Panama Canal administrator cautious about expansion plans

Panama Canal administrator cautious about expansion plans

   Panama Canal Administrator Alberto Alem'n Zubieta said Tuesday that although he was certain the Panama Canal Authority will recommend an expansion that would double the capacity of the canal, it would be several months before the authority could accurately estimate the buildings costs or present a solid financing proposal for the project.

   Zubieta made the remarks during a conference call with business journalists after he had been unanimously reappointed as administrator by the PCA's board of directors. Zubieta was appointed to a second seven-year term overseeing canal operations.

   The cost and financing of the project to widen the canal and add new locks has generated international concern, because it could lead to rate increases for steamship lines that would significantly alter the costs of shipping freight through the canal.

   The costs of moving freight from major ports of South Asia to the U.S. East Coast via the Panama Canal is slightly lower than coming from the other direction via Egypt's Suez Canal. But rate increases could tip that balance. Yet demand for moves through the Panama Canal is increasing and the canal is now close to its maximum capacity.

   A report released this year by the Massachusetts-based research and analysis company Global Insight Inc. predicted the total costs would lead to significant rate increases, prompting concerns among shippers and carriers.

   But Zubieta, an engineer by training, cautioned that the PCA does not have solid numbers, and is carefully proceeding with an evaluation of different models for construction and financing alternatives.

   'We need to have a win-win-win situation that is good for Panama, for our customers, and for the countries that use the canal,' he said.

   Once the official proposal is presented to the board of directors, he added, there will be 'ample opportunity' for canal users to provide input and express their concerns. It would take at least seven years to complete dredging and construction before the expansion is complete.

   Zubieta noted that once a formal proposal is advanced by the PCA, it would also have to be approved by the Panamanian president and his cabinet, by the legislature, and finally in a referendum election.

   The PCA had previously authorized a rate increase on containers of $20 per TEU that is being phased in from May 2005 to May 2007.