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opinion
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Rebuttal to report by The Council on Hemispheric Affairs (COHA), “Expanding the Panama Canal: A Wider Canal or More Government Payola?” PR firm responds to COHA by Edelman
The Council on Hemispheric Affairs (COHA) report is based on speculation and lacks credible data
· The report is not objective. It appears COHA started with an opinion and then set out to prove it. · COHA never contacted the ACP prior to writing the report. · COHA boasts about its scholarly approach. However, their Panama report is anything but scholarly, lacking any sort of balance. · The document boasts numerous claims and draws several conclusions with minimal citations and little evidence or facts, and, in fact, was written by a summer intern.
The COHA report also contains numerous inaccuracies
· COHA makes accusations without backup, and it appears that the author lacks a fundamental understanding of the ACP’s proposal. o Page one, third paragraph of the report states, “The expansion, proposed by the Autoridad del Canal de Panamá (ACP), includes the construction of a third set of locks as well as the expansion of existing ones.” Contrary to the report, the Panama Canal expansion does not involve an expansion of the existing locks. This is fundamental. o Instead of using official ACP materials or materials developed by those who have really studied the project, COHA quotes a Web blog regarding the number of jobs created by the project. COHA asserts that the government job projections differ from the ACP’s --- in fact, they are the same. According to both the ACP and the government estimates, Panama will see the creation of approximately 250,000 new jobs between 2015 and 2025. · Expansion would benefit Panamanians, canal users and world trade --- not Washington as the report claims. Expansion is necessary because the Canal is running out of capacity and cannot transit new, wider post-Panamax ships.
The COHA report asserts that the project’s cost estimates are way off, speculates on actual costs and claims the project would place “long-term financial burdens on Panamanians.” The ACP has spent more than three years researching and modeling costs --- with the help of the best management and financial consultants in the world
· The project estimate is $5.25 billion. · COHA uses scare tactics and other language to frighten average Panamanians into thinking the project will bring financial hardships. According to the report, “The jobs generated by the Canal project are supposed to be funded by toll increases as well as by loans, which will only increase the nation’s already substantial foreign debt.” This is not only false, but against the Panamanian constitution. The ACP is prohibited from creating debt for the government of Panama. · The report states that the ACP claims the project will generate 252,000 new jobs but that the real number could be much lower. According to the ACP’s proposal, the creation of approximately 250,000 new jobs between 2015 and 2025 is a result of the growth of economic activity of the Canal-related services cluster. The ACP’s estimate also includes some 7,000 direct jobs during the construction’s peak years. · The proposed expansion will be paid entirely by Canal users through a graduated system of toll increases. · ACP personnel developed the costs and estimates based on numerous demand forecasts, under the guidance of premier firms, using sophisticated financial modeling to provide their surveys and estimates. · The ACP and its partner firms have done their homework and, contrary to the COHA report, do not toss out costs at random. Figures quoted in the COHA report are not proven and lack specificity to the expansion project. · There are three main pillars to the cost estimate: o First, the cost estimate is based on a detailed lock and navigational channels conceptual design. o Second, this conceptual design was thoroughly analyzed in terms of the feasibility of its construction, to determine the sequence and interdependency of activities, and to accurately estimate the requirement for manpower, equipment, operating supplies, energy, administration and tests and materials, among other considerations. o Third, the cost estimate was supplemented with the use of a state-of-the-art risk analysis model that evaluated and weighed factors such as uncertainty and contingencies. · The project’s cost estimate considers: o Potential increases in manpower o Equipment o Operating supplies and materials costs o Possible price fluctuations (particularly for key operating supplies and materials) o Delays in the construction (such as weather, design changes, productivity fluctuations) o Consequences and effects of shortages or timely availability of equipment, materials, and personnel o Effect of inflation during the time period. The total estimate includes an average annual inflation of 2 percent and does not include possible financing costs per information from the General Comptroller’s Office and the International Monetary Fund World Economic Outlook Database of March 2006. Panama’s average inflation has been approximately 1.10 percent during the last 16 years (1990-2005). · Cost Breakdown (in millions) Totaling $5,250: o Locks · $1,1100 for Atlantic Locks · $1030 for Pacific Locks · $590 for Contingency (possible variations for each component along with an assumed inflation of 2 percent) o Water Saving Basins · $270 Atlantic · $210 Pacific · $140 Contingency o Access Channels for New Locks · $70 Atlantic (dredging) · $400 Pacific (dry excavation) · $180 Pacific (dredging) · $170 contingency o Existing Navigational Channel Improvements · $30 deepening and widening of Atlantic Entrance · $90 widening of Gatun Lake Channel · $120 Deepening and Widening of Pacific Entrance · $50 Contingency o Water supply improvements · $30 increase the maximum level of Gatun Lake · $150 Deepening of the navigational channels · $80 contingency
Panama Canal expansion is necessary and would benefit Panamanians, Canal users and world trade
· There is complete worldwide unanimity of opinion: The Panama Canal is running better than ever. The ACP is doing more with fewer resources than when the Canal was under US management. · According to noted shipping analyst Robert West of Global Insight, “The Canal has done a very thorough job at looking at the options available to it to carry out this expansion. And, of course, the number one thing is if it’s needed --- is there a demand for it? And, the answer to that --- coming from the world perspective of international sea trade --- is certainly yes.” · Expansion is needed because the Canal is nearing maximum capacity. Expansion will allow the Canal to keep up with the growing demand. · Panama will likely see an economic boom specifically during the expansion construction years. In that respect, 35,000 to 40,000 new jobs will be created during the construction of the third set of locks. These include 6,500 to 7,000 additional jobs that will be directly related to the works during the construction’s peak years. An overall total of 250,000 new jobs have been projected to the year 2025. · The ACP’s contribution to Panamanian coffers totaled a record $489 million in 2005. The ACP has committed to maintain contributions to the government at this level. · An expansion would double the Canal’s capacity and allow more traffic. · The project would help maximize Panama’s strategic location to become the great maritime hub of the Americas. · More than 150 studies on expansion were conducted by world-class, reputable firms in the United States, Europe and Asia. · The ACP has been and continues to be transparent. The proposal is open and available to the public through various outlets including information centers, town hall meetings and the ongoing mobile campaign tour. Panamanians will vote on October 22, 2006, to decide on the expansion proposal. · Expansion is a win-win for Panamanians: It will not burden the government with debt, ACP financial contributions to the government will not be effected and the project will create jobs.
Edelman is a US-based public relations firm hired by the Panama Canal Authority.
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