panama economy Archives | Panama Relocation Tours

Last Updated Dec 27, 2018 - by Panama Relocation Tours

The Key to Panama’s Success: Free Enterprise

My good friend Bob Adams, who has lived in Panama more than 12 years, was published in Barron’s magazine again with this story about what makes Panama such an amazing success. I was lucky to get an advance copy of the story before it came out in print. Read it here..(click on the link below)

THE KEY TO PANAMA’S SUCCESS: FREE ENTERPRISE

A lot of countries have beautiful beaches, mountain vistas and affordable living. But few countries can match the strong economy of Panama. Few countries have a government that encourages true free enterprise. A strong economy fueled by free enterprise should be important considerations when deciding where to relocate to.

The real story of Panama in the 21st century is a story of a rapidly developing economy that has nothing to do with offshore anything. For more than a decade, Panama’s GDP has averaged annual growth nearing 8%, with a few double-digit years. Even at the depth of the financial crisis in 2009, it booked a respectable 4% GDP growth, while nearly everyone else in the hemisphere booked red ink.

Foreign direct investment last year rose 17% from the record set in 2014, which was more than 9% above the record set in 2013. In 2000, per-capita GDP was similar to that in neighboring Costa Rica and Colombia, though well behind the two big Latin American emerging markets, Brazil and Mexico. As of the end of 2015, Panama’s per-capita GDP was 24% higher than Mexico’s, 39% higher than Brazil’s, 41% higher than Costa Rica’s, and 57% higher than Colombia’s.

Additionally, the massive improvement in transportation, logistics, and communications infrastructure has made Panama a leader in Latin America in those sectors.

WHY PANAMA? What changed? Can we learn something from this? The nation and its canal have been there for more than a century. Consider three lessons.

Panama’s economy is based on free enterprise. The government and the people of Panama have a commitment to free enterprise that is rare in Latin America. In the 2014 presidential elections, two candidates with a socialist perspective took part in the televised debates and ran campaigns, but barely collected 1% of the vote between them. Due to the emphasis on private enterprise, the government has the income to provide benefits to the poor that can exceed those of Latin American nations that claim to be socialist. You are not likely to meet a Panamanian who would prefer to live in Venezuela.

The immigration issue has been dealt with intelligently in Panama. When Panama’s dramatic economic growth began a decade ago, Panama’s small population and inadequate public-education system left the nation in a bad spot. The challenge was to handle growth while improving the skills of their people.

A big part of Panama’s answer was to use relocation instead of immigration. Relocators can be residents and workers, but not citizens.

Panamanian relocators include American retirees, but also other Latin Americans, especially from Colombia and Venezuela. Recently, they have been joined by a growing number of Europeans. Last year, Italians and the Spanish receiving residency visas and work permits both outnumbered Americans.

By taking citizenship out of the equation, Panama was able to absorb large numbers of relocators without the tension and rioting seen in Europe or the hate language too common in the U.S. today.

Panama’s political leadership has a common goal. I have been a relocator in Panama through two five-year presidential terms and I am in the middle of a third presidential term. Each president has had his own particular style, issues, and policies. Each represents a different political party and they are not the best of friends.

Debate among the leaders can be very partisan, but they have one important thing in common: When it comes to economic growth, they pass the ball, they don’t drop it. All the major projects supporting economic development have continued under each president. Each makes some changes here and there, and they may agree on little else, but they have proven their dedication to continuing economic growth to Panamanians and the international investment community.

READ THE REST OF THE ARTICLE HERE

If you’re thinking about retiring overseas, you seriously need to come check out Panama. Come see how you can live BETTER for LESS in Panama. Join us for a Panama Relocation Tour.

SEE PANAMA RELOCATION TOURS DETAILS HERE

Last Updated Jul 4, 2016 - by Panama Relocation Tours

What’s Going On In Panama?

The future for Panama looks very bright! Panama is a safe haven with a growing economy which attracts investments and foreign immigration. Panamanians, and foreigners, are very optimistic about their future living in Panama! Read the new article (reprinted with permission) by Bob Adams at RetirementWave.com to understand why…

Report from Panama – July 2016

Important Note – This commentary is also available in PDF form which can be read on your monitor or printed out. The PDF is in larger type so it can be easier to read for some folks. If you would like to download a copy, click here [Additional Note to readers: you may wonder why, whenever I mention the word “billion” as a statistic, that I immediately follow that with the same number, expressed differently. For example, I may write “$2 billion ($2,000 million)”. The simple fact is that there are two different definitions of “billion”, each used by many nations. By presenting “billions” in this manner, I am simply clarifying exactly what I mean to both groups. For similar reasons, I try to avoid English contractions like “don’t”, “isn’t”, “it’s” and so forth. These can be annoying to some readers for whom English is a second language.]

[2 July 2016] Once again, here is a “Report from Panama”. I hope you find it useful.

First and Foremost I will be brief, but I want to take a moment to congratulate the people of the Republic of Panama on this last Sunday’s successful inauguration of the expanded Canal. It was a beautiful day, the ceremonies were well-planned and executed, and the first “official” ship passed on its way without incident. It was the second time that the Canal has made history and every Panamanian was proud to be there, whether physically, by television, or by Internet as I was.

