The economic crisis hits the Panama Canal

photo by Eric Jackson

The Panama Canal's problem
by Eric Jackson

Problem? What problem?

But now there are visible cracks in the Panama Canal Authority's stone wall of denial.

That the freighter shown above is riding so high in the water is one obvious indication: the world shipping industry's volume is frighteningly down, by some estimates more than 50 percent, from last year. Now the Journal of Commerce reports that the world's third-largest shipping line (in terms of capacity), the French-based CMA CGM, its profits down 87 percent from last year, is negotiating with the ACP to reduce tolls, or at least put off scheduled toll increases. Other reports have the ACP considering a de facto toll increase by an admeasurement change that charges ships according to the cargo they are actually carrying rather than what they could carry. Officially, though, the ACP is sticking to its May 1 toll increases, which its marketing director told the Journal of Commerce create "a lot of stability for the shipping industry."

The global economy is weak, and if China is showing a few signs of recovery its main customers in North America and Europe aren't. South American countries may be proclaiming their relief that the meltdown that started with bad mortgages in the USA isn't much affecting them, but notice that the volume of merchandise passing throught the region's wholesaling and retailing district, the Colon Free Zone, is way down. The ACP is now admitting that the number of ships and the volume they carry is down, but they say it's a small, temporary problem.

Meanwhile, we have already seen the first route changes designed to avoid Panama Canal tolls, on CMA CGM's Asia to the Caribbean service. Other major shipping lines are considering similar shifts.

So much for the canal's revenue projections, upon which the financing of the canal expansion project is based.

The canal expansion project could be stretched out, if need be. But the canal work force is highly skilled and well paid and were that team to be broken up by mass layoffs during hard times, it would be difficult to reassemble it when business picks up again.

Revenues below projections and costs that will be hard to cut --- that's the dilemma for Panama's principal industrial enterprise.

photo by Allan Hawkins

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