Panama Canal expansion project

The scheme gives users two choices: (1) transit by order of arrival on a first-come, first-served basis, as the canal historically has operated; or (2) booked service for a fee – a congestion charge.

Recently, containerized cargo has replaced dry bulk as the canal's main income generator, moving it to second place.

But it is increasingly recognized in both the US and China that this imbalance in trade is unsustainable and will be reduced via some sort of adjustment in the coming years[12] (although such an imbalance need not be made up by physically shipped goods, but could be made by other trade such as intellectual property as China upgrades its intellectual property protection laws).

[citation needed] The most direct competition to the canal comes from alternative routes that present options for transporting cargo between the same points of origin and destination.

The opening of the Russian Northern Sea Route and the Canadian Northwest Passage to commercial traffic could pose an alternative to the canal in the long term.

Warmer waters in the Arctic Ocean could open the passage for an increasing number of months each year, making it more attractive as a major shipping route.

The Canadian commercial marine transport industry does not anticipate that this route will be a viable alternative to the Panama Canal within the next 10 to 20 years.

The main ports and merchandise distribution centers in these routes are investing in capacity, location, and maritime and land infrastructure to serve post-Panamax container ships and their larger cargo volumes.

When it reached this capacity it would not be able to continue to handle growth in demand, resulting in a reduction in the competitiveness of the Panama maritime route.

The proposed expansion of the canal by the construction of a third set of locks would allow it to capture the entire demand projected through 2025 and beyond.

[1] The former head of the Panama Canal's dredging division, Thomas Drohan, a critic of the expansion plan, discounted allegations that this is a problem in the short term.

He argued that if the supply of any good or service becomes short, businesses can raise their prices; this would apply to Panama Canal tolls as much as it does to petroleum.

The water-saving basins function as follows: The volume of water moved by the lock chamber (e.g., a height of 30 ft (9 m)) can be divided into five equal horizontal "slices" (here, 1.8 m each).

According to the plan, a 3.2 km (2.0 mi)-long access channel was excavated to connect the new Atlantic locks with the existing sea entrance of the canal.

[1][19] In July 2012, however, it was announced that the expansion project had fallen six months behind schedule, pushing the opening date back from October 2014 to April 2015.

"[21][22][23][24] In October 2011, the Panama Canal Authority announced the completion of the third phase of excavation for the Pacific access channel.

[30][31][32][33] In August 2015, a crack was reported in a concrete sill at the new Cocolí locks, but it was not initially anticipated to affect the project completion timeline.

[42] The main purpose of the canal expansion program is to increase Panama's ability to benefit from the growing traffic demand.

In this sense, with a third set of locks, the canal will be able to manage the traffic demand forecast beyond 2025;[43] total inflation-adjusted revenues for that year are predicted to amount to over US$6.2 billion.

Roberto N. Méndez, an economist at the University of Panama, alleges that the economic and financial projections are based on manipulated data.

M. A. Bernal, a professor at the University of Panama, argued that confidence in the ACP's budget is undermined because of the involvement of engineering and consultancy firm Parsons Brinckerhoff.

[1] The ACP's revenue projections are based on questionable assumptions about increased canal usage and shippers' willingness to pay higher tolls instead of seeking competing routes.

In a bid to attract new business as well as keeping the current customers, the ACP is looking to implement financial incentives in their toll programme, including a loyalty scheme, which are expected to combat the problems raised by increased fees.

[47] With the cash flow generated by the expanded canal, investment costs are expected to be recovered in less than 10 years, and financing could be repaid in approximately eight.

The ACP says that the problem can be reduced by flushing the new locks with fresh water from Gatun Lake, but this would defeat the water-saving feature.

However, one of the leading environmental organizations in Panama, the National Association for Nature Conservation (ANCON), says that the studies and projections of operations of the third set of locks, including the water-saving basins, credibly state that there will be very low levels of salinization of waters of Gatun Lake and that these levels will preserve the biological separation of the oceans while safekeeping biodiversity and water quality for human use.

To ensure the availability of Panamanian labor necessary for the third set of locks project and its connected activities, the ACP and public and private authorities worked jointly to train the required workforce, with sufficient lead time, so that it had the necessary competencies, capabilities, and certifications.

[citation needed] Among those who opposed the canal expansion proposal is Panama's construction workers' union, SUNTRACS.

The union's secretary general, Genaro Lopez, argued that while some construction jobs would be created by the project, the debt that Panama incurs to build a third set of locks will not be defrayed by increased canal usage and thus an increased part of canal revenues will go toward paying the debt, reducing the waterway's contributions to the national government's general fund, in turn reducing the money available for road projects, public schools, police protection, and other government services.

The following had also endorsed the proposal: Former President Jorge Illueca, former sub-administrator of the Panama Canal Commission Fernando Manfredo, shipping consultant Julio Manduley, and industrial entrepreneur George Richa M. said that the expansion was not necessary; they claimed that the construction of a mega-port on the Pacific side would be sufficient to meet probable future demand.