The canal expansion debate starts to get serious

The Panama News, August 2002

The Panama Canal is this country's most valuable capital asset, but it's 88 years old and many of the ships that are being built these days are too big to pass through its locks. About four percent of the world's shipping routes transit the canal, but we have competition from both maritime and land routes and as Latin America develops its highway and port systems we will face even more serious challenges.

The bottom line is that just because the Panama Canal has been a key crossroads for world commerce for as long as anyone can remember, there is no guarantee that this will continue.

It's always possible to ignore warning signs. This is especially true for those politicians who will be out of office in a few years and are thus preoccupied with accomplishing what they can while they can. Those whose principal aim is to aggrandize their personal fortunes are the most flagrant examples of short-term, damn the consequences thinking, but public officials who play the game for more noble purposes can also be afflicted with myopia when it comes to economic policy.

If we are to address the question of the canal's future with substantially more intelligence than an ostrich, there are two general approaches. We can modernize the canal so that it will continue to play an important role in world commerce throughout this century, or we can modernize and diversify the Panamanian economy such that the canal's obsolescence and marginalization as an economic asset would not be such a heavy blow to our society. These two approaches are not mutually exclusive per se, but given limited funds to invest, strategic choices will have to be made.

The debate over canal expansion has so far centered on rural communities that would be displaced by the canal watershed's westward expansion via a series of dams that would create a new lake. Despite what all the Panama Canal Authority ads say, most of those who would be affected don't want to move. Moreover, the present government's performance gives rise to a reasonable public expectation that any process of indemnification of the displaced would be the occasion for an orgy of fraud and looting.

But leave those considerations aside for a moment. A couple of economic analysts, from Stanford and Harvard respectively, have reviewed all the studies and published figures and come to the conclusion that the five to eight billion dollar cost of the canal's expansion could not be amortized by ship tolls. People in the shipping industry have been warning for years that an attempt to finance such a project by way of increased tolls would merely shift international trade routes away from Panama.

The Panama Canal Authority's answers to such assertions are unconvincing so far. The academics are blasted for not starting from scratch and generating their own original figures, and thus everything that they say is summarily dismissed. The authority's representatives wrap themselves in the Panamanian flag and proclaim this country's sovereign right to raise tolls to any level it sees fit, conveniently ignoring the commercial world's ability to take their business elsewhere.

The debate should not end here, however.

Presuming that increased ship tolls can't amortize the cost of modernizing the canal, as a nation we ought to consider all sides of the possibility of a government subsidy for the project. For starters, a canal expansion would create a lot of jobs and that would rescue a number of Panamanians from dire poverty and boost the economy in general.

Public works projects need not be crooked boondoggles that line the pockets of privileged families who corner construction contracts through rigged bidding processes. The jobs don't necessarily have to go to lazy and unqualified members of the political parties in power. We can look at the way that the Panama Canal was built, and at so many of the public works that gave North America, Western Europe and Japan the modern infrastructure that is the basis of their industrial power, for good examples.

Moreover, any analysis of the revenue side of a canal expansion project that only includes ship tolls would be incomplete. Income from the sale of electricity generated at new dams, the marketing of choice real estate on the shores of a new lake and the licensing of recreational and commercial uses of that new body of water would all accrue to the Panama Canal Authority.

Then, of course, taxes would be paid by people who obtain employment in a canal modernization project. Those people would also spend money at businesses that employ other Panamanians. It's hard to quantify with any precision, but there would clearly be what economists call a multiplier effect as dollars spent to expand the canal cycle through the national economy.

How much of a subsidy? How much ancillary revenue? How much of a multiplier effect? How much can Panama afford to invest? Not that the objections of campesinos who stand to be displaced and the shippers who stand to see their costs increased have yet been definitively answered, but a new line of inquiry needs to come to the front and center of the nation's discourse.

So let the debate proceed, but on a more sophisticated and constructive level than that on which it has been waged so far.

Bear in mind

If you can't be a good example, then you'll just have to be a horrible warning.

Catherine Aird

He who fights monsters should look into it that he himself does not become a monster. When you gaze long into the Abyss, the Abyss also gazes into you.

Friedrich Neitzsche

How can one not speak about war, poverty, and inequality when people who suffer from these afflictions don't have a voice to speak?

Isabel Allende