It is not just a Canal expansion, but more. Only a few smaller ships carrying liquefied natural gas (LNG) can use the old Canal locks, but about 80% can now use the new locks. This is a big financial savings for them and it means a great deal more traffic for the Canal. Realizing this, Panama has signed a $650 million contract for the construction of an LNG terminal that will include a power plant in Colon Province, about 60km from Panama City with the capacity to generate 380 MW of power and an LNG import terminal with a 180,000 cubic meters storage capacity. This is smart. Instead of just settling for the increase in shipping, Panama is finding ways to leverage the new expansion to further benefit the nation and its economy.

Now the launch of the expanded Canal expansion is part of Panama’s history and, like any nation that has overcome obstacles to grow rapidly and successfully as Panama has in the 21st century, the nation can turn its eyes back to the potential of the future, not the glories of the past. As I have said more than once here, the nations that look to the future, not the past, are the ones that continue to progress.

Enough. Moving right along…

The World We Live In As Best We Can

“The trouble with our times is that the future is not what it used to be.”
Paul Valéry (Ambroise-Paul-Toussaint-Jules Valéry), French poet, essayist, and philosopher, 1871-1945I am 71, born to and raised by two fine analytical minds, my parents, and trained in analysis, not by lecture, but by example and plenty of loving, constructive criticism (although I did not always see it that way back in the day!). Any talent I may have ever had in analysis I owe entirely to them. Any failure is my problem, not theirs. I count them as the two biggest blessings in my life.

Following two challenging but wonderful years as a US Peace Corps Volunteer, I sat down in 1969 to write my first formal analysis for the use of others and the first of its kind on that topic. For those interested, the topic was juvenile delinquency in the Philippines based on direct experience working with these young men and a few young women, as well as statistics that I had collected over those two years in interviews with them, having first gained their trust. It was exhausting, but it was good to be able to leave something behind that could help others in that field.

Following that, I spent decades in nations all over the world doing analysis on a wide variety of topics, most of them important perhaps, but not quite so exciting or exhausting! Eventually, I focused on global issues beyond national or regional issues, publishing articles when time allowed. Analysis is now part of who I am, but I never forget how difficult true analysis is. After all, if you do the job well, you often find that your prior assumptions are wrong and you have to change them to fit reality, not your emotions.

I do not write about my past normally. I expect it is uninteresting to most people and irrelevant to their lives, so I prefer to spare you from that! I only raise it today because it was the foundation for five decades of living, working, and always analyzing, in nations all over this beautiful planet (and it really is beautiful!).

In all these years, I have never seen so many nations consumed by so much confusion that they no longer know where they are going or what they are going to do when they get there. The great majority of those nations are what we used to call the “First World” in the past century. Today, that term is more nostalgic than anything else.

I choose the word “confusion” deliberately. There is nothing else common to all these nations. I know that because I hear from you and you are from many nations on every continent. Retirement Wave is a global site and my correspondence reflects it.

I do not discuss politics and I do not intend to begin today. I know what every real analyst knows. No human can accurately predict the future. As my friends from Scotland might say, it is “beyond our ken”, beyond our knowledge, but I will say two things.

First, my best estimate is that we are only at the beginning of a multi-year period of confusion. There is likely much more to come. Everything not only changes, as it always has, but it now changes more quickly and unexpectedly than ever before and it is more likely to accelerate before it slows.

Second, if you find yourself feeling as if you are sitting in a tiny boat, adrift in a sea of confusion, now may be the right time for you to raise your sail and find a new home, a new “sea”.

Whether that is Panama or not is totally unimportant to me. This is about you, not Bob. There are many choices, but when all is said and done, I have one simple recommendation to those who find themselves in the situation I describe above.

Choose, set your sail, and get on with your life.

Meanwhile, down here in Panama…In past reports, I have had a long list of single items on a wide variety of topics, but I am going to skip that today. They take up a lot of space and these reports are long enough. Instead I will focus on a few major items. They take up space too, but not so much from text, but from the charts and graphs included. So let us get on with it.

IMAE – The Beat Goes OnIMAE is the Spanish acronym (initials) used for the English, “Monthly Indicator of Economic Activity”. It does not include all activity (that is why it is called an “indicator”), but it includes most of the total which is called GDP (Gross Domestic Product), but GDP is reported on a quarterly basis, not monthly, and takes a long time to put together. IMAE represents the majority of the GDP information and does a very good job of providing the direction that will eventually show up in the GDP.

The IMAE also takes time to collect and prepare, so this is the latest which covers January through the end of April of this year and the five years before. The pink line shows the movement each month. The blue line shows the trend over time. If the lines go down, it does not necessarily mean that the growth is negative, only that it is slower than in the past. If we actually have negative growth (and we have not for a very long time), the lines will fall sharply and very obviously.

Nothing especially exciting up there. However, you can see a slowing down over the last couple years and this year that has “flattened” the line. That is no surprise. We all know that the current administration that took office two years ago purposefully slowed down the rate of government spending because they felt the increase in debt was too fast and too much. I wish every government felt that way. I expect that the slower movement will continue for the next few months, but now that the budget is in better shape, important government projects (a second Metro line with a third being prepared, a second airport terminal, a new convention center, and a lot more) will have their impact.

