On the 40th anniversary of the treaty that gave Panama control of its canal, the expanded waterway is seeing more traffic than ever.
On September 7, Panama celebrated the 40th anniversary of the US agreement to turn over control of the world-renowned canal.
In 1977 the Torrijos—Carter Treaties guaranteed that Panama would assume responsibility for the waterway in 1999.
Since then it has become one of the primary drivers of the country’s economy, representing around 15% of its GDP and generating an estimated revenue of more than USD10.6 billion. Linking the Pacific Ocean and the Caribbean, and by extension the Atlantic Ocean, the 48-mile channel is a key conduit for international trade.
Its importance has grown tremendously since the completion of the expansion project a year ago, an enormous engineering project which has made it possible for ships of up to 13,000TEU to pass through the canal. Such vast vessels have become known as New Panamax ships.
This has made the canal navigable to the bulk of the global shipping fleet. With the canal’s increased width and depth, large oil tankers can now pass.
As a result, Suezmax size vessels have started to navigate after the expanded canal began commercial operations in June 2016.
And over the first seven months of this year, as the country celebrates four decades of the Torrijos-Carter Treaties, the expansion has been a success.
Toll revenues increased by 19.7% as compared to the same period the year before, and the cargo volume transported by bulk vessels grew 25.1%. This accounts for a surge of 28.7 million tons more in 2017 alone, according to the National Statistics and Censuses Institute (INEC).
If trade figures keep up soaring at this rhythm, the company will certainly surpass the USD1.9 billion that it made in revenues in 2016, reported the Panama Canal Authority (ACP).
But the ACP is also developing other plans to ensure that the waterway becomes more profitable. This agency, which is responsible for managing the canal, is planning to increase tariffs charged for liquefied natural gas (LNG).
The expansion project allows LNG to be transported using the waterway for the first time in its 100-year existence.
This presents a great opportunity for producers in the Americas, with the Chinese government supporting LNG due to its lower emissions.
For LNG vessels, the transit toll would increase by between 3.1-4.2% depending on the price of the products in their destination, noted ACP.
“The expansion will also allow the canal to exploit opportunities for growth in other sectors,” said the CEO of the ACP, Jorge L. Quijano, in conversation with TBY.
But global trade growth is slowing, due to a slowdown in manufacturing in China, and the Panama Canal could possibly face competition from a rival waterway being built in Nicaragua. Progress on this project seems to have stalled, however.
At least for now, on the 40th anniversary of the Torrijos-Carter Treaties, the canal has reported better tonnage figures than ever before.
“We can proudly say Panama is the efficient merging of public investment and the belief of the private sector in the development of a common goal and idea: Panama becoming the main logistics hub in the entire region,” stated Jorge Barakat Pitty, Minister of Maritime Affairs, Panama Maritime Authority in an interview with TBY.