The Panama Canal and Its Expansion - Research Paper Example

? The Panama Canal And Its Expansion The Panama Canal And Its Expansion Panama Canal is a canal that connects ships between the pacific and Atlantic ocean through the Caribbean Sea. It is a canal that is 77.1 kilometers. The canal runs through the isthmus in panama, and it is mostly used to promote the maritime trade internationally. At the ends of each canal, there are locks that are used to lift the ships to Lake Gatun hence reducing the workload to connect to the sea level. The locks are currently 33.5 meters even though there is a proposal to construct larger ones (ACP, 2009). Panama canal was before under the Colombian management, then came the French and America before the panamian management took over in 1999. The canal had been faced by various challenges including ships traffic jam as the number rose from 1,000 in 1914 when it was opened to 14,702 in 2008. By the year 2008, more than 815,000 ships had used the panama canal most of them bigger than the initial plans that had been made (ACP, 2009). Panamax is the biggest ships that travel through the canal at the present time. The canal was named by the American society of civil engineers as among the seven worlds wonders. Due to the increased rate of international maritime trade, increase in volumes in trade and levels of containerization, there has been a keener plan of investment of more funds in canals and the ports by the shipping lines in order to curb the growing rate of demand and needs. Since the Panama Canal does not have the capacity to accommodate all this pressure, it has been faced by several issues mostly relating to traffic congestion of the ships. The canal is known to hold a great record in the maritime trade but at the same time it has been known to lose its market shares to Suez canal,which is another route used in the same type of trade, and this is because the panama canal cannot accommodate ships more than 5,000 TEUs. The canal has also been hit by several problems,which include: a decrease in demand of transit, an old model and structure of the canal, the saturation point is reached early, lack of potential to redirect traffic congestion to other potential alternatives with longer routes, their development is unsustainable and also their level of trade in the maritime industry has been low. These problems led to the proposal for the expansion of the panama canal by the panama canal authority as it was the best solution for the business of shipping,rather than ignoring,so that,by 2014, the capacity would be doubled allowing more ships to pass through the canal. The components that make up the programme of the expansion of the Panama Canal include: 1. Widening and making the Atlantic entrance deep. 2. Construction of the panama locks of the Atlantic post. 3. Increasing the working conditions of Lake Gatum to a maximum level. 4. Widening and making the steering channels of Culebra Cut and Lake Gatun deep. 5. Digging up the access channel of the post panamax locks. 6. Constructing locks on the pacific post panamax. 7. Widening and making the entrance of the pacific deep. Panama canal expansion will double its capacity come 2014 as it will allow larger ships to pass through. The plan for the canal expansion was presented on 24th April, 2006 by martin torrijos who was then the president of panama. The proposal was approved by the citizens of panama through a national referendum that was carried out in October 2006, and it was voted in by 76.8% of the population (ACP, 2009). The citizens of panama approved the expansion of the canal as it would allow larger vessels to transit and increase the level of maritime trade. The project has started to be executed by the Panama Canal authority, and it will take at least eight years to be fully implemented as they are following a well illustrated plan and it will cost them 5.25 billion US dollars. As much as this project is of much assistance to the citizens and the republic of panama, there will be a direct benefit to the maritime industry internationally through decreased costs in shipping and the improved efficiency and carrying capacity will also benefit consumers globally. After the approval of the canal expansion by the referendum, the national assembly and the government’s cabinet, the project kicked off. Martin torrijos, who was then panamas president ensured his citizens that the canal expansion would generate enough revenue to make them wealthy enough to change panama to a developed nation. The projects other objective is to lower the poverty levels by 30%, which results to an 8% rate of poverty in panama onwards (Knight, 2008). The expansion of the canal will also benefit the neighboring countries as it will increase the demand for ports along the eastern seaboard of the US hence making it possible to accommodate the post panamax ships as from January of 2012 even though there is consideration of renovations of the ports on the route from Miami to new York. The renovations that are being considered include: blasting of the rocks, deep drilling and raising the bridge except for Virginia and Norfolk as they can accommodate the larger vessels. Liverpool port in the UK is under extreme expansion in order accommodate the post panamax ships, and it may also be through by 2014. Panama Canal expansion and its benefits The expansion of the Panama Canal will lead to certain benefits which may