And do not forget that the expanded Panama Canal is now operational and it will raise those numbers too. In recent years, the Canal has contributed a little over $1 billion (1,000 million) to the national treasury after paying all expenses and retaining what it needs for operations and maintenance. Each year, it goes through the process of preparing its budget for the coming fiscal year. That would be 1 October 2016 through 30 September 2017. The current estimate of their contribution for that period is $1.6 billion (1,600 million). That is excellent. Even if business is not as heavy as predicted, despite being conservative in their estimates, it will exceed past receipts and be a great benefit to Panama.

For those really interested in GDP, it rose 4.6% during the first three months of this year, less than had been expected. But that is likely to be higher than in any other Latin American nation, higher than the EU and most individual European nations, and the US which just revised its first quarter growth upwards to 1.1%.

Foreign Direct Investment (FDI)FDI is the total of major investments made by international business and banks, not the homes or other investments made by individuals, and is used as an indicator of how foreigners feel about a market.

In 2014, Panama hit a new record of $4.3 billion (4,300 million) and it was thought that we would be fortunate to do it again in 2015 as the global economy was slowing. In fact, in 2015, it rose to just over $5 billion (5,000 million), setting a new record.

FDI for the first quarter of 2016 in Panama has been reported as $1.37 billion (1,370 million) for those three months alone. If the remaining three quarters remain the same, the 2016 total will be nearly $5.5 billion ($5,500 million), another new record. However, that cannot be known now, the numbers might fall, but the first quarter certainly looks good.

Now let us look at this in comparison to other small nations, the five nations of Central America to our west and north. If you combine all the FDI received by these nations, you will find that Panama got nearly 39% of the total, far more than any of the others, and 43% of all FDI for 2015.

But as I have said here before and as any household knows, it is not simply a matter of your income; it is also a matter of how many mouths you have to feed. So if we take the total FDI for each nation and divide it by its population, we get an amount per person (per capita). That really tells you the full story. So let us take a look at that.

Some may ask, sure, Bob, but what about our other neighbor to the east and south, Colombia? Well, they get more FDI, but they have a much greater population. So the results for Colombia are $340 for 2014 and $252 for 2015, a drop of 25.8%.

I will finish with this comment. Everything is relative. If other nations in our neighborhood were doing better than Panama, those numbers up there would be nothing to be particularly proud of, but that is not the case. Yes, every once in a while another nation or two might do better in a specific year or two, but for more than a decade, Panama’s economic growth has been more rapid than that of any other nation in the western hemisphere from Canada at the northern end to Argentina at the southern end on every major scale, not just FDI. That is the real story. Is there something special about Panama? I guess so.

Who Is Coming To Panama Now?People often ask me what nations people come from who receive residency visas in Panama. Well, it is hard to tell them these days. In the first few years I lived here, the government’s immigration agency actually listed every person who had applied for a residency permit, their nation of origin, and whether they were accepted, but they never gave the statistics by nation.

In 2005, many RW members back then believe that Americans were the majority, but I knew that wasn’t correct. Colombia was far more likely to be first in number. After all, in 1902 before Panama separated from Colombia, there were no Panamanians. They were all Colombians. There are many Colombians living here and always have been, but no one had any statistics.

So I went into the public website of the immigration division and sat down and counted more than 12,000 people who had received residency visas by nation of origin. I was then able to demonstrate that Americans were certainly present, but nowhere near a majority.

A couple years later, I have forgotten exactly when, I went back in to get new totals, only to find that the information was no longer public. I was a little disappointed, but I approved. Why should every individual’s private information be out there for everyone in the world to see?

However, since I have been here, the government has never made it a practice to publicly report the number by nation and that remains the situation today, so I have never been able to update that old information which I still have buried at the site in an old page.

Then last year, the government publicly provided the results for the top ten nations. So I can now present the statistics I counted in 2005 with those presented by the government a decade later in 2015.

But please do me a big favor! Do not misunderstand. These are not the number of people from each nation, they are the percentage of the total from each nation. If one nation’s percentage goes up dramatically, every point they go up must be deducted from another nation’s percentage.

Also, keep in mind that Panama has been a “nation of immigrants” for more than a century. We have people of Chinese, Indian, Lebanese, Jamaican and other nationalities who have lived here for a very long time and many generations. The first Chinese to become a Panamanian was registered in 1854, for example. He was probably here to help build the railroad where the Canal is now. When the French made their attempt to build a canal in the 1880s, many more came. Finally, the American canal construction brought people from all over the world. In addition, since the Canal was built, people who passed through sometimes stayed and they added to the wonderful mixture of cultures that make up Panama today.

Okay. Here it is.

As you might imagine, most people notice the rise in Venezuelans immediately. They were coming in small numbers in 2005, but that poor nation has been on a downward spiral into economic disaster ever since and their number has dramatically increased, up 34 percentage points in these stats. Every one of those percentage points had to come out of some other nation’s total. The percentages of Colombians, Americans, and others may fall, but that does not need to mean fewer of them are coming. It just means that Venezuelans have come in such great numbers to escape the disaster in their own nation that they completely changed the percentages.

You may note that one other nationality has increased, Nicaraguans. Nicaragua is one of Latin America’s poorest nations and they have come in large numbers in order to find work, but they are still a small proportion of the total.

