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Panama Canal, the Backbone of Trade

The Panama Canal, the Backbone of Trade

The Panama Canal is the backbone of global trade, but due to the recent drought, a large number of commercial ships are waiting to pass through the canal due to low water levels. This situation raises questions about whether an alternative trade route between the Atlantic and Pacific oceans is needed.

Traffic Jam in Panama Canal

There is currently a massive traffic jam in the Panama Canal. According to some estimates, more than 200 large merchant ships await the green signal to pass through. The containers loaded on these ships contain furniture, foodstuffs, construction materials, and other goods. Some of the containers contain oil and gas, while others contain grain and commodities. All these ships are waiting to cross the world’s most famous barrier to the famous sea route used for commercial purposes, an important part of global shipping. The gateway is the Panama Canal.

Season change

August is usually a rainy month in Panama, the weather changes here, but today, on the contrary, there is an unexpected drought, which has reduced the water level in the two large reservoirs that supply water to this artificial canal. As a result, operators managing this trade route have had to limit the size and number of ships that pass through.

Markets Around the World

The goods loaded on ships stuck here have to reach different markets around the world and these markets cannot wait for long. An estimated $270 billion worth of trade passes through the Panama Canal annually to more than 170 countries. Given the current situation and to avoid delays, some ships have already chosen to take other and longer routes. Michelle Weiss Boeckman, senior analyst at Lloyds List Intelligence, a global maritime trade company, says the situation is “unusual and cause for concern,” adding that it could significantly increase the costs of freight trade. which may potentially affect “end users”.

Panama Lake
A backlog of vessels awaits passage through the canal after authorities announced restrictions this year. On Thursday, those restrictions were extended by at least 10 months.Read More

Another trade Route

This is happening at a time when there is a resurgence of ideas that it would be better if there was another trade route between the Pacific and the Atlantic. In the early 1900s, the United States had two options in this regard: one was to build the Panama Canal and the other was to build a canal in Nicaragua. However, the US Senate made the easy choice of building the Panama Canal because, firstly, the route was short and secondly, unlike Nicaragua, there was no chain of active volcanoes.

Nicaragua Canal

But despite this, the idea of ​​the Nicaragua Canal still resonates in the minds. Just over a decade ago, a Chinese businessman announced that he would embark on a massive project aimed at building such a canal. Despite this announcement with much fanfare, the project never materialized. But now the drought that has badly affected the Panama Canal has some re-examining whether a second canal in Nicaragua or alternative routes through other nearby Central American countries might not be such a bad idea.

Distance Problem

“It’s technically possible,” says Jean-Paul Rodriguez of Hofstra University, who has studied the long history of past debates surrounding the construction of the Nicaraguan Canal. But they have many obstacles. “The big problem is that the distance in the plan is much longer than the Panama Canal,” he says.

Two Canals connecting Lake Nicaragua

Any such alternative route would likely require the construction of two canals connecting Lake Nicaragua to the Pacific Ocean in the west and the Atlantic Ocean in the east. One of these canals will be about 25 km long and the other, which will be connected to the Atlantic Ocean, will be about 100 km long. On the other hand, the current Panama Canal has a total length of 80 km. Estimates of how much it would cost to build the Nicaragua Canal vary, but according to Rodriguez, it would take at least 40 million in the bank account for any country or individual to do so. The amount should be more than a billion dollars. This is almost double the cost of London’s new cross-railway, which transports around 200 million passengers to their destinations each year.

Nicaragua Canal project

Rodriguez added that investors interested in the Nicaragua Canal project will not only need a large investment but also ensure that a large number of ships use the route as it is a transit route for ships. Fees will be the source of income for the owners of the new canal project. Even if all these things are guaranteed, there are still environmental consequences associated with such a large project.

