£2bn secures canal's future

PANAMA yesterday began a £2.7 billion facelift to the canal which symbolises its nationhood, to allow it to handle the ships of the 21st century.

At the ceremony to start work on improving the canal, president Martin Torrijos detonated some 15 tonnes of explosives to shift soil for the widening of the strategic waterway.

Yesterday's date was a significant one for Panama as it was 30 years ago that then US president Jimmy Carter agreed to return the canal, then under US administration, to the country it dissected. The deal was signed by the current president's father, General Omar Torrijos and the canal was delivered in 1999.

Mr Carter was present at the ceremony yesterday, accompanied by the presidents of Colombia, El Salvador and Nicaragua.

When it was finished in 1914, the gates of the Panama canal were built to handle with ease the biggest ships that designers, 92 years ago, could conceive. These ships that now squeeze through the canal gates with inches to spare, are known as Panamax vessels, but in the era of the supertanker they are regarded as small fry.

A Panamax vessel is capable of carrying up to 5,000 containers. With the building of a new set of locks alongside those currently in operations, ships almost 180ft across and 1,400ft long will be able to squeeze through, increasing cargo capacity to 12,000 containers. The project will take ten years to complete, but authorities insist it will ensure that the canal remains a hub for shipping for the next century.

Such was the importance of the project and the crushing debt it would impose on this tiny central American nation, that president Torrijos put it to a referendum last October. The Panamanian people voted overwhelmingly in favour of improving the 50 mile-long canal, one of the cornerstones of the economy. Some 80 per cent of the earnings of this nation of three million are linked to the canal.

There are still doubts that Panama can balance the books at the end of the day and that the project will end up behind schedule and way over budget. There are also concerns over the ecological costs of the project, the vast amounts of fresh water that will be needed to lift and lower the ships the 86ft that mark the difference between the Caribbean and Pacific seaboards of this small nation that links Central and South America.

"This is a project full of deceptions and imprecision and is not in the interests of the Panamanian people," said Miguel Antonio Bernal, a lawyer who led the No vote campaign. "They have severely underestimated costs and this project could end up costing three of four times more, burying us in debt."

President Torrijos insists the sums not only add up but are crucial to the future financial health of the country. The canal last year contributed more then 500 million to the economy. Payment for the work will be quickly recouped through higher tolls and the inevitable increase in shipping, the Canal Authority insists. The average toll paid by a Panamax vessel is over 36,000.

"The canal is and will continue to be vital for development and will play a fundamental role in the development of world trade," said president Torrijos, who saw his approval ratings rise with the promotion of the project.

Another pressure on Panama has been a Nicaraguan project to build its own canal. Promoted by the former president Enrique Bolanos, that idea has now been shelved with the Panamanian announcement that it will widen its canal. There are, however, still ideas for a rail bridge, with ports being built on either side of Nicaragua, linked by a high speed railway. So far the idea is still just talk, but provides Panama with further impetus to get the canal expansion done on time.

While the US handed over the canal to Panama in 1999, withdrawing the troops stationed there, the protection of the channel is still regarded as a matter of national security for Washington. Evidence of this is clear with a naval exercise "Panamax 2007", with more than 30 ships, currently being conducted at the entrances to the strategic waterway.


• The Panama Canal was opened in 1914 by the United States after ten years of construction that cost thousands of people their lives.

• It cost around $375 million to construct, some $23 million below the estimate.

• An engineering milestone, it was welcomed by crews previously forced to take the arduous route past Cape Horn, the southern tip of South America.

• Operated by the US for more than 85 years - a condition for US support of Panamanian independence from Colombia - Panama regained control of the passage on December 31, 1999.

• The exports of countries such as Chile and Ecuador rely heavily on the waterway. An upswing in trade between the United States and China in the last few years has also prompted greater demand for passage.

• The Panama Canal's income has soared from $769 million in 2000, the first year under Panamanian control, to $1.4 billion in 2006, according to figures supplied by the Panama Canal Authority.

• Traffic through the canal went up from 230 million tonnes in 2000 to nearly 300 million tonnes in 2006.

• The number of shipping accidents has gone down from an average of 28 per year in the late-1990s to 12 accidents in 2005.

• The transit time through the canal averages about 30 hours.

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