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Decisive referendum to widen the Panama Canal

Monday, October 16th 2006 - 21:00 UTC
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Next Sunday October 22 the Panamanian people will vote in a special referendum to widen the Panama Canal allowing for large container ships, a 5.5 billion US dollars project which is decisive for world trade and for the lifeblood of the country.

Each year some 5% of maritime world trade passes through the canal which remains the principal gateway between the Pacific and the Atlantic. However currently supertankers and large cargo ships exceeding 4.000 containers (post-Panamax) cannot use the narrow canal and it is estimated that early next decade it will have reached its full capacity of four dozen ships per day.

According to the Panama Canal Authority, ACP, which manages the major waterway, 40% of traffic is absorbed by Europe and the west coast of South America and the remaining 60% United States coast to coast, Asia and Europe. An estimated 14.000 ships sail through the canal built between 1904 and 1914 by United States.

Daily traffic stands at 38 vessels, of which 24 are booked and position 25 is auctioned with the rest of the vessels queuing.

To keep the canal competitive the project includes a new set of locks and widening the existing ones from 108 to 150 feet. If the Panamanian people approve the plan construction will begin 2007 and the entire project should be completed 2014.

The government headed by President Martin Torrijos ? son of the late dictator Omar Torrijos ? has vigorously pressed for the project, arguing it will generate employment, boost the Panamanian economy, and help Panama join the First World.

Panama is a relatively small country of 3 million people with a GDP of just over 14 billion US dollars and critics of the project point out that any new debt would add to the country's current national debt of over 9 billion US dollars.

President Torrijos has assured the nation that the project will be self-financing. No debt will be incurred by the state and Panama will not guarantee loans needed to finance the undertaking, as the ACP is an autonomous institution.

Construction will be paid for by the ACP and additional financing of no more than 2.3 billion will be sought on the financial markets. The ACP projects that its profits will increase from 484 million US dollars in 2005 to 4.3 billion in 2025. Thousands of jobs will be created as the project attracts other businesses and investors to Panama.

However the International Monetary Fund has also questioned the financing of the canal expansion. In its latest annual report, the fund notes: "There is no firm evidence at this stage to judge whether markets would be willing to finance the project without an explicit government guarantee."

The IMF further said the ACP does not qualify as an autonomous commercially run entity. The ACP rejected the contention, insisting that under Panama's constitution its finances are managed autonomously.

Public opinion polls show a majority support for the project to be voted on Sunday. A quarter of a century ago, Omar Torrijos Sr. signed with then US President James Carter the treaty which committed the US to hand the canal to Panamanian sovereignty which effectively happened December 31, 1999.

Categories: Mercosur.

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