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Panama canal to face direct competition soon?

      The Panama Canal, a 50mile long sea route which serves as an important short cut between the pacific and the Atlantic ocean and one of the strategic sea routes in the world is likely to face direct competition soon from its neighbor Nicaragua who plans to build a $40 billion mega canal through the country.

nicaragua canal. panama canal
Panama to face competition soon photo courtesy BBC

Also Read THE RACE FOR A GATEWAY PORT STATUS IN THE WEST AFRICAN SUB REGION

   The Panama Canal currently is one of the busiest sea routes as it helps vessels save on almost 8000 mile journey around the tip of South America. Dozens of vessels queue each day to navigate through its giant locks and it cost a Panamax vessel (Vessels that are limited by the Canals current size) an average of over $300,000 to navigate through the Canal serving as a great source of income for the country. In fact the canal is said to be adding well over a billion dollars to that country’s yearly budget.

   The canal has always faced competition indirectly from other canals like the Suez Canal which is not limited by Panamax vessels but can accommodate even bigger ones. The Panama Canal also occasionally faced competition from North America’s effective inter modal system.

   However with recent announcements by Nicaragua’s president despite stiff opposition from environmental groups to commence construction of the over $40 billion Nicaragua canal, the panama Canal could be facing a direct competition soon. The proposed canal is to be built with  a very significant involvement and the help of China.

    Some skeptics however believe it is an over ambitious project that might never see the light of day as the cost involved is too huge with uncertainties of the actual source of financing. Some political analyst also see this move by China which is continually  gaining a major influence in the Latin American region as way to   finally have its (China) “own” canal.

Also Read THE RIPPLE EFFECT OF THE PANAMA CANAL’S EXPANSION ON WEST AFRICAN PORTS

   In whichever way this turns out, the completion of this new canal would have a major impact on shipping and maritime transport globally. Geographically, both canals are in the same region with just some few miles away from each other. Some industry experts therefore argue that competition if any, would be based on pricing (tolls to be paid for crossing). But there are doubts as to whether this developments will lead to a reduction in tolls because Nicaragua would have an eventual $40 billion investment to pay off whiles Panama also would need to keep supporting its budget.

    The completion of the Nicaraguan canal would serve as an alternative and would definitely offer an option for shipping through that region. Considering the current network complexities of vessels, it would be up to shipping lines and carrier’s to decide on which of the 2 Canals to use in order to optimize available resources by lowering cost and maximizing profits. 

“Click on the  link below to read a detailed analysis of what the new Nicaragua Canal might mean for the container shipping industry. This insight has been prepared by CTI Consultancy, who specialise in Liner network optimisation, assisting Customers to further reduce operating costs   nicaragua_canal_-_a_game_changer_for_container_shipping

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  • The Nicaragua canal project should not be considered
    to be driven by commercial rationale; it is a balance of military, and
    trade power and penetration of PRC as it is gaining momentum as a global
    super-power. Strategists have been forecasting that the power will be
    shifted from East to West, and this is what is really happening.
    Following facts about this canal can be perceived: a) The canal provides
    shorter connection between American Eastern and Western Coasts; this is
    supported by the shipping industry as cited in some interviews b) it
    provides a great opportunity for investment of Chinese wealth in a money
    and strategic infrastructure project that will boost GNP of China and
    GDP of Nicaragua c) it provides a good basis for political penetration
    of Chinese in Latin American states, many of whom are inclined to
    anti-imperialistic causes and communism or socialism d) it can balance
    the implicit and explicit interventions of US in Persian Gulf and Indian
    Ocean and specifically in Energy chokepoints such as Hormuz Strait and
    Malacca Strait. e) It may be used as a passage to facilitate attendance
    of PLA Navy in Atlantic Ocean as well as Pacific and Indian Oceans, as a
    counterbalance to NATO and US Navy in the Eastern Oceans and seas f)
    Chinese project is secured by reliance on the fact that China is among
    the greatest esporters to US, but also one of greatest buyers of
    Trillions of Dollars of US Government bonds g) it also alleviates
    Chinese penetration in markets, maritime and/or naval realms in
    comparison with such competitors as India, Japan, and South Korea.

    HKND has depicted a 5-yr project horizon and has also handed out her
    economic justifications in her website (bit.ly/1AS5pbH). However,if such
    projects were purely driven by commercial interests, Frenchs and
    Americans would have never risked to spend more than 3 decades in one of
    greatest commercial failures to construct Panama canal in the advent of
    20th century, and they did not care so much to keep their control on
    it. It is obvious that Geo-strategy always counts…

    Construction of Panama canal was an ambitious, industrious and effective
    project that changed the history of the world. It is a great
    achievement in the history of the world. So is the Nicaragua canal
    project.

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