Building and Rebuilding of Panama Canal. Paul Miller Shanjiang Zhu Susan Sloper. CE5212 CS5. History of the Panama Canal. Vasco Núñez de Balboa was the first European to cross the Isthmus of Panama, 1513. Village of Panama established 1519. El Camino Real built across isthmus, 1550s
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Building and Rebuilding of Panama Canal Paul Miller Shanjiang Zhu Susan Sloper CE5212 CS5
History of the Panama Canal • Vasco Núñez de Balboa was the first European to cross the Isthmus of Panama, 1513. Village of Panama established 1519. • El Camino Real built across isthmus, 1550s • Taken by pirate Henry Morgan of England, 1671, but were forced out by disease and Spaniards in 1700 • Liberal trade laws, as well as a war between Spain and Britain, then rendered Panama irrelevant for the next 150 years • Panama became part of Columbia in 1821 • Simon Bolivar convened a congress of other liberated Spanish colonies at Panama, 1826
Panama Railroad • 1849, gold found in California • Railroad built across isthmus 1847-1850, became shortest transit from US East Coast-California • New port on east end of railroad, Colon • In some spots, swamps 180 feet deep • High fares to fund construction • January 28, 1855, line officially opens Colon-Panama City • Europe-Asia trade became popular over isthmus • Wildly successful until completion of trans-continental railroad in U.S., 1869 • Critical to construction of Panama Canal
Early Canal Ideas • Ferdinand de Lesseps (FRA) proposed sea-level canal • Deadly construction attempted by French, abandoned • Contract to build canal bought by U.S. in 1899 for $40 million • Plans were modified so that the ships would be raised 26 meters (85 feet)
Construction of the Canal • Culebra Cut • Gatun Dam • Locks • Opening
Affects of the Canal • Direct Incomes of the Canal • Indirect Impacts for American Market • Income Allocation After 1977 Treaty • Economy of two Panamas • Sustainable development of the Canal
Total Cost for the Canal • 40 Million for Compagnie Universelle • 10 Million for Republic of Panama • 250,000 Annual Stipulation • $397 Million of Total Investment
Direct income from the Canal • $1.20/Ton of Earning Capacity, or $0.90/Ton of Cargo
Rate of Return for Toll • 1924, A rate of return of 3.58 percent • US Treasury bonds---4.09 percent • Railroad---4.85 percent • Opportunity Cost---Negative!
Direct Saving due to Travel Time Saving • Import and Export Saving • East US-West S. America $4,722,420 • Coastwise Shipping Saving • East US-West US $32,780,675 • Total Saving all water $45,016,426 • Compared to Rail $121,107,327 • 50%by Rail and 60% from New Orleans $69million
Indirect Saving • Expansion of Market • Use Gravity Model • Use 1912 as basic year to predict 1924 • $864million due to the Canal, 0.99 Percent GNP in 1924 • Pro-competitive Saving • 1915, railroads petitioned the ICC to lower freight rate for coast-to-coast hauling • 0.87-0.01GDP
Revenue after 1977 Treaty • Relative importance of Panama Canal reduces. • Two-thirds of the tonnage transiting the canal had either a U.S. origin or destination.
Economic Impact for Panamanian • Canal Zone • 1760 km^2 • Population 21,000(1950)-153,000(153000) • Republic of Panama • 72000 km^2 • 75% Gross Internal Revenue from service sector, 10% from industry,15% from agriculture • Cattle and Horses---1.5 billion in 1980 • Forested Land 93%---38(1970) • 37% population in poverty, or 64% in countryside
For the Future Sustainable Development?
Future of the Panama Canal • Threats to the Canal • Water supply • Increased ship size and # traveling • Search for alternatives • Problems?
