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The Panama Canal

Since the discovery of the Pacific coast of Panama, visionaries dreamed of one day creating a great passageway from the Atlantic to the Pacific, thus avoiding the 12,000-mile journey around the tip of South America. That day finally came in August of 1914, after decades of planning and excavation. Although only 40 miles from shoreline to shoreline, the ingenuity and tenacity of the canal's creators are evident with each and every movement of this magnificent lake-and-lock-type canal. It's bound to be a voyage you will never forget.

The Panama Canal extends approximately 80 km. (50 miles) from Panama City on the Pacific Ocean to Colon on the Caribbean Sea. It is widely considered to be one of the world's great engineering achievements. The United States is the largest user of the Canal in terms of cargo tonnage, as either port of origin or destination, although Asian countries are beginning to close the gap. About 12% of U.S. sea-borne international trade, in terms of tonnage, passes through the Canal annually. Ships bound for Japan from the East Coast of the United States save about 3,000 miles by going through the Canal; ships sailing from Ecuador to Europe save about 5,000 miles.

Around 13,000 ships transit the Canal each year, hauling an estimated four- percent of the world's goods around the globe. About 70 percent of all trade through the Canal are coming from or heading to the U.S. Traffic is projected to increase two percent per year.

Fifty (50) million gallons of fresh water are needed to float one ship through the Canal and all of it is supplied free of charge by forests on the surrounding hillsides, which capture the abundant tropical rains and feed the Canal with rivers.

The Panama Canal Authority has implemented a $1 billion improvement program to maintain the Canal and keep it competitive. The program includes the widening of the narrow Gaillard Cut allowing two-way traffic for even the largest ships and increasing Canal capacity.

Treaties

In 1903, the Republic of Panama and the United States signed the original Panama Canal Treaty, which allowed the United States to build and operate a canal connecting the Pacific Ocean with the Caribbean Sea through the Isthmus of Panama. The Treaty granted the United States the use, occupation, and control of a Canal Zone, approximately 10 miles wide, in which the United States possessed full sovereign rights. In return, the United States guaranteed the independence of Panama and paid the government of Panama $10 million, as well as an annuity of $250,000, which each year increased at a rate far beyond that of inflation.

On September 7, 1977, a new Panama Canal Treaty was signed by President Torrijos of Panama and President Carter of the United States that transferred full control of the Canal to Panama on December 31, 1999. Under this Treaty, the Panama Canal Company, the Canal Zone, and its government were disenfranchised on October 1, 1979, and replaced by the Panama Canal Commission that operated the Canal during the 20-year transition period that began with the Treaty. The Panama Canal Commission has now been replaced by a new Panamanian entity, the Panama Canal Authority. The treaty guarantees permanent neutrality of the Canal. Control over U.S. military facilities in the former Panama Canal Zone has reverted to Panamanian authority. The U.S. Southern Command and U.S. Army South troops moved out of Panama at the end of 1999.

Panama Canal Developments

The Canal itself is undergoing a modernization and maintenance program of up to $1 billion, which includes finishing of the widening of Gaillard Cut as well as improvement of the locomotives (mulas) used to guide the ships through the locks, the docks, the tugs and all the machinery of the Canal operation. In addition, the Panama Canal Authority has announced preparations for constructing a third set of locks. A multi-phase program includes building additional water reservoirs to increase water availability both for the Canal and the terminal cities; dredging the entrances to the Canal to allow the entrance of larger ships to the ports; similarly deepening Gaillard Cut and Gatun Lake; building the new locks and constructing two bridges over the next ten years.

Ports and Railroad

Additionally, Panama's ports are expanding their container transshipment capacity. Manzanillo International Terminal completed a $100 million expansion program, the port of Balboa is finishing a $130 million expansion program, and another $200 million phase three program. The Evergreen port at Colon will enter a second phase of expansion and a new port at Farfan, on the Pacific side, will be defined.

All this activity will allow Panama to transship over 2.8 million containers per year around year 2005 and continue growing over the years making Panama the No.1 container transshipment center in Latin America.

Together with the ports, the restored railroad by Kansas City Southern Railways already operational connect the ports creating a land bridge to complement the Canal.

This port and railroad activity will require additional services from the local economy such as financing, insurance, specialized maintenance and repair, electricity and water, telecommunications, trained manpower and other services, and it will create new business opportunities for logistics and cargo industries.

Investment Opportunities

Some of the multi-million dollar investment opportunities include:

  • The development of major intermodal transportation and logistics centers at Colon and at the Howard/Farfan complex on the Pacific, including the construction of a new container port at Farfan.
  • Ship owners services, servicing of vessels, ship repair and maintenance, container repair, intermodal cargo services.
  • The future construction of the third set of locks, which will include the necessity for additional water resources, expanded hydroelectric power generation, the expansion of the entrances to the Canal and the deepening of Gatun Lake and Culebra Cut.
  • Contracts related to the Panama Canal operation (provisions, equipment, material, construction, consulting etc.) that reached $135 million in 2001, not including purchases of $22 million.
  • Provision of concessionary services to the ports (power, water, fuel, material, food, banking services, telecommunications, maintenance and repair, dredging) estimated at between $47 and $60 million annually).
  • Services to passengers and crewmembers transiting the Canal, which in 2000 numbered 255,571 and 458,134 respectively.
  • Services to smaller ships, such as yachts and motor cruisers, which totaled 1,748 in 2001.
  • The relocation of approximately 8 to 10 thousand persons, as a result of Canal expansion, requiring housing and infrastructure.
  • Cruise ship reception and tourism.
  • Others. 

In terms of related air transport opportunities, Tocumen International Airport should be developed as an international and regional hub for both passenger traffic and cargo; the former Howard airforce base should become an aviation industrial center, making use of its modern airport facilities; and construction of the cargo airport at France Field in the Atlantic must be completed.

Howard/Farfan Multimodal Project

The studies made for the development of this sector clearly indicate that their location at the entrance and west shore of the Panama Canal is ideal for the establishment of a multimodal center for industry and the commerce. The existing airport infrastructure, and advance telecommunications facilities and the integration of the just in time manufacture with the multimodal transport will provide fast and flexible connections between users, suppliers and clients.

These areas and facilities that reverted to Panama at the end of 1999 have a total area of 2,628 hectares, and are one of the most important sites based on the opportunities for the development in the shores of the Canal in the Pacific.

A New Opportunity: Container Port in Farfan

Located at the Panama Canal’s entrance, near to the bridge of the Americas, the 253 hectares of Farfan are part of the former air base of Howard, the biggest military airport that the EE.UU Armed Forces had outside of the United States.

The Japanese government through its Agency for the Development (JICA), prepared a feasibility study that reveals that after occurring the maximum development of the Balboa port and after its modernization, Farfan can become the second great port of containers in the Pacific.

This port will be part of the multimodal center of transport that Panama promotes. With a view to integrate itself more indeed to the system of international transport its proximity to the port of Balboa and the airport of Howard makes this site especially attractive for the predicted development.

Business Opportunities of the Howard Project:

  • Center of repair and maintenance of airplanes and helicopters.
  • Development of a harbor complex in Farfan
  • Logistic center of manufacturing and distribution
  • Call Centers
  • Industrial parks and processing zones for export
  • Development of residential areas
  • Establishment of educative and institutional centers
  • Recreational parks, of sports and tourist and recreational activities.

Howard/Farfan has an estimated value of US$1 billion that will require participation from major developers or consortiums.

The Panama Canal plays a significant role in the country's economy and has contributed an average of six percent of Panama's GDP since the 1980s.





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