LATIN AMERICAN TRADE BI-ANNUAL - Panama Canal expansion concerns focus on financing

By: | at 08:00 PM | Channel(s): International Trade  

By Paul Scott Abbott, AJOTExpansion of the Panama Canal to accommodate the new wave of supersized containerships is an endeavor upon which future global trade patterns hinge - and one that presents concerns to ocean carriers regarding financing.
The cost of the expansion - projected at somewhere between $3 billion and $7 billion - does not necessarily need to be shouldered entirely by carriers through toll increases, according to a pair of Panama Canal experts interviewed by the American Journal of Transportation. Those experts suggest that International Monetary Fund (IMF) resources plus Panamanian government revenues are among options.
Meanwhile, Stanley Muschett, executive administration manager for the Panama Canal Authority (ACP), told AJOT that any such discussions are premature. He rebuked reports from a recent Global Insight Inc. study that tolls could nearly quadruple over a 20-year period.
“The carriers are vitally concerned and in no way can assume the entire cost,” said C. Thomas Burke in a recent interview. Burke served from 1991 to 1999 as a member of the Panama Canal Alternative Study Commission. A 40-year veteran of the port and ocean carrier industry, Burke currently serves as Great Falls, VA-based senior adviser to the president of Kawasaki Kisen Kaisha Ltd. (“K” Line America Inc.)
“I don’t see how the ocean carriers are going to do it,” Burke said. “Our industry runs in peaks and valleys, and the carriers simply are not going to be able to fund a $5 billion to $6 billion expansion.”
Burke said he does not know exactly how much of the cost carriers will be able to bear, but he said he believes they will be willing to pay their “fair share.”
He urged that carriers be involved in the overall process and suggested that carrier representatives likely would be willing to take part later this year in policy discussions in Panama, during which funding alternatives could be discussed.
“This project is so big and so meaningful for the world that the IMF and World Bank, and other such entities should all be interested in it,” Burke said.
The IMF is an organization of 184 countries, with a stated purpose of working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty. The World Bank Group has a stated mission of fighting poverty and improving the living standards of people in the developing world. It provides loans, policy advice, technical assistance and knowledge-sharing services to more than 100 developing countries.
The Panamanian government, which assumed control of the canal from the United States at the end of 1999, relies on canal tolls as a primary revenue source.
Panama government revenues could pay for expansion
In a separate interview, Richard A. Wainio, who served from 1975 through 1998 in Panama Canal staff functions, the last eight years as director of executive planning, said he believes Panamanian government revenues from the canal, which amount to some $1 billion a year, could go a long way toward paying for the expansion.
“The question is, ‘Will they choose to share?’” said the Panama-born Wainio, who currently serves as port director and chief executive officer of the Tampa Port Authority. “It seems to me to be a pretty substantial amount of money to handle financing of a loan if the terms of the loan are good. It certainly seems they should be able to pay for this project over a 10- or 20-year period.”
Wainio, who plans to be part of an Oct. 5-8 trip to Panama sponsored by the Greater Tampa Chamber of Commerce and the Tampa Port Authority, said he believes expansion costs will be about $5 billion with a $2 billion contingent - a lower figure than earlier estimates (as high as $10 billion). He attributed lowering costs to opting to install water-saving basins and deepening Gatun Lake rather than having to greatly expand water reserves through a series of new dams, reservoirs and pumping systems.
Wainio said

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For more than a quarter of a century, Paul Scott Abbott has been writing and shooting images for the American Journal of Transportation, applying four decades of experience as an award-winning journalist. A graduate of Northwestern University’s Medill School of Journalism, with a master’s magna cum laude from Trinity Evangelical Divinity School, Abbott has served as president of chapters of the Propeller Club of the United States, Florida Public Relations Association and Society of Professional Journalists. Abbott honed his skills on several daily newspapers, including [em]The Cincinnati Enquirer, The Richmond (Va.) News Leader, Albuquerque Journal and (South Florida) Sun-Sentinel, and was editor and publisher of The County Line, a weekly newspaper he founded in suburban Richmond, Va.[/em] A native Chicagoan, he is a member of American Mensa and an ever-optimistic fan of the Chicago Cubs.