Panama Canal expansion project Totally Explained

Everything about Panama Canal Expansion Project totally explained

The Third Set of Locks Project is a megaproject that will expand the Panama Canal. The expansion will be greater than at any time since the canal's construction. The Panama Canal Authority proposed the project after years of study. Panamanian President Martín Torrijos presented the plan on April 24, 2006 and Panamanian citizens approved it in a national referendum by 76.8% of votes on October 22, 2006. The project will double the canal's capacity and allow more traffic.
The project will create a new lane of traffic along the Canal by constructing a new set of locks. Details of the project include the following integrated components:

Construction of two lock complexes — one on the Atlantic side and another on the Pacific side — each with three chambers, which include three water-saving basins;
Excavation of new access channels to the new locks and the widening of existing navigational channels; and,
Deepening of the navigation channels and the elevation of Gatun Lake’s maximum operating level.

As stipulated by the Panamanian Constitution, any project to expand the Canal had to be approved by the Cabinet, the National Assembly and by a referendum. On Friday July 14 2006, the National Assembly unanimously approved the proposal. In addition, the Assembly passed a law mandating a national referendum on the proposal. The Panama Canal expansion referendum was held on October 22, 2006, the first Sunday more than 90 days after National Assembly approval.
On September 3, 2007 the Panama Canal expansion project officially started. Panama's president Martín Torrijos stated that the Canal will generate enough wealth to transform Panama into a First World country.
The president also announced that the canal will also industrialize the country when the expansion projects start progress. The project is also expected to reduce poverty by about 30%, making Panama have an estimated 8% of poverty in 2012.

Background

Since the 1930s, all of the Canal widening studies have determined that the most effective and efficient alternative to enhance Canal capacity is the construction of a third set of locks, with bigger dimensions than those of the locks built in 1914. Thus, in 1939, the United States initiated the construction of locks designed to allow the transit of commercial and war ships, whose dimensions exceeded the size of the existing locks. In 1942, after advancing the excavations significantly, the Americans suspended the third set of locks project due to the outbreak of World War II. In the 1980s, the tripartite commission formed by Panama, Japan, and the United States took up the issue again, and like the Americans in 1939, determined that a third set of locks with larger lock chambers was the most appropriate alternative for increasing Canal capacity. Today, the studies developed by the Panama Canal Authority (ACP) as part of its Master Plan, with a horizon to the year 2025, confirm that a third set of locks, larger than those existing now, is the most suitable, profitable and environmentally responsible way to increase Canal capacity and allow the Panamanian maritime route to continue to grow.

Cargo volume

Based on ACP's projections, during the next 20 years, cargo volume transiting the Canal will grow at an average of three percent per year, doubling 2005’s tonnage by the year 2025. As such, providing the Canal with the capacity to transit larger vessels will make it more efficient by allowing the transit of higher cargo volumes with relatively fewer transits and less water use.
Historically, the dry and liquid bulk segments have generated most of the Canal’s revenues. Bulk cargo includes dry goods, such as grains (corn, soy and wheat, among others), minerals, fertilizers, coal, and liquid goods, such as chemical products, propane gas, crude oil and oil derivatives. Recently, the containerized cargo segment has replaced the dry bulk segment as the Canal’s main income generator, moving it to second place. On the other hand, the vehicle carriers segment has become the third income generator, replacing the liquid bulk segment. Shipping industry analyses conducted by the ACP and top industry experts indicate that it would be beneficial to both the Canal and its users to expand the Canal due to the demand that will be served by allowing the transit of more tonnage. though it's important to note that any such imbalance need not be made up by physically-shipped goods, but could be made by other trade such as intellectual property as China upgrades its intellectual property protection laws. The ACP, however, presumes that it won't only not be adjusted, but will continue to grow for a generation as it has for the past several years. One of the central points of the canal expansion proposal's critics, most prominently made by former canal administrator Fernando Manfredo, is that it's unrealistic to attempt to predict canal usage trends over a generation, most improbable to expect that U.S. imports from China will continue to grow as they've the past few years over a generation, and irresponsible to bet Panama's financial future on such a projection.