The above numbers are very good samples, more than 10,000 in each case, but neither covers a full year and since I am not sure how many months were covered in 2005, comparing the “raw numbers” does not really tell us anything. In addition there are other factors which can affect numbers selected at one specific point in time. But we are interested in where people are coming from and they are very useful for that.

Frankly, none of those numbers I just mentioned impressed me or surprised me and if that is all there was to say, then I probably would not bother with them. They do not tell me or anyone else in Panama interested in expat arrivals anything we do not already know. Except for one thing.

I was blown away, not by the Venezuelans, but by the Europeans! If you did not notice that, go back and look again. The three European nations in the top ten combined represent 17.3% of the total, more than the Colombians! No European nation made it into the top ten in 2005.

In 2005, Spain was #14 on the list and is #3 in 2015’s statistics. Italy was #18 in 2005, but #4 in 2015. And Portugal was #43 in 2005 at one-tenth of one percent and now it is in the top ten!

Now you know why I welcomed the new “wave” of residents coming from Europe in my last Report from Panama. If matters continue as they are now in Europe, those numbers could easily rise. And the Germans, French, British, Dutch and other Europeans may not have made it into the top ten, but we know they are coming too.

Oddly enough, although the 2015 statistics were published in the major newspapers here, I have never heard one person comment on the rise of the Europeans. Well, I can assure my European members that I certainly noticed and I am happy you are joining us.

I often tell my Panamanian friends that the arrival of residents from all over the world is a great blessing. Panama is a nation of only four million people, one of the smallest populations in the western hemisphere, other than Caribbean islands. Only Uruguay is smaller. With the dramatic increase in the Panamanian economy, it finds itself short of enough workers for the needs of its private sector. In addition, as I have mentioned many times in past reports, the public education system is simply not producing graduates with the many skills required in the 21st century.

The arrival of new residents has helped immensely in meeting the need while the nation works on improving its education system, not an easy task done rapidly. Foreign residents have been a critical assistance to Panama’s development and will continue to be as the economy grows and the education system is reformed to meet today’s reality. Without them, the last decade would have been marred by lost potential due to a small and under-educated workforce. Panama would be in a very different place today and not as good a place.

Some of you may think Panama will experience the angry conflicts underway in Europe and the US regarding immigration. Anything is possible, but it is not the same thing, so it does not have to have the same end result. People who move to another nation in search of citizenship are called “immigrants”. I call those like most of us who come to Panama to live indefinitely, but not seek citizenship, “relocators”. That is a crucial difference.

In Panama, residents have many of the same rights and responsibilities of citizens, but they are not citizens. They do not have Panamanian passports, vote in elections, hold government office, or have the other political rights and responsibilities of citizens. They are relocators. Panamanians retain complete control of their nation’s political structure. Citizenship is granted to only a small number of foreigners each year. That policy may change at some point in the future, but that is the situation now.

As a result, discussions about foreign residents do not have the extreme emotional content that we see every day in the US and Europe and many other nations, another blessing of the way things work here for both Panamanians and everyone else. We do not need or want the anger and extreme emotionalism of less fortunate nations and I sincerely hope we can continue to avoid that. My one request to you is that, if you are one of those angry and emotional on the topic in your home nation, you leave that behind when you come down. If nothing else, please remember that you are sitting on other side of the table when you relocate to another nation, wherever you choose to go.

It is not so hard. It is easy. If you come to live in Panama, just remember to treat the citizens of Panama (and any nation) with exactly the same respect you expect from foreigners living in your home nation.

In Summary

“Don’t fear failure so much that you refuse to try new things. The saddest summary of a life contains three descriptions:
could have, might have, and should have.”
Louis E. Boone, American author, 1941-?I am going to conclude this Report with some of the same words I used in the last Report from Panama. They remain every bit as true today and I think every bit as useful.

The 20th century is over and never coming back. It is history. I celebrated my 55th birthday in 2000 and my 71st earlier this year. I have spent the great majority of my life in the 20th century and sometimes it can still “seem like yesterday”. Today, the average Panamanian is 28 years old. He or she has already spent the majority of his or her life in the 21st century. It is probably safe to guess that 90% of their real memories are from the 21st century. Three years from now in 2019, Panama will hold its next national elections and among the voters will be some who were born in the 21st century. The same will be true in many nations. This is their century.

But it is our century too, we share it with them. We all need to make this our best century. Any goal less than that is a mistake.

That is it for this Report. I hope you found it useful and interesting.

If you are someone who has read my past Reports from Panama, you know exactly what comes next. The final words are always the same from the very first report I wrote many years ago. So let us all read this together, once again.

No one knows the future. Free markets go up and free markets go down. The future is not a simple extrapolation of the present. Anything can happen. Everyone has an opinion and those words above are just opinions.

Note…

You can read all of Bob Adams previous and future articles about Panama when you become a member (for free) of his website www.RetirementWave.com

Last Updated Feb 7, 2015 - by Panama Relocation Tours

Panama Canal Expansion Will Have a Big Effect on Energy, Water and Grain in the US and China

When considering where to relocate to overseas you need to look beyond the beautiful beaches and mountain views. A more affordable place to live should not be your only consideration.

The stability of the government and the economy are important factors to consider too.

