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.
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.
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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