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Panama Canal Expansion
Part 2 of 2
Panama Canal
Construction timeline
The construction of the third set of locks project is slated to take between seven to eight years. The new locks could begin operations between fiscal years 2014 and 2015.[1]
Panama Canal
Finances
The main purpose of the Canal expansion program is to increase Panama’s ability to benefit from the growing traffic demand. This growing demand is manifested both in increased cargo volume and vessel size that will use the Panama route. In this sense, the Canal, with a third set of locks, will be able to manage the traffic demand forecast beyond 2025, and total revenues for that year, adjusted for inflation, will amount to over USD $6.2 billion.[1]
Panama Canal
Estimated cost
The cost to construct the third set of locks is estimated by the ACP at approximately USD $5.25 billion. This estimate includes design, administrative, construction, testing, environmental mitigation, and commissioning costs. Additionally, this cost includes contingencies to cover risks and unforeseen events, such as those that might be caused by accidents, design changes, price increases, and possible delays, among others. The most relevant program cost is that of constructing the two new lock complexes — one on the Atlantic side and the other on the Pacific side — with estimated costs of approximately USD $1.110 billion and USD $1.03 billion each, plus a USD $590 million provision for possible contingencies during their construction.[1]Opponents contend the project is based on uncertain projections about maritime trade and the world economy. Prof. R.N. Mendez, an economist who works for the University of Panama, alleged that the economic and financial projections are based on manipulated data[8]. Independent engineers, most notably Humberto Reynolds[9] and Tomas Drohan Ruiz[10], 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 is 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 one tunnel currently closed due to structural and safety concerns.[11]
Panama Canal
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 will not 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.[1]What "self-financing" actually means, however, is disputed. At least half of the money needed for the canal expansion project will have to be borrowed, and the ACP does not calculate the interest on that as part of the project's costs.[citation needed] The ACP's revenue projections are based on suppositions about increase in canal usage and the willingness of shippers to pay higher tolls instead of seeking competing routes, both of which critics question.
Panama Canal
Environmental impact
The ACP claims in the proposal that the third set of locks project is environmentally viable. It has been found that all possible adverse environmental impacts can be mitigated through existing procedures and technology, and no immitigable or permanent adverse impacts on the population or the environment are anticipated. There are no elements within the scope of the project that will compromise its environmental viability, such as communities, primary forests, national parks or forest reserves, relevant patrimonial or archaeological sites, agricultural or industrial production areas, or tourist or port areas. The project will not cause permanent or irreversible impacts on water or air quality. The proposed water supply program fulfills the objectives of maximizing the water capacity of Gatun and Alhajuela Lakes, and applies the most efficient water utilization technology at the locks so no new reservoirs will be required. Consequently, it will not be necessary to relocate communities. The entire area directly affected by the project is located within ACP operational and administrative areas.[1]Critics to the project contend there are a lot of environmental topics to be considered. For example: link between El Niño (ENSO) and global warming threat to water supplies. The ACP has commissioned a number of studies by a number of consultants about water supply and quality issues, and some like Eric Jackson[12] (editor of the Panama News internet newspaper), Gonzalo Menendez[13] (former head of the National Environmental Authority or ANAM by its Spanish initials), Ariel Rodriguez[14] (University of Panama biologist), former Vice Minister of Public Works Grettel Villalaz de Allen [1] 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 do not match the findings of their studies. He says that the Delft Hydraulics[15], WPSI Inc[16], and DHI[17] 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 have posted as evidence, it is 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.[18]
Panama Canal
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.[1] Critics dismiss this as pure demagogy, noting that by the ACP's own studies at the peak of construction there will be fewer than 6,000 jobs created and that some of these will be highly skilled posts filled by foreigners because there are no Panamanians who are qualified to fill them.[citation needed] Among those who oppose the canal expansion proposal is Panama's construction workers' union, SUNTRACS. The union's secretary general, Genaro Lopez, argues that while some construction jobs would be created by the project, the debt that Panama incurs to build a third set of locks would not be defrayed by increased canal usage and thus an increased part of canal revenues would go toward paying the debt, reducing the waterway's contributions to the national government's general fund and in turn reducing money for road projects, public schools, police protection and all other government services.[citation needed] Critics also claim the project lacks an accompanying social development plan. President Torrijos has since accepted to develop one with the mediation of the UNDP. [19]
