The Future of the Panama Canal

On December 31, 1999, the United States handed the Republic of Panama control of the Panama Canal. While much controversy surrounded Panama’s ability to provide efficient service, business on the canal has been flowing smoothly. However, the switch in power was only the first of many hurdles the canal has faced and will be facing in years to come. The amount of traffic through the canal is increasing by 5% to 8% every year [1]; traffic increase is occurring in volume as well as in size. How long can this almost century-old engineering marvel serve the needs of the shipping world? With physical and technological improvements, the Panama Canal can expand to provide for the shipping community in the future.

A vessel approaching the canal from the Atlantic Ocean encounters the Gatun Locks (commonly referred to as water elevators) first. The Gatun Locks raise the ship 26 meters above sea level to Gatun Lake. (see Fig. 1) In addition, train tracks run parallel to the locks. The locomotives travel along the vessel in order to help stabilize it as it passes through the locks. Next, the vessels travel through Gatun Lake while being pulled by a tugboat. The vessel then reaches the Pedro Miguel Locks where it is lowered into Miraflores Lake. After traveling the length of Miraflores Lake, the vessel is lowered back into the Pacific Ocean by the Miraflores Locks. The total travel time through the Panama Canals is approximately 24 hours.

According to the U.S. Marine Transportation 1998 report, “Marine transportation is an integral component of the U.S. transportation system and essential to the nation’s economy.” The United States ships over 1 billion long tons of cargo through the Panama Canal each year, making the Panama Canal an indespensible aspect of the nation’s economy. Servicing over 50 countries on all 7 continents, the Panama Canal is vital to the transportation of natural resources and manufactured goods. This can be seen through the following facts:

• 141 trade routes converge at the Panama Canal.
• It serviced an average of 37.8 vessels a day in 2000.
• The busiest of the trade routes, the East Coast of the United States to Asia, is 3,000 miles shorter than the alternative all-water route around the Southern tip of South America.
• Nearly 195 million long tons of cargo were transported in 2000.
• Total revenues for 1999 were nearly $750 million.

The new controlling agency, the Panama Canal Authority (ACP), has successfully maintained the level of service previously provided by the United States. Up until December 31, 1999, the United States had complete control of the Panama Canal. However, the change in authority did not happen abruptly: The Panama Canal Treaty of 1977 outlined a gradual change over to ensure continued customer satisfaction. The Panama Canal is crucial to global business, and the United States and other world powers that rely on the canal were concerned that the canal would be more susceptible to a hostile take-over without the protection of the U.S. military. The ACP was established as a separate entity of the Panamanian government and has financial sovereignty to avoid such a problem. It comprises maritime experts and heavyweights from around the world. Being free from political influence, the ACP operates as a business whose main concern is efficient service for its customers.

Shipping through the Panama Canal has increased in the last two decades due to the decreased service of rail systems in the United States (see Fig. 2). Before the 1980’s, most cargo from Asia to the Eastern United States did travel through the canal. Improvements in rail shipping procedure at the time provided service six days faster at only a slightly higher cost. Now, however, the rails are unable to keep up with the increase in cargo tonnage. For instance, containers may remain stacked at ports in California weeks before they make it to the rail lines. Many shipping companies from China have chosen to get their cargo to the east coast of the Unites States through the Panama Canal to avoid congested railways in California. The rail service in the United States is no longer the consistently fastest option. Since the early 1990’s, all water shipping routes, as opposed to water and rail routes, have increased 65%.

Vessels are getting larger. While larger vessels are beneficial in that they reduce the volume of vessels through the canal, they exhaust the canal’s resources. The Panamax, the largest vessel to fit in the canal, has a 106 ft beam and 965 ft length. Panamax vessels comprised 32% of the some 13,000 vessels that used the canal in 2000.

The size of vessel increased as a direct response to new technology in container loading. Originally containers were loaded onto pallets and then loaded into the vessels. With the installation of cranes at ports, the containers are directly loaded onto the vessel. This greatly decreases the amount of time to load the vessel. In the old method, the loading and unloading of vessels was a significant percentage of the operating cost.

The canal, a large-scale man-made waterway is dependent on the ecosystem in the surrounding area. The natural resources of Panama are being threatened by the cities along the canal. This is because cities and rural areas are expanding now that more jobs are available for Panamanians along the canal.

The threat of further land development due to the population increase may be the biggest problem. The canal watershed, or the area adjacent to the canal, embodies 715 thousand acres. More than half of this area is heavily forested, and environmental researchers have long recognized that the forests in the watershed are crucial for maintaining the water supply of the canal [2]. A 16-year study showed that deforestation in the watershed changes the temporal stream flow. Panama receives ample rainfall for most of the year and experiences a dry spell from December to April.

The study showed that compared to a forest area, the deforested areas had greater runoff in the wet season (June – November) and much lower runoff in the dry season (December – April). Runoff and stream flow, the water supply for the canal, already drop 25% in the dry season. The study concluded that the forested area helped ration the water supply for the dry season. Panama does have substantial area of protected National Parks, however only 7% of the watershed is part of a National Park [2]. The remaining land is not protected by law from development and could be bought by developers. If the whole watershed was deforested, the canal would have to shut down in the dry season.

The Panama Canal provides service 24 hours a day, 365 days a year, which is a difficult task for any business. The canal is currently under many renovations. The billion-dollar project, which began in 1996, should be completed in 2002 (Morton 2001). Current improvements include:

• Beyond the narrowest part, the Gillard Cut, which will allow two-way Panamax traffic for the first time; the cut will be widened from 500 ft to 630 ft.
• Upgrade 80 year electromechanical lock machinery with hydraulic systems.
• Add 26 new locomotives. The locomotives are used to maintain transiting vessels in position while in the locks.
• Repair 53,000 ft of locomotive tow track.
• Increase tow boat fleet.

The transiting time for a vessel, about 24 hours, has not changed much in the past two decades, but the sometimes week-long wait to enter the canal has been steadily growing [1]. After the improvements, the transition time and the wait will be reduced.

The ACP is working on designs to increase the depth of Gatun Lake. Deepening the lake will provide more water storing capacity. The extra storage capacity will provide an extra 300 million gallons of water per year, which is an added 25% of usable storage volume. The added capacity will ensure high levels of reliability and provide for the growing population around the canal. The project should be completed in 8 years at a cost of $13.9 million [3].

The future of the Panama Canal is promising for both the world and Panama. The shipping industry relies heavily on the canal for transporting cargo and Panama’s economy benefits from the canal’s operations. Renovations are designed and planned to serve the needs of the growing population and the shipping industry, as long as the ecosystem is no longer infringed. The ACP and Panama need to protect the forested land in the watershed to ensure continuing service.