Panama’s economy is already booming but the Panama Canal expansion will bring in even more revenue to Panama. The article and photos below (reprinted with permission) from Keith Schneider at Circle of Blue website does a great job of explaining how the Canal will help Panama and many other countries too. Circle of Blue website has several great articles about Panama

Deeper channels and immense new locks are due to open in 2016.

Panama Canal expansion infrastructure under construction shipping global trade Keith Schneider Circle of Blue

Photo © Keith Schneider / Circle of Blue

The scale of the Panama Canal construction to excavate new channels, widen existing shipping corridors, and complete three new lock chambers on the Pacific side and three more close to the Caribbean make the canal expansion a 21st-century parallel to building the Egyptian pyramids. Click image to enlarge.

By Keith Schneider
Circle of Blue

PANAMA CITY, Panama – It was an elaborate, even theatrical display of national pride and elite engineering. On January 19, Panama’s four-quarter, red and blue starred flag gleamed in bright morning sunlight as a 2,300 metric ton steel gate slid into place inside a colossal new lock of the Panama Canal.

It was the first of eight mammoth gates, ranging in height from seven to nine stories, to be installed in the three concrete locking chambers near the canal’s Pacific entrance. Almost 90 percent complete now and scheduled to open for commercial traffic in the spring of 2016, the roughly $US 6 billion canal expansion is expected to double the amount of cargo that crosses the Isthmus of Panama to 660 million metric tons per year.

Thousands of men and hundreds of trucks and excavators, like a colony of motorized ants, swarmed through the construction site to bend steel and pour concrete. The scale of the project to excavate new channels, widen existing shipping corridors, and complete three new lock chambers on the Pacific side and three more close to the Caribbean make the canal expansion a 21st-century parallel to building the Egyptian pyramids.

“The expansion project is pushing the country in new directions. It’s changing Panama.”

–Onesimo V. Sánchez, manager
Panama Canal Authority economic research

With its much larger locks lifting and lowering much bigger ships for the day-long crossing, the expanded canal is projected to alter global patterns of food and energy production and trade. Analysts anticipate that the additional transport capacity will shift water use and supply, particularly in the United States and China, the primary producers and consumers of goods that are shipped through the canal.

The expansion project’s effects on Panama’s economy and management also are extraordinary. Both the Pacific and Caribbean entrances are swollen with new construction. Proposals for big power-generating, fuel-storage, logistics, and transport projects in the canal corridor are under review by national authorities.

The canal’s ability to drive economic growth is evident in Panama City, the capital, where an impressive skyline of seaside white towers bloomed in the last decade. The Pacific coast city of 1.5 million people has quickly become a modern maritime hub where jobs are plentiful and employees are needed for almost 100 banks holding more than $US 100 billion in assets, as well as for hundreds of shipping firms and busy container terminals.

Panama City skyline skyscraper construction global trade maritime capital Keith Schneider Circle of Blue

Photo © Keith Schneider / Circle of Blue

The effects of the Panama Canal expansion project on Panama’s economy and management are extraordinary. Panama City displays an impressive skyline of seaside white towers that did not exist a decade ago. The Pacific coast city has quickly become a modern global maritime capital. Click image to enlarge.

Along the Caribbean coast, the canal expansion also is attracting developers of mega-projects who are testing Panama’s regulatory agencies with proposals that could have substantial effects on the nation’s water resources and tropical landscape. The projects include a $US 6.4 billion open-pit copper mine powered by a 300-megawatt coal-fired power plant, a $US 8.7 billion container terminal east of Colon, and a $US 4 billion residential resort.

“The expansion project is pushing the country in new directions,” said Onesimo V. Sánchez, manager of the Panama Canal Authority’s economic research unit. “It’s been a long road to discovery of yourself. It’s changing Panama.”

Contractors here and in the United States say that the expansion project also can be seen as a global model of astute construction management. The opening of the expanded canal is expected to cost less than $US 6 billion, just 10 percent more than the original $US 5.25 billion price tag.

Panama Canal Fun Facts

Length of Panama Canal: 77 kilometers (48 miles)

Area of Lago Gatun: 423 square kilometers (163 square miles)

Height ships are raised: 26 meters (85 feet)

Direct revenue to Panama Treasury: $US 1 billion annually

Source: Panama Canal Authority

Its commercial opening in 2016 will come a year later than anticipated. In contrast, the construction of the $US 3 billion Olmsted Locks and Dam on the Ohio River, the largest inland navigation project in the United States, is more than $US 2 billion over budget and decades late in opening.

“We had a lot of experience in construction, moving equipment, applying our experience in managing the canal before the expansion,” said Ilya R. Espino De Marotta, the Panama Canal Authority executive vice president who oversees the project. “It’s helped give us the know-how to do this project well. It’s not easy. Redoing a bathroom is not easy. For a project this size, we’re doing well.”

Effect on Trade

In every major study that assesses the new canal’s influence on trade, including a 2013 report by the U.S. Maritime Administration, researchers find that among the project’s big effects will be increasing the flow of American energy products to China and Japan.

The reason relates to the canal’s size. The new locking chambers — of which there are six — are longer, deeper, and wider than their forebears, which translates into a three-fold increase in a chamber’s holding capacity. The supersized locks enable contemporary Capesize bulk ore vessels, big liquid natural gas (LNG) carriers, and much larger liquid petroleum and bulk chemical tankers to make the run from American ports to Asian ports.

