MercoPress. South Atlantic News Agency

Chile fears Panama Canal rates hike

Last Sunday's landslide support for expanding the Panama Canal is causing concern in Chile since the financing of the massive project has yet to be revealed.

Chile is the overcrowded Canal's leading client in Latinamerica and last Sunday the Panamanian people went to the polls on a referendum to support the 5.2 billion US dollars project

Those contrary to the widening of the canal and the construction of three new locks not only argued environmental reasons but also warned that cost estimates were "grossly" and deliberately underestimated given Panama's limited access to international credit.

Chilean exporters and ship owners favor the enlargement of the Canal which should put an end to the queuing and waiting costs, but fear that part of the 5.2 billion US dollars bill could begin to be collected through increased rates.

Eugenio Valenzuela president of Chile's Ship Owners believes that higher crossing rates before the expansion works actually begin would have a negative competitiveness impact for many Chilean export produce.

"When certain items are no longer competitive, they cease to be traded, which undoubtedly affects demand for hold space in ships with an impact on the whole maritime freight business", said Valenzuela in Santiago.

Furthermore Chilean ship owners are not against an increase in Panama Canal rates but scaled with those benefiting most, because they currently can't get across, paying accordingly, and the rest, which make use of the waterway now, normally.

"We're going to present this initiative at the International Maritime Chamber", announced Valenzuela.

It is estimated that toll costs in the Panama Canal in the next twenty years will at least double.

Chilean exports heading for the east coast of United States, Caribbean, Gulf of Mexico and Europe and which represent 28% of the country's overseas sales, must cross the Panama Canal.

An alternative route is the Magellan Strait, but this is time consuming adding five days on shipments to Europe and up to ten for the US east coast.

The extreme south of Chile is used mainly for Chilean trade with South America and particularly for wood and pulp shipments since vessels usually call in Brazil to complete the cargo.