Competition

The most direct competition to the Canal is from alternative routes which present options for the transport of cargo between the same geographical points of origin and destination. The two main competitors of the Panama Canal are the U.S. intermodal system and the Suez Canal.
According to the ACP, the growing trend to use Post-Panamax container ships in transcontinental routes competing with the canal is irreversible. The main ports and merchandise distribution centers in these routes are investing in capacity, location, and maritime and land infrastructure to serve these vessels and handle their cargo volumes. If this trend continues, by the year 2011, approximately 37% of the capacity of the world’s container ship fleet will consist of vessels that don't fit through the canal, and a great part of this fleet will be placed in routes that compete with Panama, such as the transpacific-intermodal route and the Suez Canal route.
Although the Canal is reaching its maximum capacity, the ACP clarifies that this doesn't mean that ships will be unable to transit the Canal. However, it does mean that the Canal’s growth capacity will stagnate and that it won't capture additional cargo volumes..

The project

Locks

The Canal proposal today has two lanes each with its own set of locks. The proposal consists of adding a third lane through the construction of lock complexes at each end of the Canal. One lock complex will be located on the Pacific side to the southwest of the existing Miraflores Locks. The other complex will be located to the east of the existing Gatun Locks. Each of these new lock complexes will have three consecutive chambers designed to move vessels from sea level to the level of Gatun Lake and back down again. Each chamber will have three lateral water-saving basins, for a total of nine basins per lock and 18 basins total. Just like the existing locks, the new locks and their basins will be filled and emptied by gravity, without the use of pumps. The location of the new locks uses a significant portion of the area excavated by the United States in 1939 and suspended in 1942 because of the start of World War II. The new locks will be connected to the existing channel system through new navigational channels. Independent engineers, most notably Humberto Reynolds and Tomas Drohan Ruiz, the former head of Engineering and Dredging of the Panama Canal, say that the project will cost much more than currently budgeted and that it's too risky for Panama.
M.A. Bernal, professor at the University of Panama thinks that confidence in the budget of the Panama Canal Authority is undermined because of engineering and consultancy firm Parsons Brinckerhoff's involvement. Parsons Brinckerhoff is best known for the Boston Big Dig, which ended up costing three times the estimated amount with several structural and safety concerns.

Estimated profit

According to the ACP, the third set of locks is financially profitable, producing a 12% internal rate of return. The third set of locks project is self-financed and its financing will be separate from the Government’s financing. The state won't guarantee or endorse any loans undertaken by the ACP for the project’s execution. With tolls increasing at an annual average rate of 3.5% for 20 years, and according to the most probable traffic demand forecast and construction schedule, the external financing required will be mainly temporary and in the order of USD $2.3 billion to cover peak construction activities between 2009 and 2011. With the cash flows generated by the expanded Canal, investment costs will be recovered in less than 10 years and financing could be repaid in approximately eight years. (editor of the Panama News internet newspaper), Gonzalo Menendez (former head of the National Environmental Authority or ANAM by its Spanish initials), Ariel Rodriguez (University of Panama biologist), former Vice Minister of Public Works Grettel Villalaz de Allen and others are some of the most prominent critics of the canal expansion plan from the point of view of water quality issues. Jackson contends that ACP's public statements often don't match the findings of their studies. He says that the Delft Hydraulics, WPSI Inc, and DHI studies all say that no matter what is done to mitigate the problem, the water saving basins feature of the proposed new locks would increase the intrusion of salt water into Gatun Lake, from which about half of Panama’s population takes its drinking water. The chosen method to partially mitigate this problem is to "flush" the new locks with fresh water from Gatun Lake — but that tends to defeat the proposed new locks’ water saving feature and raises questions about the security of the urban water supply. Even though these claims have been brought, when reading the same studies they've posted as evidence, it's clear that their interpretation of the studies are incorrect.
However, one of the leading environmental organizations in Panama, ANCON (National Association for Nature Conservation) says that the studies and projections of operation of the Third Lock, including the water saving basins, state in a credible manner that there will be very low levels of salinization of waters of Gatun Lake and that these levels would preserve the biologic separation of the Oceans with the safekeeping of the biodiversity and water quality for human use.

