Enlarged Panama Canal set to boost trade

A cargo ship making a trial trip within the enlarged Panama Canal on June 23.
A cargo ship making a trial trip within the enlarged Panama Canal on June 23. PHOTO: EPA

New cargo ships built to pass through wider canal expected to drive US-Asia commerce

PANAMA CITY • With its capacity boosted by nearly three times, Panama's enlarged canal - set to be inaugurated tomorrow - is expected to stimulate trade between the United States and Asia and steal business from the rival Suez Canal.

"A good deal of the commerce between Asia and the east coast of the United States can pass through directly on Neopanamax ships, which will help both sides," said Mr Nicolas Ardito Barletta, a former Panamanian president and former vice-president of the World Bank in Latin America.

Neopanamax ships, as their name suggests, are new-generation cargo vessels built specifically to pass through the broadened Panama Canal. They can carry up to 14,000 containers - three times the number the previous generation of smaller Panamax ships do.

A dozen foreign leaders, including the presidents of Taiwan and Chile, will be on hand tomorrow to see a giant Chinese freighter, baptised Cosco Shipping Panama for the occasion, become the first to officially use the broadened canal.

"The inauguration of the expanded Panama Canal means new opportunities for international trade and, for Panama, bolstering its competitive advantages like in logistics," Panama's President Juan Carlos Varela said.

The Central American country has spent the past nine years and more than US$5.5 billion (S$7.4 billion) expanding its century-old, 80km-long canal, which accounts for 5 per cent of the world's maritime commercial traffic.

New locks and a wider shipping lane will allow vessels as wide as 49m and as long as 366m to pass through.

Big ships that use Egypt's Suez Canal as a shortcut between Asia and America will now fit through Panama's link between the Atlantic and Pacific oceans, benefiting world trade.

More cargo on bigger ships should also mean lower transport costs.

Panama hopes it will double the volume of goods passing through the canal over the next decade, up from 300 million tonnes currently, and boost revenue from shipping fees from the US$1 billion the country collects now.

Mr Varela's government also hopes to use the inauguration to seize back control of Panama's image and eclipse the fallout from the recent "Panama Papers" revelations that threaten to revive the country's reputation as a tax haven.

A consortium led by the Spanish company Sacyr and Italy's Salini Impregilo toiled since 2007 to carry out the canal expansion. The project missed a 2014 deadline and also went well over budget.

The New York Times this week published a long investigation into problems the expanded canal faces, including questions over the standard of concrete used, the effectiveness of tug boats for the massive freighters, and whether a freshwater lake used to float ships in the canal has sufficient capacity.

Mr Jorge Quijano, head of the Panama Canal Authority, dismissed in an interview this week the issues raised by the US daily as "old stories" based on accounts from people with grudges.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on June 25, 2016, with the headline 'Enlarged Panama Canal set to boost trade'. Print Edition | Subscribe