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Alternatives Considered to Historic Panama Canal

Trade: It is near capacity and some new vessels cannot fit its narrow docks. Four countries jockey for potentially lucrative sweepstakes.

September 03, 1996|From Reuters

MEXICO CITY — The Panama Canal has served east-west shipping through the Americas for more than 80 years, but now a growing list of other countries from the region want in on the act.

Four countries--Mexico, Colombia, Honduras and Nicaragua--all say they have plans to compete alongside the historic Panama Canal, each jockeying to be first or risk losing out on the potentially lucrative sweepstakes.

The Panama Canal has neared its capacity, sometimes backing up for days, if not weeks, during maintenance, at a time when east-west container ship traffic is growing at a rate of from 5% to 8% a year.

What's more, the export-oriented "Asian tiger" economies of the Far East are now building container vessels so big that they do not fit in the Panama Canal's narrow locks.

Instead of digging another canal--a costly proposition evoking memories of workers stricken with yellow fever toiling and dying in ghastly conditions--three of the countries propose building a "dry canal."

The idea is to link Atlantic and Pacific deep-water ports with a high-speed rail line shuttling containers across the Middle American isthmus.

Only Colombia is talking about a Panama-style waterway, but because of costs and environmental damage, it is also mulling an interoceanic road and railway.

Officials at the U.S. government's Panama Canal Commission roll their eyes with bemused exasperation, writing off the proposals as so much "pie in the sky."

Still, analysts say market demand for a second canal is real and that one of the proposals might just fly.

"First you take a look at world economic growth, and then you have to figure shipping usually grows at a brisker pace," said Jack Deino, a transportation equities strategist for the Inverlat financial group in New York. "There's a lot of emphasis on exports and free trade right now."

Moreover, backers of the idea say a dry canal in Central America would provide a faster route than the Suez Canal for ships traveling between Asia and northern Europe.

"This idea is very old," said Manfred Rucker, a shipping consultant based in Mexico City. "I knew of one project in Nicaragua when I was there in 1962. Then there was another one in Costa Rica with Japanese investment. Then about 1975 or so, there was the project in Mexico."

Former Mexican President Jose Lopez Portillo, in power from 1976 to 1982, envisioned a dry canal to siphon business from the Panama Canal. Rail track was laid across the Tehuantepec isthmus between the Gulf of Mexico and Pacific Ocean ports, but the project never took off.

"They sat there and waited for people to come. They never did and they never will," said Richard Wainio, planning director with the Panama Canal Commission. "It's a pie-in-the-sky idea that everyone has rejected."

Not Mexico. Transport Minister Carlos Ruiz Sacristan said last month the government wants to rehabilitate the two existing ports and the rail line and privatize them, but admitted the proposal was expensive and far off.

The most advanced proposal on the books comes from Nicaragua, where a group of heavyweight international engineering and construction firms expects government approval to start feasibility studies this month.

The $1.4-billion project would be financed privately by a group that includes, among others, Parsons Brinckerhoff International engineers of New York, Europe Combined Terminals of the Netherlands, China Merchants Holding Ltd. of Hong Kong and Spain's state-run RENFE rail company, as well as Japanese and mainland Chinese shipping interests.

It also would allow Nicaragua to fulfill its perceived historic destiny as a canal site and finally make real the erstwhile dreams of Spanish kings and big stick-carrying Americans. Nicaragua narrowly lost out to Panama as the U.S. government's chosen location for the original canal.

If plans hold, construction would start by 1998.

"They're talking and we're doing. That's the difference," said New York-based Don M. Bosco, leader of the Canal Interoceanico de Nicaragua (CINN) consortium, referring to competing proposals. "Once we get started, we'll knock the others out of the box."

Thomas Elder of the New Orleans-based Trans-World Traders consulting firm begs to differ.

"I think I have the most well-thought-out proposal at the moment," Elder said. "I have looked into it to the point that if you're going to build a dry canal somewhere, it won't be as feasible as one in Honduras."

Environmental damage would be limited because the route already is deforested, and the port sites are ideal, he said. The Honduran government is keen to promote the project.

Critics of the notion say a dry canal effectively exists in the United States, where cargo is taken by truck or train across the North American continent.

Panama Canal Commission officials call the proposals expensive and redundant, noting that they plan to invest some $3 billion from 1997 to 2005 in capital improvements. They plan, for example, to widen the Gaillard Cut, the narrowest point in the 52-mile canal, to allow two-way traffic.

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