As a result, natural gas, propane, and petroleum liquids shipments from the United States to Asia are expected to grow substantially. Coal exports from the United States to China also could expand.

Graphic Infographic Map Panama Canal Authority expansion infrastructure number of transits traffic 1998 2014 shipping global trade Kaye LaFond Circle of Blue

Graphic © Kaye LaFond / Circle of Blue

The Panama Canal expansion is expected to sharply increase the amount of cargo that passes from the Caribbean Sea to the Pacific Ocean each year. Click image to enlarge.

The Maritime Administration study noted that American grain production should increase because the expanded canal and larger ships will make it less expensive to export American harvests of soybeans, corn, and wheat to Asian markets — though how much less expensive is unclear.

Shippers await the Canal Authority’s new toll structure for the expanded locks. In August 2012, Alberto Alemán Zubieta, the canal’s former administrator, illustrated the projected cost savings.

A shipment of eastern U.S. coal from the Port of Baltimore to Xiangang, China, in a Panamax vessel that fits the existing canal costs about $US 35 per ton, said Zubieta. Shipping the same amount of coal between the same two cities in the larger post-Panamax vessels would cost approximately $US 25 per ton.

Zubieta also estimated that grain transported to Asia from the U.S. Midwest and Great Plains would cost about $US 50 per ton in the larger bulk carriers, or $US 5 less per ton than in the Panamax vessel.

“Grain exported from the U.S. Midwest, and new opportunities for exports, such as coal, oil, and petroleum products, and liquefied natural gas (LNG), may be able to capitalize on expanded Panama Canal capacity,” wrote the authors of the U.S. Maritime Administration study. They added: “Impacts are likely to be significantly different by geographic region and by the type of product transported.”

Effect on Water Reserves

The effects of these trends on global water supplies could be substantial. International trade in farm and industrial products accounts for 2.32 trillion cubic meters (612 quadrillion gallons) of water use annually, according to a study in 2011 by UNESCO-IHE Institute for Water Education, a water research institute in Delft, the Netherlands.

Trade in crops contributes 76 percent to the total volume. Trade in animal and industrial products contributes 12 percent each, according to the UNESCO-IHE study.

Nicaragua Seeks Own Sea-to-Sea Canal

Panama’s government decided to expand its 77-kilometer (48-mile) canal knowing the many risks, among them the threat of competition from nearby Nicaragua, whose leaders plan to build a massive new shipping channel from the Pacific to the Caribbean.

It is not clear how much of a competitor the proposed Nicaragua canal represents to the Panama Canal. The proposal, by a Chinese developer, calls for a 22-meter (72-foot) deep waterway, built at sea level, that will cost $US 50 billion, according to preliminary estimates. Engineers who are familiar with such mega-projects put the price tag at $US 80 billion or more for the 286-kilometer (178-mile) canal.

Financing will have to be supplied from outside Nicaragua, which has a $US 30 billion gross domestic product. Such high construction costs will make it difficult, if not impossible, for the Nicaragua canal’s owners to charge tolls that are competitive with the Panama Canal’s tolls.

The official start of the Nicaragua project came in a ceremony in late December 2014 that was attended by Wang Jing, a Chinese telecoms entrepreneur and head of the Hong Kong Nicaragua Canal Development Co. Jing told reporters that the proposed canal could be finished in five years. News reports at the time estimated that Jing amassed $US 200 million in funding to build the project.

Panama Canal executives say they are not terribly concerned about the Nicaragua project, which is more than three times longer than their canal. They note that feasibility studies central to understanding the Nicaragua project’s potential economic and engineering success were postponed to April 2015. An environmental impact study, required by Nicaraguan law, has not been conducted. Excavation work is not scheduled to begin until after June 2015.

Civic opposition also is mounting in Nicaragua because of the toll that the project would have on Lake Managua and the rainforest. Lastly, marine environmental organizations warn that a sea-level canal would enable poisonous Pacific sea snakes to migrate into the Caribbean, threatening the region’s beach-based recreation and tourism industry.

The Panama Canal currently accounts for 3 percent of global trade volume, a share that is expected to increase to 6 percent to 7 percent over the next decade. In terms of water use, 7 percent of global trade equals roughly 174 billion cubic meters (46 trillion gallons) of water annually. That is equivalent to one-third of all the water that was used in the United States in 2010, according to the most recent water-use assessment by the U.S. Geological Survey.

The authors of the UNESCO-IHE study found that global use of water in trade was not evenly distributed, especially because the trade in energy and agricultural products — the largest users of water — involves producing countries using their waters and consuming countries saving their waters. Researchers call this swap a trade of “virtual water,” or the supplies used to grow, produce, or manufacture other goods. “Several countries heavily rely on water resources elsewhere,” wrote the report’s authors, “and many countries have significant impacts on water consumption and pollution elsewhere.”

Two cases in point involve energy and agricultural products transported through the expanded Panama Canal. In the United States, coal production to serve the increased exports to China would exacerbate water pollution from acid mine and toxic metal pollution in the eastern coal belts of Illinois, Indiana, Kentucky, Ohio, and Tennessee. It also would put more pressure on already scarce freshwater reserves in Asia to cool coal-fired power plants in China.