include,a decrease in the bottleneck cases, a decrease in the number of transit due to an increase in the capacity of the cargo and the post panamax ships will be allowed to pass through the canal. The widening, digging out and deepening the channels that was proposed in the expansion project will increase the number of ships to 42 everyday, which at some point may be raised to 51 ships daily come 2020. When the Gaillard cut is widened, the movement fleet increases to 100units from 80 units, and an increase in the number of robust tugs there will be a great drop in timing of canal waters (Knight, 2008). Figure 1, showing the Dam that was developed into a canal (Knight, 2008). The expansion of the panama canal will also lead to an increase in the number of travels made daily through the canal there will be a possibility of an increase in speed of the vessels using the canal and there will be an increase in the  tones number transported hence increasing the source of revenue for the country. As the cost of efficiency of Panama Canal is low, shippers and traders worldwide would prefer transporting their product using the large vessels by the Panama Canal to the other Cape Horn or Suez Canal,which may not be efficient. The expansion of Panama Canal has led to pronounced growth in trade of cargo by 8.4% and its continued rise in demand by traders to use the route will raise the economic functions of panama. The expansion of Panama Canal will easens the access to the pacific by the Latin American citizens and at the same time draw the Atlantic closer to the Asians hence increasing the chances of promoting trade. The plan implemented in the expansion of the canal affects the exports of the US as it lowers the cost of transit and this was noted by William Eaton (Knight, 2008). The expansion of the Panama Canal also contributes to environmental conservation. For instance, helps in the reduction of the green house gas emissions in the atmosphere with proficient transport, it reduces the consumption of fuel on each cargo and low levels of emission production compared to any other means of road transport. Water quality will not be affected by the project. The project fulfills the need of maximizing the water that is used from lake gatun and lake alhajuela by improvising new technology of the locks and this does not require any new water source to support it. The expansion of the Panama Canal has lead to increased creation of employment. The employer's state that the terms of employment maybe mid or long terms jobs and this will greatly co tribute to growth of the economy as more money is generated from the canal that has been expanded leading to an increase in the cargo to be transported. Most of labor which will be required for the construction of the canal will be from the citizens of panama hence that increases the source of income for the country as most people will at least earn some salary. The Panama Canal has numerous obligations and plays an important role in the social and financial status of a country as well as it is to remain on the front list of the maritime industry inorder to maintain a steady economic growth as it makes sure that its activities adhere with the standards required to conserve the environment. The Panama Canal expansion would probably make it provide safe, cost effective, reliable time and the most proficient services for economic and trade benefits worldwide with an aim of increasing the growth of cargo supply. The Panama Canal expansion is not only having positive impacts on the economy of panama, but its effects are felt all over the world. Globally, the positive imparts are felt at a large percentage especially in the economic sector. Lots of profits are being generated due to an increased number of cargos being transported in the larger vessels hence boosting the revenue of many countries in the world. Due to the increase in the number of cargo being transported through the canal, the trade, infrastructure along the port and logistics worldwide is to prepare for a raise in cargo for transportation. A good example is the 13 ports found in the US which have recorded 8.57 billion US dollars for the improvement of the terminal and deepening of the channels, something that should be implemented in five years to come (Bingham, 2012) There is a possibility that ports should be familiar to any changes that come about in order to be competitive and maintain some of their present customers in the shipping market. Companies from Asia can transport their cargo via the canal but offload from the ports along the gulf of mexico. The canal expansion has greatly benefited a few of Latin Americans countries than others.Countries like Peru, Ecuador and Chile benefit a lot (Bingham, 2012). It is believed that the authority in Panama Canal may significantly increase their tariffs on completion of the canal. The assumed rise in tariffs may be overshadowed by companies savings that they would have generated from conservation of fuel and large profits from the increased number of cargoes from the larger vessels used for transportation. For companies to preserve their fuel, they may take on reducing the speed of the ships by steaming low. The reduction in speed in the shipping may make the producers and suppliers maintain a large inventory, which will in turn increase the storage space and demand for warehouse by ports. Figure 2 showing the outcome of Panama Canal