The Panama Canal expansion will be open for business next Sunday, June 26, allowing thousands of ships to carry a third of the commerce from Asia to America.
An expansion had to take place since shipping companies have opted to use larger ships but in lesser amounts. Most of these ships cannot fit the original structure of the Panama Canal.
Cutting through a continent
Thanks to the expansion, the Panama Canal will now pose a significant competition with other continental canals, such as the Suez Canal in Egypt. The Panama Canal is vital for the economy of the continent because it eliminates the necessity of ships having to circumvent Tierra del Fuego, the most southern region of South America.
The expansion was first proposed by Panamanian President Martin Torrijos in April 2006. The proposal was approved by a large majority and in 2007 the project started its development.
The reasons behind the expansion
Experts argue that there is still a long way to go, and by inaugurating the new canal’s expansion there is a great deal of infrastructure that needs to be upgraded so America can match the maritime economy of Asia, for example. Most ports in the U.S. are not designed to accommodate the large ships that the canal will now be able to let through.
The Port of New York’s has to undergo a modification of its terminal for large ships, which costs over $1 billion. And yet, an ability to host larger ships does not always mean that they will always yield more profits. The modification of New York’s port will reportedly be finished by late 2017. Until then, the bigger ships that the new expansion of the Panama Canal will be able to let through cannot arrive in the Port of New York.
Rather than an upgrade, the expansion of the Panama Canal was a necessity for it to keep up with global commerce. Now, performing shipments on larger ships has been established as a trend since fuel costs are much more manageable by sending less-frequent freights with a larger capacity.
Some shipping companies have slowed their activities due to the ongoing uncertainty concerning the canal. Because New York, the largest eastern market, will remain without the ability to receive large freights, shipping companies will refrain to send their larger fleets. Others have opted for fitting their ships so they can fit the current infrastructure. One of the main concerns, in this case, is the Bayonne Bridge, which is to undergo a structural lift and a deepening of its harbor.
But the inauguration is still a major step towards the modernization of the eastern maritime economy. Heads of state, including the King of Spain, and thousands of guests are expected at the inauguration. Since so many important politicians and delegations will be attending, a monumental security team comprising snipers, commando operatives, and medical emergency staff will be ready to ensure the safety of the world-class guests.
A total of 11,151 security and emergency agents will be on active duty on Sunday, including those deployed in places where the event will be publicly transmitted.
A lackluster upgrade?
Last year, the canal saw 6 percent of the world’s commerce pass through its waters. And although the expansion will be of great help to accommodate larger ships, the canal still won’t be able to fit the largest ships that are able to carry around 20,000 containers.
The canal was supposed to be inaugurated two years ago. There were many issues, some include lack of durability for the cement blocks, worker strikes, leaks that called for steel frame reinforcement and more. It is estimated that an additional $1.6 billion was filed as a cost overrun by the Grupo Por El Canal (GUPC), the coalition of companies and countries striving to make the Panama Canal expansion possible.
The new locks that comprise the expansion are expected to generate a return rate of at least 12 percent. The project is not included in the government budget and there are no guarantees concerning any loans. If the GUPC fails to meet performance standards they have to pay the consequent bills, something that has already occurred on several occasions.
Reportedly, the project will not cause a major impact on the environment. The Panama Canal Authority (ACP) asserts that there won’t be any permanent water or air pollution and that there will not any communities displaced from their homes. The expansion is also supposed to generate at least 7,000 new jobs through its building stages. The ACP assures that more jobs will be generated as more cargo makes it through the canal, producing additional income to the area and developing economic activity.
People linked to the canal’s administration have stated that the expansion is not necessary and that they would rather build a larger port on the Pacific side of the country. That port would have been the second in America to be able to accommodate large ships.
Source: WSJ