PanCanal’s malaise

The problem with the new locks became apparent this past August and since then the Panama Canal Authority (ACP) has maintained an imperfect news blockade. The information controls, along with some details that have slipped through, suggest a worse problem than has been admitted.

The Panama Canal’s multifaceted funk

by Eric Jackson

The problem of the moment — the one that appears in Google News — is dissipating. That the delays for ships seeking to transit the canal, and most probably the Panama Canal Authority’s method of reducing them, have driven business away from the Panama Canal is something that you won’t hear from canal officials. THAT you hear from shipping industry sources. CMA CGM, for example, abandoned its Manhattan Bridge Service route between China and the US East Coast, telling the Journal of Commerce that it was “due to operational issues resulting from delays in transiting the Panama Canal.” And although the ACP’s ban on ships less than 390 feet long was quickly lifted, it would be reasonable to suppose that some of the owners of such vessels — and their customers — will take that incident into account when making future business plans.

The issues causing the delays might be ephemeral, largely having to do with maritime problems in California, some of them drought-related, and rainy season fog slowing transits here. But the problem of the canal’s customers switching to other routes is structural and in large part flows from steep toll increases enacted after the ACP’s 2006 referendum campaign projections of ever-rising canal usage (and thus toll revenue) were spectacularly disproven by the 2008 economic crash. The revenue shortfall was resolved by the toll increases, but those drove many shippers to routes that don’t use the Panama Canal. A two-lane Suez Canal, expanded port and rail multimodal systems in many parts of the world and thawing Arctic ice mean that regardless of whether the Nicaragua Canal ever happens, we are not the only way to go and the competition is going to grow.

There may be some visible problems with the new locks, but the big problem with the Panama Canal expansion is economic. Canal management has never acknowledged this, but the search for new businesses to generate non-toll revenue for the ACP allows for no other reasonable explanations. The quest makes sense for the institution, at least. The ACP wants to go into the ports, fossil fuel power generation and oil and gas pipeline businesses. One can go back to the days of the old Canal Zone, which was a company town of the US-owned Panama Canal Company conglomerate, to find a history of the canal business encompassing these things. But why, from the institutionally disinterested perspective of the Republic of Panama and its citizens, does it make sense for the ACP to get into a ports industry that is and has been the busisness of the Panama Maritime Authority? Why should the power generating companies already in business here — or environmentalists — look kindly upon a new ACP power plant that burns bunker oil? Why would those who don’t view Gatun Lake as an environmental lost cause not object to a new oil pipeline alongside the lake?

The ACP website features gushy news about all of the international port operators interested in the proposed Corozal / Diablo port. But they could only get one vote for the project in the legislative committee when it came up for a vote last April. Now La Estrella reports that only three of the ACP’s 11 board members unambiguously back the port proposal. We don’t know precisely why, because the authority’s rules provide that the board speaks through the minister of canal affairs and individual board members can’t talk to the press about canal matters. We do know, however, about some of the conflicting business and family loyalties both represented on the board and with mostly indirect but real stakes in the port scramble. What makes institutional sense for the ACP is not necessarily reasonable for Panama’s squabbling rabiblanco families or political factions, or for that matter for the general public. Blurring those distinctions is a daunting public relations task.

Are the premises on which the port proposal’s economics are based all that certain in the first place? Heaven help Panama if they are totally wrong, but our opportunities for expansion as a transshipment center have been questioned.

The leaking new locks? At the moment PanCanal pilots are more concerned with maintenance issues on the present Miraflores and Pedro Miguel locks. The measures to ease the delays at canal entrances include putting off locks maintenance said not to be urgent. Beside the apparent leaky gate seals at Miraflores we are told that regularly scheduled maintenance at Pedro Miguel ran into some problems and was abandoned unfinished.

The incontinent lock sill at the new Cocoli Locks made worldwide news. The discovery of new cracks in that and another sill have only been reported in Panama. Stuff that has been kept out of the news might — or might not — be the worst of all. For example, the last time that the ACP mentioned the leaks in the national language on its website was in an August 27 report about experts from Panama Technological University (UTP) making a field visit to evaluate the problem and give a technical opinion about the GUPC construction consortium’s report on the leak. But even though what is billed as GUPC repair work is ongoing, neither the consortium’s report on the problem nor the UTP professors’ evaluation of the GUPC analysis have been forthcoming to the public. Minister of Canal Affairs Roberto Roy and Canal Administrator Jorge Luis Quijano have maintained silence on the technical issues. Quijano has, however, assured foreign ship owners that the new locks will be open for business next April. But GUPC’s José Peláez told the Cuban Prensa Latina news agency that it’s too early to know whether the new locks will be open by that time.

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