The heightened trade in petroleum products and natural gas from the United States is likely to affect water supplies needed for fracking in the oil and gas fields of Ohio, Pennsylvania, Texas, and the Great Plains. Under current weak and largely voluntary water-treatment measures, an increase in hydraulic fracturing could increase water pollution from fracked wells.

In China, though, increased use of U.S. natural gas to fuel power plants would reduce water use. Generating a kilowatt of electricity from natural gas uses 60 percent less water than generating an equal amount of power from coal, according to the U.S. Department of Energy.

Similarly, increased grain trade between Asia and the United States has consequences for water use in both places. The Midwest grain belts — which stretch from Ohio to Missouri and Iowa — are water rich. But the eight-state Great Plains, which supports a $US 30 billion agriculture and livestock industry, could experience canal-related water-supply pressures.

The Great Plains, which relies on the Ogallala Aquifer to produce one-fifth of the 410 million metric ton annual U.S. corn and wheat harvest, faces a new era of reckoning. The Ogallala’s users pump significantly more water out of the aquifer than filters back into the ground. Increased grain production to serve Asian markets will put more pressure on the Ogallala.

Shipments in Food and Energy

As it is, shipments of U.S. grain and energy resources through the canal are increasing. In 2014, 48.6 million metric tons of grain — most of it produced in the United States — moved through the canal from the Caribbean to the Pacific side for shipment to Asia, an increase of more than 50 percent compared to 2013.

Shipments of petroleum liquids from the Caribbean side to the Pacific, most of them refined and processed along the U.S. Gulf Coast, reached 32.3 million metric tons in 2014. Coal and coke shipments, principally from Colombia and eastern U.S. coal fields, totaled almost 14.3 million metric tons.

In all, bulk container shipments to Asia totaled 89 million metric tons, or 27 percent of the tonnage handled by the canal. When the much smaller reverse Pacific-to-Caribbean trade is included, bulk chemical and energy shipments accounted for $US 687 million in tolls, or 36 percent of the $US 1.9 billion that was paid to the Panama Canal Authority by merchant ships last year, according to authority figures.

Canal Construction Shapes Panama

From her office in the U.S.-built Panama Canal Authority headquarters, decorated with a coat rack that holds her pink construction helmet and pink safety vest, Ilya R. Espino De Marotta patiently supervises the mammoth project that is shaping her country.

Panama Canal Authority expansion Executive Vice President Ilya R. Espino De Marotta Keith Schneider Circle of Blue

Appointed two years ago to supervise the mammoth expansion project, Panama Canal Authority’s executive vice president, Ilya R. Espino De Marotta, is one of the highest ranking women in Panama. Marotta is so well-respected that she is a candidate for the Canal Authority’s top job as administrator and is being recruited for the nation’s top job as president. Click image to enlarge.

Appointed two years ago to succeed Jorge L. Quijano, who became the authority’s administrator and chief executive, Marotta is one of the highest ranking women in the country and is so well-respected that she’s a candidate for the Canal Authority’s top job as administrator or the nation’s top job as president. The next presidential election is scheduled for 2019.

Marotta’s reputation rests on her characteristically unflappable and engaging demeanor. Those personality traits served her and the Canal Authority well during several strikes by construction workers, as well as very difficult disagreements over contract provisions and payments to the international consortium of companies that are building the new canal.

“People keep asking me that,” she said in an interview with Circle of Blue. “Do I want to be president? Do I want to do something that difficult? That different from what I do? It’s not something I think about. We have to finish this project, which is hard enough. We’re close. It takes all of my attention right now.”

Inside the Project

It should hold Marotta’s attention. Constructing the third set of locks is one of the largest and most complex construction projects on the planet right now. Like almost every other facet of the Panama Canal, the expansion is a study in history, fluid dynamics, and keen water management.

The United States took over the original canal-construction project from the French in 1904 and completed it in 1914. The result is a 77-kilometer (48-mile) water route across the isthmus with groupings of side-by-side locks; one group on the Caribbean side and two more groups on the Pacific side.

Panama City Canal construction historic photo infrastructure shipping global trade Panama Canal Museum

In the late 1930s, the U.S. military began construction of a third set of locks but halted the effort in 1939 at the start of World War II.

President Jimmy Carter (D: 1977-1981) launched the process to turn over the canal to Panamanian ownership and management in the late 1970s. Panama gradually assumed ever-more management authority and expertise, and the country gained full control on December 31, 1999.

The contemporary expansion builds on the previous work but with 21st-century principles of water use and water management, which are defined by the need to conserve water and safeguard the canal’s expansive 345,000-hectare (1,332-square-mile) watershed.

Almost half of the canal’s route crosses Lago Gatun, a freshwater reservoir fed by the Chagres River and held in place by Gatun Dam. Lago Gatun and a second big reservoir nearby, Lago Alajuela, supply the 7.6 million cubic meters (2 billion gallons) of water needed daily for 35 to 38 ships to complete the transit on the existing locks, or what is known here as “lockages.”

Water is used to fill the old locks with water to raise ships 26 meters (85 feet) and then lower ships by the same amount. It takes 208,000 cubic meters (55 million gallons) of water per transit or lockage, according to the Canal Authority.

