Larger Panama Canal in future

October 19, 1999|By Robert McMillan

WITH the transfer of the Panama Canal to Panama scheduled for December 31, the canal's capacity will receive increased attention.

Although 92 percent of the world's oceangoing vessels still are able to transit the waterway, the trend is clearly to larger ships. Only 82 percent of the vessels on today's drawing boards will be able to clear the canal's 1,000-by-110-foot locks.

Will it be necessary to enlarge the canal? The answer really depends on whose shoes you are walking in. Putting nationalistic pride aside, the real issue is the price tag that must be paid for any enlargement.

Over the years, the question of increasing the Panama Canal's capacity has been the subject of many studies.

As far back as 1929, the U.S. Congress authorized a review to ascertain the cost and practicability of enlarging the canal to "provide for the future needs of interoceanic shipping." Construction was started on a third set of locks, which were designed to handle ships some 20 percent larger than the canal's current capacity. The cost for completion was to be about $277 million 1941 dollars. Work on the project was terminated at the outset of World War II.

Added locks

Another review began in 1985, when the governments of Panama, Japan and the United States created the Commission for the Study of Alternatives to the Panama Canal. The 1993 final report of the tripartite commission called for a third set of locks that would have been capable of handling most of today's largest ships.

While the proposal was never implemented, it is interesting to note that the projected cost would have been more than $5 billion. Japan's economy was booming at the time, and there was private talk that Japan was prepared to help in the financing and implementation of the report.

If it had not been for some narrow-minded United States' management of the Panama Canal, the 1929 vision of Congress would have been completed by now.

Rather than viewing the past events as a potential controversy between the United States and Panama, an enlargement of the canal provides a creative opportunity for the Clinton administration. The United States should take the initiative and enter discussions with Panama on steps to aid in the financing of the construction required for expanded capacity.

Assuming the price tag for increased capacity would be about $5 billion, without accounting for amortization or maintenance costs for a new set of locks, interest alone would amount to at least $300 million a year.

Even with additional traffic, it is my judgment that enlarging the canal would require a doubling of current tolls. There are alternatives to the canal for shippers. With a land bridge across the United States and the construction of a modernized railroad across the Isthmus of Panama, a 100 percent increase in tolls would not permit the canal to remain competitive.

Beyond the issue of tolls, another critical enlargement issue for Panama will be the availability of the canal's watershed to support the need for billions of gallons of additional water to support increased traffic.

It takes about 52 million gallons of water for each ship transiting the canal. Deforestation of the rain forest surrounding the canal does not help the situation.

A creative solution would be in the best interests of Panama, world shipping and the United States. It is time for the United States to focus positively on Panama once again and provide upfront financial support for the canal's enlargement.

Just as the canal, at the turn of this century, became a centerpiece for the United States in abandoning its isolationist role, so could the construction of a massive new set of locks be a fitting first chapter for the United States and Panama in the new millennium.

It need not be a one-way street. With U.S. military bases closing, our drug surveillance and interdiction capabilities have been severely hampered in the region. Panamanians also have become more anxious about the ongoing incursions by Colombian guerrillas.

Joint financing

It would make sense for the United States and Panama to join together in financing the canal's enlargement in return for the continued military assistance of the United States.

Another part of negotiations could include the composition of the canal's board of directors. The Panamanian Constitution permits Panama to name international board members for its Panama Canal Authority. Adding one or two Americans to the board would be a positive signal from Panama for the canal's future. Cooperation by Panama and the United States would make good economic and security sense for both nations.

With some 70 percent of Panama Canal traffic destined to or from the United States, the Clinton administration has to put Panama back on its radar screen.

Robert McMillan is a former chairman of the Panama Canal Commission. He wrote this commentary for Newsday.

Pub Date: 10/19/99

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