Canal’s water is supplied from Lake Gatun • The canal’s operation of locks requires a continuous supply of water to operate Source:worldatlas.com
The destruction of the Central American Rainforest is reducing Panama’s water supply • The health of Gatun Lake depends on the health of the surrounding watershed forest • In the past few decades, ½ of the forest has been lost to over-logging & slash/burn agriculture
Each ship that goes through the canal requires 52 million gallons of freshwater from Gatun Lake • Reservoir also serves as a water source for many people of Panama • With a rapidly growing population and an increasing # of canal transits, there is an increased demand on the reservoir • 1990-1991- a drought prevented the usual # of ships from passing because of insufficient water • Less than 30 ships were allowed, normally there are 40 ships on a busy day
Modern shipping has increased the size of ships • Oil supertankers- nearly 50 ft. too wide to fit inside the locks of the canal • “post-panamax” • Increased size means increased tonnage
Canal is also approaching its daily transit capacity limit • Current canal capacity constraint of about 47 transits per day and 17,000 per year is expected to be reached by 2012
Proposed Alternatives • Expansion of the canal • Nicaragua • Mexico
Expansion of the Panama Canal • Autoridad del Canal de Panama (ACP) –panama canal authority– proposed the construction of a 3rd set of larger locks • Deemed essential by the ACP in order to remain competitive and foster continuing economic growth for Panama
With expansion- commercial growth of canal is projected to increase 400% between 1990 and 2060 • Problem: Lake Gatun does not have sufficient water to supply an expanded canal • Solution: construct a new dam on the Indio River
Effects of expansion • Estimated that at least 3500 people living in the region-mostly poor farmers will have to be relocated as their lands will be flooded by the new dam
Opposition- rural peasants organization, La Coordinadora Campesina Contra Las Embalses (CCCE) is opposing any construction of new dam in watershed • Claim never to have seen any benefits from the current canal
Projections for expansion range from $2 billion to $12 billion USD Panama’s population- 3 million and annual GDP is $12 billion USD QUESTION: Should the people of Panama be solely responsible for financing the canal expansion? If so, how will they pay for it? Investment opportunities for International Business? Cost
Other Alternatives • Nicaragua • wet and dry canal • Mexico • Isthmus of Tehuantepec Railroad
Nicaragua • 4 proposals • 2 dry canals • Eco-canal • Grand Canal
Dry Canal • High speed railways designed to carry containers from deep water ports at either end • Double decker trains up to 23 km long • Difference is in the cost- 1.4 billion v. 2.6 billion
Eco-canal • Priced at $50 million • Low-impact use of San Juan River and Lake Nicaragua • Instead of traditional locks, air-powered moveable dams would be used to assist cargo barges to pass through rapids • Has approval of Nicaragua’s congress, but has struggled to raise $4 million for the feasability study
Grand Canal • This proposal is very extensive and expensive • Canal would be 172.8 miles long and would follow the San Juan River • Proposed by a public private partnership called the Grand Canal Foundation • Would create jobs and be wide and deep enough to handle the “post-panamax” container ships
Issue of Cost • QUESTION: Would would truly reap the profits from the megaprojects, and who would suffer? • Many are skeptical about the proposals, they wonder who will benefits. • They often see it as a foreign benefit
MEXICO • Isthmus of Tehuantepec • Shortest distance between the Gulf of Mexico and the Pacific Ocean • Considered a favorable route for an interoceanic canal and since the 19th Century for an interoceanic railway • Benefits from its proximity to the axis of International trade
James B. Eads • Proposed to construct a quadruple track ship-railway in the 1800’s
Issues/concerns with proposals • Cost • Economic winners and losers • Environmental concerns • Many of proposals are located in the heart of tropical jungles and forests • Biodiversity
QUESTIONS: • What are the benefits brought by the Panama Canal for the U.S. How does the Canal influence the life of a Panamanian? • How much political influence did the U.S. yield in Central America while controlling the Panama Canal? • Should alternatives be looked at for a new canal? If so, is it possible to ensure that the problems that have faced the Panama Canal do not occur in a new canal?