Panama City Canal Authority Madden Dam infrastructure electrical generating capacity 33 megawatts Keith Schneider Circle of Blue

Madden Dam was completed in 1935 for water storage for the canal and Panama City and to supply 33 megawatts of electrical-generating capacity to the Panama Canal Authority and to Panama. Click image to enlarge.

Before 2006 — when 80 percent of Panamanian voters cast ballots in favor of the canal expansion — the authority’s engineers considered building a third reservoir to supply water for the third set of locks. The reason: filling the new locking basins would take 483,600 cubic meters (128 million gallons) cubic meters of water per lockage.

That would have meant high expense, enormous changes in land use, and evicting some of the 150,000 people who live in the watershed.

A better way involved an idea proven in Germany. Canal officials installed storage basins alongside the new locks to recycle 60 percent of the water that is used in lockages before it is discharged. The recycling technology enables the new locks to use 7 percent less water than the existing locks, or 193,500 cubic meters (51 million gallons) per lockage. The water savings nullified the need for a new reservoir, said Carlos A. Vargas, the Canal Authority’s executive vice president for water and energy.

More Panama Canal Fun Facts

Number employed during construction (1904-1913): 56,307

Number employed during construction (2007-2015): 10,000

Number died during construction (1904-1913): 5,609

Number died during construction (prior to 1904): 22,000

Number died during construction (2007-2015): 6

Source: Panama Canal Authority

“It’s smarter. It’s cheaper. It uses less water,” Vargas said.

Still, the new locks will also use more than 7 million cubic meters (1.8 billion gallons) of water for the 13 to 15 big ships that will cross the isthmus each day. With a roughly 15 million cubic meter (4 billion gallon) daily demand for water, the authority still needed a larger water supply. That problem was solved in large part by raising Gatun Dam and raising Lago Gatun’s maximum operating level by 45 centimeters (18 inches).

The authority also is dredging deeper navigation channels and controlling sedimentation by replanting tracts of forest, controlling tree cutting, and improving farm-cultivation practices.

“The whole idea is not to waste water,” Vargas said. “Even in this country, with so much rain, water is a concern. When you save water, use less, it amounts to not having to build more dams.”

The New Locks

Standing on the bottom of the canal’s nearly completed locks is an exercise in feeling small. Three lock chambers unfold in a concrete canyon nearly two kilometers (1.2 miles) long. Graders and haul trucks at one end are so distant they appear as small as pencil points. Hanging from the sides of the chamber, here and there, are men on platforms drilling bolts in the concrete. The sound of groaning diesels and whining drills fills the space.

Panama Canal expansion construction worker locking chamber infrastructure shipping global trade Keith Schneider Circle of Blue

Hanging from the sides of the new Pharaoh-like locking chambers are men on platforms drilling bolts in the concrete. The sound of groaning diesel equipment and whining drills fills the space. Click image to enlarge.

Well over 100 million cubic meters (3.5 billion cubic feet) of earth were excavated for the project. Tens of millions of cubic meters of concrete were poured, enough to construct a sizable city.

“From the start of construction in 2007 to when the first ship goes through here, it will be nine years,” said Luis Ferreira, an architect and engineer who has worked for the Canal Authority for 40 years. “It’s big. But it may not be big enough. There are ships out there already that are too big for the new locks.”

“Imagine,” Ferreira said, spreading his arms wide. “Bigger than this. There are some people around here that think we need a fourth set of even bigger locks.”

Panama Canal lockage transit ship ships lock locks expansion infrastructure shipping global trade

Photo courtesy of Creative Commons

The Panama Canal currently accounts for 3 percent of the volume of global trade, a share that is expected to increase to 6 or 7 percent over the next decade. Click image to enlarge.

Panama Canal Authority expansion German technology water saving conservation recycle recycling storage basin lockage infrastructure shipping global trade

Graphic courtesy of Panama Canal Authority

A German technology to conserve water involves installing storage basins alongside the new locks to recycle 60 percent of the water that is used in lockages before it is discharged. The recycling technology enables the new locks to use 7 percent less water than the existing locks, nullifying the need for a new dam and reservoir. Click image to enlarge.

Panama Canal Mira Flores locks lockage transit infrastructure shipping global trade Keith Schneider Circle of Blue

The Mira Flores locks, opened in 1914, are the start of a maritime shortcut from the Pacific to the Caribbean that takes ships eight to 10 hours to complete. Click image to enlarge.

Panama Canal Authority Panamax ship post-Panamax ship expanded locks expansion infrastructure shipping global trade

Graphic courtesy of Panama Canal Authority

Comparison between the Panamax ships that fit the old canal locks and the post-Panamax ships that fit the expanded locks. Click image to enlarge.

Panama Canal Authority expansion Luis Ferreira architect engineer construction infrastructure shipping global trade Keith Schneider Circle of Blue

Luis Ferreira, an architect and engineer, has worked for the Panama Canal Authority for 40 years. “It’s big,” he says of the expansion project. “But it may not be big enough. There are ships out there already that are too big for the new locks.” Click image to enlarge.

Panama Canal expansion construction worker water recycling recycle storage basin infrastructure shipping global trade Keith Schneider Circle of Blue

Thousands of men and hundreds of trucks and excavators, like a colony of motorized ants, swarm through the Panama Canal construction site to bend steel and pour concrete. Here, workers complete basins for recycling water during lockages.