efforts but the project was abandoned in 1946. The issue of sovereignty became contentious in the post-war years as Panama asserted its nationalism. Panamanian student protests caused the Americans to fence in the canal zone and increase its military presence. Finally in 1977, the US and Panama signed the Torrijos-Carter Treaty (named for the countries’ presidents) to formalise the handover of the canal back to Panama. Panama finally regained control of the canal in 1999.

The canal is so successful it is now greatly overloaded. Designed to carry 80 million tons a year it carried four times that much in 2005. The canal consists of two artificial lakes, several improved and artificial channels, and three sets of locks. Only Panamax sized ships can negotiate the locks. These have a maximum length of 294m, a width of 32m and a height of 58m. Post-Panamax ships are often far larger than these restrictions. These ships must travel the costly and treacherous 36 day route around Cape Horn. As a result, the canal is missing out on the lucrative revenues from oil tankers, LNG (liquefied natural gas) carriers and bulk carriers. Driven by China’s resource boom, these ships are becoming more common on the high seas. By 2010 almost 40% of the world's fleet will be post-panamx. But Panama is not alone in its desperation to grab a bigger slice of that action.

Nicaragua has even bigger plans to cater for the super sized structures of the future. It plans to build its own $20 billion grand canal that will dwarf Panama’s project in size and scope. Like Panama, they will put the proposal to a vote and if successful it will be ready by 2019. There are massive obstacles to overcome to make this happen. Not least are serious environmental concerns on Nicaragua's tropical forests, coral reefs and indigenous villages living near the Caribbean coast. Panama too has environmental concerns over their expansion. But with 5% of the world’s trade going through the narrow isthmus, pressure to conform was always going to be too great for the nation of 2.1 million whose livelihood depends on the canal.

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