Panamanian officials say that recent trade figures justify
their confidence that the canal expansion, due to be completed
in 2014, will pay for itself.
Despite the drop in world commerce last year, revenue from the
canal was up 4%. Volume was off slightly for the year, but did
increase by 3.5% in the final three months of the year.
More encouraging, according to Deputy Finance Minister Dulcidio
de la Guardia, are numbers for volume at the Colon Free Zone,
which were up 17% at the start of this year compared to
Trade will continue to grow. This is a trend that is not
going to change, de la Guardia said. The all-water
route is much cheaper than land-water routes, and we are going
to take market share from them.
The canal expansion, which is in full swing with the
construction of new locks, will require $5.2 billion in
investment by its 2014 completion. The largest component, $3.2
billion for new locks, was awarded in July 2009 to a
four-member consortium. It is on time and new estimates
actually have the cost at around $290 million lower than
Panama is financing the expansion with loans from five
development agencies: the IDB ($400 million), Andean
Corporation for Development ($300 million), European Investment
Bank ($500 million), Japan Bank for International Cooperation
($800 million), and the International Finance Corporation ($300
million). The rest is being paid for by users through an
increase in rates.
The US is the canals largest user, followed by China and
Chile. De la Guardia said Chinas continued appetite for
raw materials will guarantee increasing volume flows with the
new canal lane.
But there are big investments in alternatives to and
competition for the Panama Canal. Brazil and Peru, for
example, are concluding several projects that will connect the
Atlantic and Pacific oceans.
The most watched is an all-weather highway that will connect
Sao Paulo with ports in southern Peru. Brazil is financing most
of the $1.5-billion project, which should be concluded early
This will give Brazil opportunities to move products overland
through Peru and then on to China, and ease Chniese exports of
manufactured goods to Brazil. There are two other inter-oceanic
links, which will use highways and rivers to move goods.
Peru is offering concessions this year to build ocean and river
ports, and President Alan Garcia has invited Brazilian and
Chinese investors to use Peru as a platform for
trade. Brazil and Ecuador have a similar plan to create a
river-highway intermodal link, but this is not as advanced as
the Peruvian projects.
De la Guardia said Panama is not concerned. The expansion
will let larger ships move raw materials from Argentina, Brazil
and the US to China at costs much lower than any other
This is a benefit that is already recognized and can be
seen in the investment in port along the US eastern seaboard to
receive larger ships.