Voices supporting the project
* ANCON (National Association for Nature Conservation)[18] has given its approval of the environmental studies of the proposal and stated some recommendations if the project is approved. Among others, also the Nature Conservancy, a U.S.-based organization with a few Panamanian followers, and the former director of the INRENARE agency that was the predecessor of the National Environmental Authority, Stanley Heckadon, have endorsed the proposal. * Former Presidents Mireya Moscoso and Ernesto Pérez Balladares. * La Prensa newspaper on an editorial note.[20] * Chamber of Commerce, Industries and Agriculture[21]. * Former Miss Universe Justine Pasek, writer Rosa María Britton and painter Olga Sinclair[21]. * Former presidential candidate Ricardo Martinelli and Panama City's mayor Juan Carlos Navarro. * Panamanian boxing world champions Roberto "The Spider" Vásquez, Celestino "Pelenchín" Caballero and legend Roberto Duran. * The government-aligned CONATO[22] (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.[23] * Panama sportman like Carlos Lee, Mariano Rivera, Roberto Vasquez, Vicente Mosquera, Maestrito Cordoba and Danilo Pinnock * singers like Mach and Daddy, Ruben Blade, Karen Peralta and most importantly Real Phantom who wrote the official song of the expansion of the canal called: "si a la ampliacion"
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 is not 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. [24] * Former President Guillermo Endara and his Vanguardia Moral de la Patria Party[25], MOLIRENA[26] (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[27] 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[28] (National Independent Syndicate Union) and FRENADESO[29] (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 have a social base would be adversely affected. The canal expansion issue has aggravated the breach between this mainly Catholic strain and the Catholic hierarchy[30]. 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 will not 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[31]. Some letters have arrived to COHA where they have acknowledged some factual errors, so COHA is going to make some modifications to reflect these facts[32].
Notes
1. ^ a b c d e f g h i j k l m n o p q Proposal for the Expansion of the Panama Canal by the Panama Canal Authority (English) 2. ^ Panamanian Constitution, page 109.(Spanish) 3. ^ Panama to Vote on Canal Expansion Oct. 22, The Washington Post (English) 4. ^ President Martín Torrijos's speech at the unveiling of the project (Spanish) 5. ^ Why the U.S. China Trade Imbalance is Unsustainable by About.com 6. ^ Analysis: Expanding the Panama Canal By INGRID VASQUEZ 7. ^ The “no” campaign holds a forum by Eric Jackson 8. ^ "A bad business for Panama" by Roberto Mendez (Spanish) 9. ^ "Estimated cost of the Third Locks" by Humberto Reynolds (Spanish) 10. ^ "The real cost of the expansion" by Tomas Drohan Ruiz (Spanish) 11. ^ "The 'Big Dig' of the expansion" by M.A. Bernal (Spanish) 12. ^ Propaganda, studies differ about Gatun Lake water quality by Eric Jackson (English) 13. ^ Some worrisome environmental aspects of the Panama Canal expansion by Gonzalo Menendez 14. ^ Panama News Spanish Opinion Section (Spanish) 15. ^ Delft study on the water quality 16. ^ WPSI study about the water 17. ^ DHI "study of studies" 18. ^ a b ANCON approves the proposal (Spanish) 19. ^ Press release of the UNDP-Panama about the mediation process (Spanish) 20. ^ Editorial of la Prensa Newspaper in favor of the project (Spanish) 21. ^ a b The people behind the "yes" (Spanish) 22. ^ Conato supports Canal project, La Prensa (Spanish) 23. ^ Panama Canal at the crossroads Editorial of The Washington Times 24. ^ Statement by former President Illueca and others about the megaport in the Pacific side (Spanish) 25. ^ Guillermo Endara's Vanguardia Moral de la Patria New party nears ballot status, prepares for first campaign 26. ^ El Molirena rechaza la ampliación (Spanish) 27. ^ Los promotores del ‘sí’ y el ‘no’ (Spanish) 28. ^ CONUSI's 10 big reasons to vote no on the referendum (Spanish) 29. ^ FRENADESO: Why we say no to the ACP project (Spanish) 30. ^ Panama Profundo (Spanish) 31. ^ Expanding the Panama Canal: A wider canal or more government payola? - Press release of COHA (English) 32. ^ Regarding COHA’s August 8 Release “Expanding the Panama Canal: A Wider Canal or More Governmental Payola?”Additional Articles
The expansion of Panama Canal By: Marcus Laval Nearly thirty years ago, General Omar Torrijos signed with the United States a treaty leading on January 1, 2000 to the return to Panama of the sovereignty on Panama Canal. At the time of
Panama Canal expansion project Wide load: the Panama Canal, running at almost full capacity, considers a major expansion projectLatin Trade, April, 2006 by Marisol Rueda
**CC All photos are courtesy of Panama Canal Authority
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