Pollution of freshwater in Lake Nicaragua

In the past, opponents of this project have raised issues such as the destruction of rainforests and wetlands, and the pollution of freshwater in Lake Nicaragua. Despite these obstacles, some people have tried to carry out this project. In 2013, a Chinese firm called HKND signed an agreement with the Nicaraguan government that gave the company 50 years of total rights to build the canal, renewable for another 50 years.  However, this could not go ahead.

Sarah McCall Harris

HKND finally closed its office in Hong Kong in 2018. Attempts by the BBC to contact the firm were also unsuccessful, and the company’s website is no longer active. Sarah McCall Harris, while affiliated with the University of Denver, wrote a research paper on this on behalf of local communities in Nicaragua. Resistance to the project was written in detail. Opponents of the project were led by local women, she says. She wrote that some residents were concerned that the entire project lacked transparency and environmental protection. These concerns were dismissed by ‘HKND’ at the time.

As sea levels around the Panama Canal shrink due to climate change, ships must part load to navigate the vital waterway one of the world’s most potent symbols of global trade. Read More

Nicaraguan Region was Truly Committed to the Project

McCall Harris now works for Centenary College of Louisiana. Today, she also questions whether the Nicaraguan region was truly committed to the project. By including a Chinese company in the project, the Nicaraguan government at the time may have wanted to show the United States that it could build other partners, she says. Although work on the project appears to have stalled, Nicaraguan officials insist the project is far from over. During a visit to Belarus in May this year, Nicaragua’s foreign minister claimed that the project was still underway and hinted that Belarus might be involved in some way. In response to this offer, Belarus has expressed interest in providing machinery to be used in the construction of the project, but to date, no such action has been taken.

Absolutely Pointless Project

Regarding the Nicaragua Canal, Bockman believes that the project is “absolutely pointless”. Because there has been little progress on the project over the years. This means that there is no alternative to Panama. It is worth noting that the current Panama Canal is an extraordinary feat of engineering.

Incredibly Unusual

Julian Boomer, a professor of civil engineering at Imperial College London in the UK, says it’s incredibly unusual because when ships pass through narrow spaces there are inches of space left on either side of them. And this is demonstrate by the dozens of cargo ships that pass through here every day. But due to the prevailing drought. The number of ships passing through each set of locks on the canal has been reduce from 23 to 16. This engineering masterpiece has large devices that allow the ships. To travel up and then down. where at the top the ships are floating about 26 meters above sea level.


According to Bockman, waiting for ships to pass through the Panama Canal is actually quite common. According to data from SeaSearcher.com. 149 ships were station here on August 22 last year. And were waiting for their turn to pass. However, the number of ships waiting to depart on the same date this year was 201.

Building a New Reservoir

Panama Canal operators say that under normal conditions, 90 ships can line up for transit at a time. Operators’ own calculations and report figures regarding current traffic jams difference. The canal’s managers have already suggest. That they may need to accelerate plans to dig a third reservoir. To ensure water supply to the canal in the coming years. That could be a solution. And Boomer notes that, despite all his big plans. Building a new reservoir would be more expansive than building a whole new canal.

Gatton Lake were Completely Drain

Maintaining water resources for the Panama Canal. In general, is very important because reservoirs also use for drinking water in the area. For example, if Gatton Lake completely drain, it would take several years to refill it, Boomer says. In the past, proposals have made to build tributaries. There is other schemes that could compete with the Panama Canal in the coming years. Take Mexico’s plan for a land bridge. The project is a massive system of railways highways and pipelines. That connect the west coast of the country with the east coast. The Mexican government first announced the beginning of planning for the project in 1975. Despite opposition from local people. And it recently prioritized for reinvestment.

Underground Maglev Railway

There is also a proposal to build an underground maglev railway to transport containers in Colombia. The situation at the Panama Canal this summer has sparked renewed interest in alternatives to the strategically important waterway. However, Rodrigues says that once the drought conditions facing the Panama Canal end. And more rains return to normal. The idea of ​​an alternate likely lost again.

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