ECONOMY-CENTRAL AMERICA: Canal Competitors Lining Up

By IPS Correspondents Reprint | | Print |

Silvio Hernandez

PANAMA CITY, Oct 12 1997 (IPS) - Competitors to the Panama Canal are lining up in Central America , despite the insistence of officials here that the waterway is still the best and cheapest way to move goods between the Atlantic and Pacific Oceans.

The latest of these projects was made public earlier this month when the government of Honduras announced it would propose with El Salvador to build a series of highways between the Atlantic and Pacific oceans to compete with the Panama Canal.

Cost of the project was not revealed by the private group that would finance it. The “dry canal” would unite Puerto Cortes on the Atlantic coast of Honduras with La Union on the Pacific coast of El Salvador.

Panamanian officials, hiowever, estimated the project could cost 1,200 billion dollars.

The President of Honduras, Carlos Alberto Reina, said that his country would have its own inter-oceanic route to get the traffic that would have to abandon the Panama Canal once its capacity is outstripped by demand.

“I have seen today how lines of ships wait to pass through the Panama canal,” said Reina, when talking about the potential for competition that a dry canal through Honduras would have.

Ships that crossing the Panama Canal take an average of 24 hours for the crossing, except for those that pay a special priority handling fee.

Reina said the proposed dry canal “is not a rival” (to Panama’s) but rather another form of transportation between the two oceans, which are today tremendous sources of commerce in the world.

Reina’s initiative comes a decade after a similar project, was presented by a group of Costa Rican investors to unite the two oceans by railroad, at a cost of some 1.4 billion dollars. It eventually was rejected by its promoters because of the low potential to recoup investments in a reasonable amount of time.

Still another plan for a dry canal through Nicaragua is currently under consideration. The cost would exceed 1.5 billion dollars and includes the construction of deep water ports in the Pacific and the Atlantic and a high speed railroad to move containers between the two oceans.

Despite the fact that the two projects are technically feasible, authorities of the Panama Canal say the plans will not mean competition for the Panamanian route.

The general manager of the canal, Alberto Aleman, said that planned improvements and a third set of locks that will be built early next century will prevent demand from overtaking capacity.

The improvements include the widening of the 13-kilometer stretch in the Culebra Cut – so that ships can travel in both directions at once – and the renovation of barges and locomotives, which would allow for a 30 percent increase in ship traffic by the year 2002.

The canal currently can let 38 ships a day make the crossing on average. The improvement program, which began in 1992, will cost around one billion dollars.

The planned construction of the third set of locks will nearly double the capacity for 150,000-ton ships to pass through the canal by 2015 and will preserve the canal as a safe, competitive and profitable route, Aleman said. The cost of this huge project is estimated at 7.5 billion dollars.

Something else that promoters of the alternative routes are taking into account is the nature of the cargo that crosses the isthmus.

The container cargo that the new dry canals want to capture comprise just 13.1 percent of the 180 million tons of goods that moved through the Panama Canal in 1996, according to official statistics.

Heavy goods, such as grains, coal, fertilizers and others, together with oil and its derivatives, make up more than 80 percent of the cargo that crosses the canal.

Fernando Manfredo, former assistant manager of the canal, said the route is the shortest, safest and most economical, and shippers who use it do not have unload goods onto a train and then reload them on the other side of the isthmus, as would be the case with a dry canal.

Sources at the economic planning office of the Administrative Commission of the Panama Canal explained that the cost of transporting one container on a railroad from the west to east coasts of the United States is between 200 and 300 dollars. The unit cost to transport a container on board a ship through the Panama Canal, on the other hand, is only 50 dollars.

In 1996, the Panama canal earned 490 million dollars from the 14,000 boats that used the route.

The canal will be turned over to Panama on December 31, 1999 according to the terms of the treaties signed in 1977 between the late Panamanian General Omar Torrijos and then US President Jimmy Carter. (FIN/IPS/sh/ff/tr/dtk/97)