Employment generation

According to the ACP, the Canal expansion’s impact on employment will first be observed in the jobs directly generated by the economic boom experienced during the years of its construction. Approximately 35,000 to 40,000 new jobs will be created during the construction of the third set of locks, including 6,500 to 7,000 additional jobs that will be directly related to the project during the construction’s peak years.
However, officials state that the most important impact on employment will be medium and long term and will come from the economic growth brought about by extra income generated by the expanded Canal and the economic activities produced by the increase in Canal cargo and vessel transits – all of these contributing to fully leverage the advantages of Panama’s geographic position. The labor required for construction of the third set of locks will, in its vast majority, be done by Panamanians. To ensure the availability of Panamanian labor necessary for the third set of locks project and its connected activities, the ACP and public and private authorities will work jointly to train the required workforce with sufficient lead time, so that it has the necessary competencies, capabilities and certifications. The amounts necessary to carry out these training programs are included in the cost estimates of the project.

Voices supporting the project

ANCON (National Association for Nature Conservation)

Chamber of Commerce, Industries and Agriculture.

Former Miss Universe Justine Pasek, writer Rosa María Britton and painter Olga Sinclair (National Council of Organized Workers) favors the project.

Canal customers, many in the maritime industries and in Panama's and the world's business communities.

Panama sportman like Carlos Lee, Mariano Rivera, Roberto Vasquez, Vicente Mosquera, Maestrito Cordoba and Danilo Pinnock

singers like Mach and Daddy, Ruben Blades, Karen Peralta and others.

Voices against the project

Ex-president Jorge Illueca, former sub-administrator of the Panama Canal Commission, Fernando Manfredo, shipping consultant Julio Manduley and industrial entrepreneur George Richa M. say that the expansion isn't necessary; they claim that the construction of a mega-port on the Pacific side would by itself be sufficient to meet probable future demand. The logic behind this is that said port would be the second port (the first being Los Angeles) deep enough in the American Pacfic capable of handling post-panamax ships. As Panama is already a natural trading route, it would be able to handle the movement of containers from the Pacific to the Atlantic side via railroad, where containers would be reloaded to other ships for worldwide distribution.

Former President Guillermo Endara and his Vanguardia Moral de la Patria Party, MOLIRENA (a conservative, business oriented party that normally gets about 10 percent of the vote), most members of the nationalistic Panameñista Party (Grettel Villalaz de Allen and Gonzalo Menendez, mentioned above, and former legislator Gloria Young are prominent examples) oppose the expansion plan.

Some environmentalist leaders and groups are against the project. Biodiversidad Panama, whose principal leader is University of Panama biologist Ariel Rodrirguez, and former National Environmental Authority director Gonzalo Menendez.

Most Panamanian left, including most of the labor movement, is in the "no" camp. For example CONUSI (National Independent Syndicate Union) and FRENADESO (National Front for the Defence of Social and Economic Rights) oppose the project.

The Liberation Theology people don't like the proposal, in part because they suspect that poor farmers among whom they've a social base would be adversely affected. The canal expansion issue has aggravated the breach between this mainly Catholic strain and the Catholic hierarchy. The "no" campaign has chosen as its principal spokesmen for relations with the Electoral Tribunal the radical Catholic priest Father Conrado Sanjur.

The Council on Hemispheric Affairs (COHA) stated on a press release that under the Torrijos government, the expanding Panama Canal won't likely serve the needs of the vast majority of Panamanians. Much of the benefits will be tied to the commercial interests of the country’s accountants, bankers and lawyers, as well as their U.S. counterparts, and world trade. They also say that the administration's rampant corruption and other flaws raise questions about Panama's capacity to supervise such an enormous project. Some letters have arrived to COHA where they've acknowledged some factual errors, so COHA is going to make some modifications to reflect these facts.Further Information

Get more info on 'Panama Canal Expansion Project'.

External Link Exchanges

Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:

<a href="http://panama_canal_expansion_project.totallyexplained.com">Panama Canal expansion project Totally Explained</a>

Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned.