Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

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Visiting the Panama Canal

by Shannon K. O'Neil
January 29, 2014

Panama Canal Panama Canal

Last week I was in Panama, and had the good fortune of visiting the Canal. In its Centennial year, it is a truly impressive feat of engineering, some forty-eight miles long, rising and falling some eighty-five vertical feet (roughly eight stories) overall through three lock systems and six different chambers. Its storied construction is captured eloquently in David McCullough’s The Path Between the Seas—a great read for those interested in this piece of history.

The Canal has been a huge source of growth for Panama. Upwards of 13,000 to 14,000 ships go through the locks each year, paying, on average roughly $250,000 for passage (which they wire to the Canal a couple days before entering the line). This direct influx on money (netting the federal government some $6 million a day) is complemented by a huge supporting transportation and logistics service sector that, combined, have helped Panama grow an average of almost 7 percent a year since it gained control of the passageway in 1999—faster than any other Latin American country during this time period.

Still, while the country as a whole has gotten richer, not everyone has benefited. Panama’s middle class remains small and inequality high. The sleek skyscrapers that fill the cityscape sit alongside neglected cinder-block apartments. And outside of Panama City’s metropolitan area (where just over one third of the country’s population lives), almost 70 percent of the population lives in poverty (as measured by ECLAC). In fact, Panama’s richest 20 percent of the population control over 60 percent of the nation’s income—a disparity that rivals neighboring countries such as the Dominican Republic and Honduras.

With an expanded Canal set to open in 2015 commerce will only increase; many expect the Canal to double its capacity by 2025. While bringing in even greater revenues, as well as likely investment, this growth will further tax Panama’s already overburdened infrastructure, including bridges, roads, and even sewer systems. The challenge will be to make its economic growth sustainable and inclusive, finding more ways for average Panamanians, and especially those in areas far away from the Canal, to share in the benefits from their country’s continuing economic boom.

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  • Posted by theCardinal

    What is remarkable and unexpected is not just how smooth the transition went from US to Panama but how Panama has capitalized on its ownership. It is after all the Authority that turned the Canal into a profit making venture that has sustained and transformed the nation. True, many challenges remain but with continued professional administration the Canal should continue to prosper. The question remains whether the political leadership of the country can make the most out of it.

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