BY JOACHIM BAMRUD
Nearly 30 years have passed since president Jimmy Carter signed a historic treaty with Panamanian strongman, Gen. Omar Torrijos to hand over the Panama Canal. As the Carter-Torrijos Treaty called for, the United States handed over the 50-mile long waterway to Panama in 1999. Last month, the canal made history again after a majority of Panamanians voted in favor of a $5.2 billion expansion plan.
Neither the treaty nor the new expansion program are without controversy, albeit for different reasons, as Robert McMillan shows in his new book, Global Passage. The former chairman of the Panama Canal Commission has written a balanced overview of the arguments for and against the treaty and handover as well as a powerful statement in favor of the current expansion plans.
But McMillan has also managed to include more than canal technicalities in his book, which is full of anecdotes and colorful insight about everything from the conflict between strongman General Manuel Noriega (deposed by a 1989 U.S. invasion) and the U.S. canal executives to his own conflicts with the U.S. State and Defense Departments and his dealings with prominent Panamanian businessmen, politicians and diplomats.
While the treaty and the subsequent handover are now part of past history, the expansion plan is still very much current. The expansion starts next year and is scheduled to end in 2014, a century after the canal opened. The expansion will enable the canal to handle ships that currently are too big to pass, so called post-Panamax ships.
The new plans call for the construction of two lock facilities (one on the Atlantic side and another on the Pacific side), the excavation of new access channels to the new locks, the widening and deepening of existing navigational channels and the elevation of Gatun Lake’s maximum operating level. More than half of the expenses for the expansion - $2.9 billion - will come from a gradual increase in tolls, while the remaining $2.3 billion will come from what the Panama Canal Authority (ACP) calls "temporary" external financing.
The expansion, especially the cost, has been criticized by former canal administrator Fernando Manfredo, among others. However, McMillan has no doubts. "There is little doubt in my mind that the enlargement of the Panama Canal will benefit the entire global economy," he writes. "Panama and the world are ready for an expanded Canal."
In fact, plans to expand the waterway are not new, McMillan points out. As far back as 1936 the U.S. Congress passed a resolution to expand the canal's capacity. Construction started in 1940, but had to be abandoned with the outbreak of World War II. More recently, a tripartite commission of Panama, the United States and Japan also recommended expanding the canal, but its cost estimates were deemed too high. Even today's estimate is not without risk, as McMillan himself points out.
So why does the canal matter? Because it still is a major route for world commerce. Almost 14 percent of U.S. ocean commerce passes the canal and traffic is growing as a result of the boom in U.S.-China trade. However, also other countries are increasingly using the waterway to reach U.S. consumers. That's the case with Chile, which uses the canal for 87 percent of its ocean commerce, McMillan points out.
"For the United States, disruption of the Canal would mean not just dislocation of jobs," he writes. "Higher costs for consumer products would be another consequence in many regions of the country."
McMillan also touches on China's growing role in the canal. In addition to a Chinese company operating the ports on each side of the canal, China may play a key role in the financing for the expansion, he predicts. In fact, he favors such a scenario. "Ideally, the countries most dependent on the canal should be involved in financing," McMillan writes. "That means the United States, China, Japan, Canada and Chile."
TRIBUTE TO PANAMA
But more anything the book is a tribute to Panama and the Panamanians who have run the canal since the handover, and even before then. "Panama has succeeded far beyond my imagination," he writes in the preface. "Canal management, under Panamanian control, has run a very efficient and well-maintained Canal."
The facts and figures bear him out. Net income for the fiscal year 2005 (ending September 20, 2005) reached $483.9 million, an increase of 27.2 percent from the previous fiscal year.
"Now it is up to Panama to complete the transformation of the Canal," McMillan writes.
The former canal chairman has written a book rich in interesting content in a style that is well-written and easy to read. With Christmas around the corner, we recommend this as a perfect gift for friends, family and business contacts interested in Panama and its canal.
Joachim Bamrud, editor-in-chief of Latin Business Chronicle, was a Panama correspondent for Reuters and UPI in the early 1990s and is the author of Panama Jack, a spy novel set around the Panama Canal.
Robert R. McMillan
Transformation of Panama and the Panama Canal