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Panama votes to widen canal

Voters in Panama have approved a massive expansion to the Panama Canal. The $5.25 billion dollar project will open up the canal to post-panamax shipping. The government run Panama Canal Authority expects the modernization to complete by 2014 - the 100th anniversary of its initial opening. It will be a massive engineering project which will create 40,000 jobs in the area. The project will be financed by increasing tolls to raise more than $6bn by 2025. The canal is Panama's primary economic earner. About 80 per cent of Panama's gross domestic product, $16 billion in 2005, is linked to canal activity.

The canal is so successful it is now greatly overloaded. Designed to carry 80 million tons a year it carried four times that much in 2005. The canal consists of two artificial lakes, several improved and artificial channels, and three sets of locks. Only Panamax sized ships can negotiate the locks. These have a maximum length of 294m, a width of 32m and a height of 58m. Post-Panamax ships are often far larger than these restrictions. These ships must travel the costly and treacherous 36 day route around Cape Horn. As a result, the canal is missing out on the lucrative revenues from oil tankers, LNG (liquefied natural gas) carriers and bulk carriers. Driven by China's resource boom, these ships are becoming more common on the high seas. By 2010 almost 40% of the world's fleet will be post-panamx. But Panama is not alone in its desperation to grab a bigger slice of that action.

Nicaragua has even bigger plans to cater for the super sized structures of the future. It plans to build its own $20 billion grand canal that will dwarf Panama's project in size and scope. Like Panama, they will put the proposal to a vote and if successful it will be ready by 2019. There are massive obstacles to overcome to make this happen. Not least are serious environmental concerns on Nicaragua's tropical forests, coral reefs and indigenous villages living near the Caribbean coast. Panama too has environmental concerns over their expansion. But with 5% of the world's trade going through the narrow isthmus, pressure to conform was always going to be too great for the nation of 2.1 million whose livelihood depends on the canal.