Panama Canal expansion a ‘game changer’
As Costa Rica squabbles over an almost $1 billion project to expand its Caribbean port of Moín, the country is not just jittery about the plans for its east coast. Costa Rica also is keeping one eye south of the border, on Panama.
Costa Rica is not alone. Major port revamps from Moín to Miami are under way with that small but mighty isthmus country in mind.
When the Panama Canal was built almost 100 years ago, it revolutionized travel and trade. Now expansion of the canal, set to be unveiled in 2014, is a new driving force for ports across the hemisphere that see the need to gear up for the future it promises: an all-water route for oversize ships transiting from Asia to the Atlantic.
Before the 1960s, virtually every commercial ship on the seas could fit through the Panama Canal’s locks, which measure 1,000 feet by 110 feet (305 meters by 33.5 meters) (TT, March 11, 2010). But the size of ships has been swelling over the years. Today the canal is too narrow and shallow for vessels deemed “post-Panamax,” which are larger than the “Panamax” limit set by the canal’s current dimensions. The canal’s size causes it to miss out on as much as 15 percent of seaborne shipping, according to the U.S. National Maritime Domain Awareness Coordination Office.
Squeezed by rising fuel prices, shipping-line companies are quickly moving to supersize their fleets to protect their profit margins. Bigger boats can save money by way of fewer journeys and greater economies of scale. The Panama Canal Authority saw expanding as a critical move to accommodate the new fleets, according to Rodolfo Sabonge, the authority’s vice president of market research and analysis.
To the tune of $5.25 billion, the Panama Canal will have larger locks and deeper and wider channels to make way for the post-Panamax world of shipping. Sabonge said the expansion will nearly triple per-ship cargo capacity from the current 4,400 20-foot container limit to 12,600 containers.
Other ports in the Americas lack the capacity to handle vessels loaded with that many boxes, so the race is on to deepen and widen harbors and upgrade port equipment in time for Panama’s much hyped canal opening.
The United States’ leading 13 ports have slated $8.57 billion for terminal improvements and channel deepening projects in the next five years, according to a report by real estate consulting firm Jones Lang LaSalle. The country’s new infrastructure kick is largely motivated by the Panama Canal project, an absolute “game changer,” said the report’s author, John Carver.
“The Panama Canal … is stimulating a great deal of infrastructure investment and attention into the port systems, particularly along the East Coast of the U.S., the mid-Atlantic coast and certain areas of the Gulf Coast as well,” Carver said.
He added that on the U.S. West Coast, which has long held a market advantage for handling ships from Asia, the expansion is forcing ports there “to really step up their game to remain competitive.”
The American Association of Port Authorities (AAPA) has been observing these trends closely. While some experts argue the canal expansion is win-win for all, port officials are wary that some docks are positioned to become bigger winners.
“The bigger ships will make fewer stops to be efficient,” said Rafael Díaz-Balart, AAPA’s coordinator for Latin America. “That means on the one hand there’s going to be a lot more transshipment than there is right now, and ultimately there are certain ports that will benefit from those ships visiting the ports, but they won’t be that many ports.”
Which ports will benefit most? “That is the question everybody has and nobody has answered,” Díaz-Balart said.
These issues are sure to come up at the AAPA’s 20th Latin America Congress of Ports in Lima, Peru from June 22 to 24, the association’s Latin America coordinator added.
The United Nation’s top Latin America infrastructure authority expects winners in this region as well.
“The expansion, by allowing larger ships to pass, will also give an advantage to other countries in the Americas that are also going to see greater possibility of connection through Panama,” said Ricardo Sánchez, infrastructure chief at the Economic Commission for Latin America and the Caribbean, or ECLAC.
Sánchez said the biggest Latin American beneficiaries outside Panama will be Peru, Chile and Ecuador.
Costa Rica, which expects its yearly container traffic to more than double in the next 35 years, is planning its own maritime overhaul. The publicly run port of Moín struggles with a maximum haul of 2,500 containers and relies on the ships’ own cranes to move them. In March, the government awarded a $992 million contract to
Dutch firm APM Terminals to expand and modernize the port’s outdated facilities. The new Moín Port would have state-of-the-art loading equipment to handle vessels lugging as many as 8,500 containers, said Paul Gallie, APM Terminals’ director of business development for the Americas.
Because of increased costs, the privatization and revamp of Moín is still a hard sell to domestic exporters such as banana businesses, which are challenging the concession in court. Many dockworkers also object to privatizing the ports.
ECLAC’s Sánchez said the plans laid out for Moín are “very interesting and ambitious.”
However, he urges the region overall to cool down. The expansion is clearly a game-changer for the U.S. East Coast but it does not guarantee that the rising tide will lift all boats at Latin America’s nearly 400 ports.
Rattling off the list of expansions at the Dominican Republic’s Causedo, Jamaica’s Kingston, Trinidad’s Point Lisas, Guadeloupe, Martinique and others, Sánchez begins to worry.
“It makes us a little concerned that maybe it’s too much,” he said. “I don’t think there will be so much impact for so many ports.”
Sabonge, the Panama Canal Authority vice president, said that infrastructure improvements must be well supported by demand.
“The first thing that we tell everybody is, ‘Don’t build fields of dreams,’ because fields of dreams tend to go with the theory of build it and they will come,” Sabonge said.
You may be interested
Costa Rica places 1.5 billion dollars in Eurobonds to refinance debtAFP and The Tico Times - November 13, 2019
In an operation to cover state budgetary needs, including the refinancing of public debt, Costa Rica on Tuesday placed $1.5…
The coffee conundrum: consumption is up, but trade prices are lowBenoît Pelegrin / AFP - November 13, 2019
Despite a steady increase in coffee consumption around the world, trade prices have fallen dramatically in the past three years,…
Pic of the Day: Costa Rica’s beautiful Nicoya PeninsulaThe Tico Times - November 13, 2019
Costa Rica's Nicoya Peninsula is worth the challenge. The roads are sometimes better suited for ATVs than cars, and some…