outcomes (Bingham, 2012) Panama canal expansion is a project which involves sacyr vallehermoso, a company based in Spain and constructora urbana, a company in panama, will permit vessels which can accommodate three times the weight of cargo to pass through it compared to the vessels passing through the current panama canal as from October 2014. Ametller serge, who is n engineer from Spain said that the expansion of the panama canal was going to be a landmark of the engineering of the century (Bingham, 2012). In order to achieve their expectation, they are spending 3.2 billion US dollars to construct two different channel outlets. One that is based in Atlantic and the other one in the pacific through which ships loaded with 12,600 containers will travel through with a length of 366m, which is a raise from the present 4,400 containers with a length of 294m of the vessels that will travel through present panama canal (Bijo, 2010). Each one of the outlets next to the ocean will have three water hollows that will be closed by locks which will be able to raise them up to 27metres between the lake and the ocean. In every two hours, the expansion will permit the ship to travel via the newly constructed locks on every side of the canal and complete it’s through way the Panama Canal for an average of 10 hours. It is so difficult to extend the canal as the dimensions may not allow that to work. The canal totally weighs 50,000tonnes which includes 16gates and 158valves and all this are being made in a factory in Venice.A ship that is 106ft by 965ft is the maximum one that can pass through the Panama Canal and in fresh waters it should be of 39.5ft of draught. This size is normally referred to as panamax, but in most cases you find smaller ships (Bijo, 2010). Figure 3 showing Panama canal expansion (Bijo, 2010) The expansion of the Panama Canal was not supported by every individual as there were others who opposed it. Some of those who were against the expansion were the suntracs, who were a workers union in the department of construction from panama. Genaro argues was the union's secretary general claimed that as much as there will be a factor of creation of employment, the liabilities that would be felt by panama while building its third block of locks would not be delayed by using the canal and that brings in the factor where most of the revenue collected from the canal will be used to pay the debt. This on the other hand reduces the contributions made by the waterways to the government of that country which in turn reduces the funding to be released for the infrastructure, education purposes, medical services and protection purposes in the police department. This group that opposes the expansion of the Panama Canal claims that there is the lack of social maturity plan to accompany the project. So most of them were against the development of this project, but torrijo,who was then the president supported the project and even requested the United Nations assistance through mediation. Panama Canal is like any other scenery feature that lures tourist to visit it as in other words is referred to as among the wonders of the world. Panama is known to be favored to have the canal in its country, a growing industry that is well known and appreciated. The amount of tones packed in a ship that goes through the canal is the one that determines the amount of money that it will be charged. So it is obviously known that, there are mere costs where the ship is big. Despite this factor, it is also determined that as a way of alternative, when one travels about South America, it is of low cost and its approximately 10% of the original cost when you use the longest route (Bijo, 2010) Some of the present news claim that in January 16th, 5,000 workers who were constructing the two locks to build a post panama for the Panama Canal expansion were on strike. The strike has been supported by workers and supervisors from both Atlantic and the pacific. The workers claim that there have been cases of abuses from the canal group consortium. This group that provoked the strike is headed by sacyr and CUSA group. The strike has affected the economy as it took like a week hence slowing down all the duties that were to be carried out. Reference ACP (Panama Canal Authority). 2001. “History of the Panama Canal: French and American Construction Efforts.” http://www.pancanal.com/eng/history/history/index.html. [Accessed November 1, 2012] “Panama Canal Expansion Threatens Some U.S Ports,” Los Angels Times-Washington Post News, December 7, 2008 Bijo, M, 2010. “Panama Canal Expansion: Cost and Benefit Analysois” Bingham, P, “Economic Outlook and Ports, “ HIS/Global Insight, February 18, 2009. How Long Can We Go?” Institutional Real Estate Letter, November 2008, Knight, Kevin. 2008. “The Implications of Panama Canal Expansion to U.S. Ports and Coastal Navigation Economic Analysis.” A White Paper Prepared by Institute for Water Resources, U.S. Army Corps of Engineers. 2006. “Proposal for the Expansion of the Panama Canal Third Set of Locks Project.” http:// www.pancanal.com/eng/plan/documentos/propuesta/acp-expansion-proposal.pdf. [Accessed November 1, 2012] 2009a. “Leaders of Multilateral Agencies and the Panama Canal Sign Agreement for $2.3 Billion to Finance the Canal Expansion Program.” Press Releases, December 9, 2008. http://www.pancanal.com/eng/pr/press-releases/2008/12/09/pr307.html. [November 1,2012] Read More