CANAL EXPANSION: ANALYSIS Rewards outpacing risks . C.C.13
Wednesday, 30 May 2012 10:55
CANAL EXPANSION: ANALYSIS Rewards outpacing risks canal expansion
By Mark Scheinbaum
Special to Newsroom Panama
Just the fourth and final phase remains of the gigantic expansion of the Panama Canal with the Panama Canal Authority (ACP)
Meanwhile the entire nation is feeling optimistic that the rewards in commerce and revenue will outstrip the risks.
Recently along with members of the American Society of Panama I got to see from the Cocoli side of the Canal--across from the Pedro Miguel Locks--areas which by the end of 2014 are expected to be underwater, perhaps for eternity. It was my first comprehensive look behind the scenes of the project since a similar visit in the early days of the "third system of locks" expansion more than two years ago.
Below you will find links to information about the millions of metric yards of earth, billions of dollars spent, and specifics of contractors from Panama, the USA, Brazil. Canada, Italy, France, Costa Rica, Germany and many other countries. But the overall scheme of things might be more productive for those not following the world's largest public works project in decades.
First, I am gun shy about naming a price tag, although I have seen reliable numbers that this is a $5 to 7 Billion project. From a more inclusive business perspective, the actual ACP project can not and should not be separated from several simultaneous Panamanian projects, all reaping huge sales for U.S. heavy equipment manufacturers Caterpillar and John Deere.
The ancient highway from the Atlantic port of Colon to the Pacific metropolis of Panama City has been renovated; next to it the high speed toll road from Panama to Colon has been completed and then expanded. A spur is being completed all the way to Tocumen International Airport. Also the traffic-mangling, and ear bursting construction of the first ever Panama Metro--both underground and elevated commuter trains is 20 per cent finished. Two new international airports are being built...and on it goes.
So let's say the Panama Canal Expansion is a $12-14 billion long term upgrade and renovation consortium for the Republic of Panama which has resisted most of the 2008 global recession and beyond.
Today the typical "Panamax" ship (the largest ships designed specifically to traverse the Panama Canal) carry approximately 4,500 shipping containers when fully loaded. Longer and wider locks in the "third generation" of locks will allow "Post-Panamax" ships, already sailing the seas, to cross the Isthmus with 12,500 containers.
Today's average toll for a ship traveling through the Panama Canal of $250,000 will jump to nearly $1 million in tolls for these leviathan ships. That's a big reward for the ACP.
A big risk?
"Frankly, we know there will be bigger and larger ships in the future. They are already out there now," said ACP spokesman Luis Ferreire, my guide on the inspection tour.
He quickly added, "You can't say we would never have to expand again, and we are using designs which allow for that contingency, but we think the revenue stream will be solid because, let's face it, these super, super gigantic vessels were never designed to use the Panama Canal anyway....they stay at sea longer, and go further than ever before, with such huge cargo capacity, particularly for non perishables, that their costs tot he end users stay down."
Even with those limitations, many expert believe that just the 12,500 v 4,500 per load container factors will cut shipping costs, and hopefully prices to the consumer--from customers of Wal-Mart to Japanese and European cars, even after higher tolls are absorbed.
The United States and many of its aging port facilities have also been part of specific ACP information tours, seminars, friendship visits, trade missions, and projected expansion schemes with promises that a bigger Panama Canal means more money.
Since neither the attractive cruise ship ports of Miami and Port Everglades (Fort Lauderdale) or Palm Beach are huge container players compared to say Jacksonville or New Orleans, Port Manatee at the lower mouth entrance to lucrative rail-head Tampa Bay is positioning for more Panama induced trade.
Port Manatee believes it actually becomes the closest viable transshipment point to the expanded Panama Canal, and also to renewed trade with Cuba if and when embargos are lifted, and its Port Authority has geared up for the 2014 new Canal completion.
An estimated $750 million is being spent as part of a Master Plan for the Manatee area to improve shipping and harbor and connecting road and resource infrastructure. What's good for Panama could be good for Florida and Manatee County.
In Houston, shipping interests have been big promoters of the Canal Expansion not only for potential as an oil and gas customer--a role being expanded monthly--but because of the large confluence of rail lines which bring air freight, rail, truck, and Houston Shipping Channel cargo into play in the fourth largest metropolitan area in the United States.
The 2014 completion date is a bit iffy, but politically it is important to the ACP and its arms-length civilian surroundings of Panama to complete the project within the 100th anniversary year of the completion of the Panama Canal by the United States. As of now it looks as if the "official" rededication will be December, 2014 even if the new areas are not yet fully functional.
Environmental issues have been dealt with, again hopefully, in ways never anticipated a century ago. Three "holding ponds" will re-use and filter water in each new lock three times, before releasing it into the next chamber, and so forth, until pristine water is released and allowed to flow in the Pacific Ocean. Dredging and anti erosion projects along Lake Gatun and to the Atlantic Coast are also considering wildlife, water pollution, sustainable environments etc at all levels of planning.
Historically, ACP scholars are trying to map, and photograph, and restore as much of the old "Canal Zone" heritage as possible, within the limitations of entire mountains (but they call them "hills") having been leveled, blasted, and chopped to silt and sand. Even the old Borinquin (Puerto Rican) Highway which winded along the west side of the Canal and villages such as Cocoli, will be retained in the name of an overflow spillway and reservoir system.
Perhaps most surprising to many of the non-VIP tourists going to the Miraflores Panama Canal Visitors Center with its restaurants, interactive displays and simulators and gift shops, is the lasting durability of the portions of the Canal from a century ago. Many of the redundant systems, floating steel lock doors, pumps and hydro electric generators are still functioning. Many have been modified and upgraded, but even with current construction it is mostly business as usual along the existing Canal.
Additional data, news releases, photo sites, engineering notes: http://www.pancanal.com/eng/expansion/index.html
Mark Scheinbaum is a financial consultant and former professor at Louisville University in Panama, and now living in the USA. He is a regular contributor to Newsroom.