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Manfredo weighs in against canal expansion
by Eric Jackson
The national debate over whether the Panama Canal should be expanded by the construction of a third set of locks that can accomodate post-Panamax-sized ships recently became more acute, with the publication of a series of three articles by Fernando Manfredo in the opinion pages of El Panama America.
Manfredo was the deputy canal administrator, the top Panamanian executive for the Panama Canal Commission at the time, during the late 1980s and early 1990s. After an unsuccessful plunge into the world of politics as a vice-presidential candidate on the 1994 Papa Egoro slate headed by Rubén Blades, Manfredo was chairman of the October 1997 Universal Congress on the Panama Canal. That event was a major world shipping industry summit but failed to attract United Nations officials or many heads of state due to a Chinese-led boycott that was prompted by the attendance of Taiwan's president. At the congress Taiwan and the European Union expressed an interest in financing the Panama Canal's modernization and expansion.
The Panama Canal's expansion was approved in principle by legislation passed in 1999, which expanded the canal watershed to the west and contemplates a series of new dams and a second lake that would inundate parts of Panama, Colon and Cocle provinces. Watershed expansion would be necessary to trap the water needed to run a third set of locks, but defenders of the new dams and lake sometimes argue that whether or not new locks are built, the extra water is needed to avoid ship draft restrictions during El Niño years and to provide for the water needs of the urban areas near the canal. A new lake has also piqued the interest of some of the larger farmers in Panama's central provinces, who see it as a possible source of irrigation water. The canal watershed expansion plan has met strong resistance from most of the small farmers who might be displaced, as well as from church, environmentalist and leftist groups.
Manfredo is something of an environmental activist himself. He was one of the first Panamanians to sound the alarm about US intentions to abandon former military training sites without cleaning them of unexploded munitions. In the recent series of articles, however, he looked at the possibility of a third set of locks --- a proposition that, unlike watershed expansion, has not come before the Legislative Assembly and for which there are no definitive plans --- from a business perspective.
In the first article, published on September 25, Manfredo reviewed the various studies conducted during the 1990s about what a third set of locks would cost and how such a project might be financed. As a ballpark figure, he estimated that it would be a $10 billion construction project. The former canal executive noted wide discrepancies in predictions of the tonnage of shipping that is likely to use the canal by 2020 and on into the middle of this century. "Such marked differences demonstrate to us that it's not only difficult, but impossible, to realize not only long-term transit projections, but even medium-term ones," he argued, asking "Are we going to embark on a $10 billion project, hoping that traffic projections come to pass?"
Then Manfredo recounted 20th century maritime history, most particularly the advent of ships that are too large to use the Panama Canal. The first commercial class of such vessels, he noted, were the supertankers. That development prompted the former American canal management to more seriously study the possibility of a larger third set of locks, and even to begin construction on the project as World War II approached. After $90 million worth of digging on the Third Cut, however, the project was abandoned. Basically there are very few ports with sufficient draft to accomodate supertankers, and the dredging costs to deepen other ports to serve these vessels would be enormous. Thus Manfredo argued that supertankers are restricted to a relatively few routes and that expanding the canal to permit their transit would not attract very many of them to pass through Panama.
Similarly, Manfredo argued that the post-Panamax container ships and the multimodal rail connections have carved out niches in the world shipping business that a third set of locks is unlikely to take away. To get automobiles from Japan to New York, he noted, takes 15 days by way of container ship to the Pacific coast of North America and railroad the rest of the way, while it takes 30 days to make the journey through the Panama Canal. However, he pointed out that we are still the preferred route for cargoes of electronic devices with the same origin and destination, because we're cheaper and there is less damage to merchandise if it goes all the way by sea and avoids the bumps and jolts of multiple crane transfers and rail transport.
Similarly, the former number two man at the canal reviewed the other maritime and terrestrial routes that compete with our principal industry or will do so, in terms of a complex set of calculations that includes factors of time, cost and the changing needs of specific businesses. He predicted a canal that will increasingly occupy specific niches in world shipping.
Manfredo does not, however, think that post-Panamax container ships will sweep all competitors and the Panama Canal into history's dustbin. Although he concedes that they will take their large part of the shipping business, he predicts that the same physical limitations that keep supertankers out of most of the world's ports will also limit the appeal of post-Panamax ships.
But meanwhile, if a set of locks that can accomodate these huge vessels is built and Panama expects to pay for the project through increased tolls, Manfredo notes that the predictions are that all canal users, from the yachties to the giants, will pay between 50 and 80 percent more for the privilege of passage. "Nobody consulted the users" about such a steep price hike, he points out.
Manfredo does not think that the Panama Canal will reach the limit of the traffic it can bear soon, or that it will quickly pass into obsolescence if a third set of locks is not built. "The experience is that for the ships that pass through the canal, it's the best route for the markets they serve."
Until now, the Panama Canal Authority has attempted with a certain amount of success to brand the opposition to canal expansion as a ragtag fringe of a small group of farmers with special interests or exaggerated sentimental attachments to their pitiful possessions, backed by a collection of activists with other agendas. Such success as the authority has enjoyed comes largely from having coopted a minority of landowners in the western watershed, a few environmental activists and part of the nation's Roman Catholic heirarchy to their side.
Manfredo, however, commands great respect in Panama's business community, particularly in the shipping sector. Moreover, even if the current Panamanian government can brush him off as a political enemy, a third set of locks will not be built without massive foreign investment by people and institutions that have no allegiance to any of Panama's political factions. His objections to canal expansion will not be easily dismissed.
The current directors and top management of the Panama Canal Authority also have some renowned business minds among them, led by canal administrator Alberto Alemán Zubieta (who came to his position from the big-time construction industry) and Canal Affairs Minister and board chairman Ricardo Martinelli (one of Panama's supermarket barons). To win the argument about a third set of locks, however, they will need more than their reputations. They will have to present a business plan that convinces this country's economic and political elites, international investors, the world shipping industry and ultimately the Panamanian electorate.
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