Home' Trinidad and Tobago Guardian : August 21st 2014 Contents In 1914, troubled by the onset
of the Great War, The Econ-
omist published a 176-page
special edition on what it
called a great "achievement of
peace": the opening of the Panama
"It may be long before the tolls
become remunerative, but its
immediate effect on commerce will
be stimulative," it said.
"Eventually, the Isthmus is likely
to become one of the busiest resorts
of shipping upon the face of the
Half right. In fact, World War I
meant there was almost no com-
mercial traffic on the canal for its
first six years. But from 1921
onward, the canal quickly started
paying rich dividends---particularly
to its owner, the United States.
Now, with the canal soon to
complete its first expansion in a
century, there are again hopes that
it will transform interoceanic trade.
Yet canals are worse than buses:
Wait 100 years and three come
along at once.
On the eve of the anniversary of
the Panama Canal s opening August
15, the Egyptian government has
announced a plan to upgrade the
Suez Canal for the first time in its
Nicaragua has endorsed a 278
kilometre (173-mile) route for a
US$40-billion canal linking the
Atlantic to the Pacific, the quixot-
ic-sounding dream of a little-
known Chinese magnate and the
country s Sandinista government.
Causing further intrigue, on
August 8, a delegation of Chinese
businessmen from the state-owned
China Harbour Engineering Com-
pany visited Panama to explore the
idea of building and financing a
fourth set of locks---even before the
third set, part of the existing expan-
sion plan, is in place.
As 100 years ago, numerous
commercial and geopolitical inter-
ests are at play.
In 1914, Panama s beauty was its
lack of competition. It was the
dawn of an American century. The
United States west coast was
enjoying an oil boom and wanted
a cheaper way than the steam train
to move goods and fuel between
the Pacific and Atlantic.
The canal lopped 12,600 kilo-
metres from the sea route between
New York and San Francisco. It also
had strategic value. After the Span-
ish-American war in 1898 gave it
territories and protectorates from
Cuba to the Philippines, the United
States needed a naval route between
Atlantic and Pacific.
The gains were swift. By 1922
real shipping rates on some routes
had dropped almost one-third
below their pre-war average,
according to The Big Ditch: How
America Took, Built, Ran and Ulti-
mately Gave Away the Panama
Canal, by Noel Maurer and Carlos
Yu. American taxpayers quickly
recouped their investment.
After World War II, however,
America s trade with Asia soared
above that between its east and
Competition to the canal came
from America s interstate highways
and new diesel-fueled railways.
That led to the Torrijos-Carter
Treaties, which handed control of
the canal to Panama in 1999.
Panama has done a good job of
running it. But competition is
emerging on all sides.
When the semiautonomous
Panama Canal Authority (ACP)
started planning its expansion ten
years ago, it aimed to win traffic
from Suez by making room for
ships carrying up to 13,000 con-
tainers (at the moment the biggest
that can squeeze through carry
But ships have since emerged
that can carry 18,000.
Suez, a sea-level canal with no
locks which can take these bigger
vessels, saw its share of traffic
between Asia and the east coast of
the United States rise from below
30 per cent four years ago to 42
per cent last October.
Another problem for Panama is
that manufacturing is moving out
of China as wage costs there rise---
much of it is drifting to more
southeasterly parts of Asia, closer
to the Suez route.
Panama is also facing challenges
closer to home.
Technical problems such as
dodgy cement, and a fight over
costs between the ACP and its
European contractors, have delayed
the US$5.25-billion expansion by
at least a year and may raise its
cost. Meanwhile Nicaragua, once
deemed too earthquake-prone for
a big canal, is trying to rekindle its
Many doubt the commitment of
Wang Jing, a 41-year-old billionaire,
to build a giant waterway through
But the Pharaonic project, and
the more recent interest of Chinese
businessmen in expanding the
Panama Canal, reflect the fact that
China may want a say in the isth-
There is more competition from
the United States, too. Shipping a
box from Shanghai to New York
takes 26 days via Panama. Shipping
it to California and completing the
journey by train takes only 21 days
(though it costs more). West-coast
ports are modernising in a bid to
"beat the canal."
In a fiercely competitive shipping
market, analysts say the key to
Panama s competitiveness in the
future may be issues like the size
of its tolls. But for now it is focusing
on the long term.
"They re not doing this for 2017,"
said Paul Bingham of CDM Smith,
an infrastructure firm.
"It s the 100-year view that s
@2014 The Economist News-
paper Ltd. Distributed by the New
York Times Syndicate
BG28 THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2014 • WEEK THREE
Now for the next 100 years
Drained for maintenance, the
Miraflores Locks remain
impressive after 93 years of
operation. A recently approved
expansion plan will double canal
capacity by 2015.
The Panama Canal
Technical problems such as dodgy
cement, and a fight over costs between
the ACP and its European contractors,
have delayed the US$5.25-billion
expansion by at least a year and may
raise its cost.
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