From correspondents in Panama City: An ambitious $US5.25 billion ($6.99 billion) plan to expand Panama’s famous canal is expected to win voter support in a referendum next month despite fears that costs could spiral and threaten the poor nation with bankruptcy. Polls show some two thirds of voters, hoping for a jobs bonanza, support the widening of the canal as opposition to the canal’s first major overhaul since it opened in 1914 has lost steam. The canal, which initially cost $US375 million and 25,000 lives nearly a century ago, carries four per cent of world trade on a shortcut between the Pacific and Atlantic Oceans, saving ships a long haul around South America and the dangerous Cape Horn. But many modern ships are too bulky to fit into its narrow locks, meaning Panama has to expand them or lose business to competitors like the US intermodal system of ports and cross-country rail links. The Panama Canal Authority (ACP), which runs the waterway, warns the route will become log-jammed in seven years if nothing is done. The current plan would double capacity. “The ability of the canal to compete with other routes and alternative methods of transport depends on its expansion,” President Martin Torrijos said yesterday. “The canal is important not only for Panama but also for world trade.”
Opponents say the size of the project is too risky for a poor nation like Panama. In a worst case scenario, they say, costs could skyrocket and Panama could be forced to sell the canal to stave off bankruptcy. That would not only be an economic disaster, but a blow to Panama’s nationalist pride after the United States handed over the canal to Panama in 1999.
“Costs could triple, as they have done with other megaprojects around the world, in countries that have more solid institutions,” said Miguel Antonio Bernal, a law professor at the University of Panama and prominent opponent of the plan. “If we mortgage the canal we could lose it - we’d have to privatize it,” he said.
Still, many like Panama City teacher Carlos Gonzalez argue that the risk is worth taking. “Something’s better than nothing,” he said. “We need jobs. How many jobs will a ‘no’ vote create?”
Mr Torrijos’ approval ratings have climbed to over 67 per cent in recent weeks, helped by booming economic growth of 7.9 per cent in the first half of this year. A recent poll of 1200 Panamanians showed almost 64 per cent would vote for the expansion in the October 22 referendum, up 7 points from a May survey. The poll’s margin of error was 2.9 points.
The project, due to start in 2008, would need $US2.3 billion in loans or bond issues to be paid back with the revenues from higher tolls from ships using the canal. It will create up to 7000 jobs in the construction phase and up to 40,000 indirect jobs.
Panama’s constitution grants the canal authority complete autonomy, but experts say that might not protect taxpayers from shouldering the burden in case of future financial problems. “It’s hard to believe that if the canal was having major problems the government would sit idly by and do nothing as if it were a private entity,” Jane Eddy, managing director of the Standard and Poor’s rating agency, said.
Alberto Aleman, head of the ACP, said he was confident voters will give the go ahead.
SOURCE: Don Winner @ Panama-guide.com
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Source: VIP Panama