Panama has voted a resounding ‘yes’ in favor of expanding its famous canal, with approval for the $5.25 billion project at a decisive four-to-one.

Although turnout was low for yesterday’s national referendum, with only 40 per cent of voters casting the ballot, there was little opposition to the ambitious plan that would see the 92-year-old waterway upgraded and widened to accommodate today’s larger shipping vessels.

“History will mark this day as one when Panamanians made a major decision about the Panama Canal and its future, for themselves,” said an enthusiastic President Martin Torrijos, who campaigned heavily in favor of the plan.

Some 7,000 direct jobs, and another 40,000 indirect jobs will be created over the coming years, relieving the local unemployment now sitting at 9.5 per cent.

Supporters of the plan have maintained not only would the project itself create much-needed jobs, but without an overhaul, the canal would soon begin to lose trade to other shipping routes.

Construction is set to begin in 2008, and completed in 2014. The Panama Canal Authority (ACP), the autonomous government body that runs the canal, says work will not interrupt the current flow of traffic.

The expansion will double the waterway’s capacity, with a third set of locks added to loosen congestion in the busy canal and make room for the latest generation of colossal container ships.

Innovative water-saving basins will be put in place to reuse the freshwater that fills the locks, avoiding the need for dams or artificial flooding.

The Canal currently receives 14,000 vessels a year, or about five per cent of all world shipping, putting it at near-capacity. This has led to costly wait times for vessels crowding to cross the 50-mile (80-kilometer) strait between the Pacific and Atlantic oceans.

The ACP warned the canal in its existing state would reach its maximum sustainable capacity by 2012.

When first built in 1914, planners had allowed a margin for cargo ships to grow, setting the ‘Panamax’ benchmark for vessel size. In the last 20 years, however, some bulk carriers such natural gas and oil tankers, called ‘post-Panamax’, have far exceeded the width of the locks, and must rely on alternate shipping routes to deliver their cargo.

Projections showed if Panama did not move quickly to capture this new market, it could risk losing its key position in world shipping.

“Without an expansion, the Canal would face new competitors as well as permanent and irreversible changes in trade patterns in which Panama would stop being relevant as a global maritime route,” cautioned ACP officials.

Financing for the costly project will go directly to the ACP, paid for by increased tolls beginning in 2007.

Construction on the canal was originally begun in 1880 by the French under Ferdinand de Lesseps, and taken over by the United States under Theodore Roosevelt in 1904.

Considered one of the world’s most difficult engineering feats, it was formally opened in 1914, and has had an enormous impact on world trade by shortening the travel between the Atlantic and Pacific oceans.

The United States relinquished control of the canal to the Panamanian government in 1999.

Further reading :

Panama Canal Authority (Available in English and Spanish)

Latin Business Chronicle : 

• Interview with Robert McMillan , former Panama Canal Chairman and author of Global Passage
• Panama Canal Expansion Overdue

Panama Bulletin : Series of articles on the Panama Canal