The inauguration of the enlarged Panama Canal has coincided with a delicate situation affecting the world economy. Both the maritime industry and international commerce at large are suffering from a slowdown, which has been further complicated by the steep fall in the price of oil.
The latter means that shipping companies can economically choose longer routes that require more fuel than does the Panama Canal route.
Additionally, one of the Panama Canal #39, main competitors, the Suez Canal, has benefited from the delay in the inauguration of the Panamanian waterway, as well as from its ability to handle larger vessels.
The commercial ports of the western coast of the United States also represent significant competition for the Panama Canal.
Competition is already indeed heating up. The Suez Canal has, for instance, offered a 65% discount to shipping companies travelling from the eastern coast of the U.S. to Singapore and beyond, in a direct challenge to the Panama Canal.
According to Juan Carlos Croston, maritime expert at the MIT port operator in Panama, cheap fuel is one other main challenges that the enlarged Panama Canal will face in persuading shipping companies to use its route and instead of longer alternatives. “Many shipping companies are still likely to use the Cape of Good Hope route rather than the Panama Canal, given the low fuel prices"he explained.
For his part, Panama Canal administrator Jorge Quijano put on a show of optimism. He argued that, though it is true that we are sailing through difficult times, the canal is fully prepared to face them, and that better times will come.
According to the Panama Canal Authority, over 150 additional vessels have already booked passage through the enlarged canal. Today Monday, three vessels will cross the enlarged waterway. By 2017, in its first full year of operations, the canal is expected to generate some $400 million in additional revenues for the Panamanian Treasury.
Olmedo Estrada, a local economist, points to the very high expectations that the enlarged waterway has created for the national economy, in spite of the difficult economic situation of many Latin American and Asian countries. “Estimates point to a significant impact across a number of industries which are related to the canal activities: not only shipping, but also logistics, banking, insurance and transport", he predicted.
According to the president of the Panamanian Maritime Chamber, Rommel Troetsch, the enlarged canal will benefit the country through extra revenues that will be deployed in infrastructure and social projects.
“The canal enlargement will create new business opportunities: however, for those opportunities to materialize, both government and the private sector will have to work together", he explained, going on to add that “if we manage to make that happen, we will create wealth and employment”.
