Investment and the Panama Canal Expansion

Seldom has a major construction project had such as wide ranging effect on investment opportunity as the Panama Canal expansion. Panama investment and the Panama Canal expansion are easy to understand. But there are wider ranging connections to investment and the Panama Canal expansion up and down the Atlantic coast of the Americas. Shipping experts expect to see substantial and permanent changes in shipping patterns and trade once the “third lane” addition of substantially larger locks and widened shipping channels is completed in 2015. Whether your interest is to invest in middle class growth in Latin America or a resurging North American economy a close look at the Panama Canal expansion will be useful.

The Panama Canal

At the beginning of the 20 th century the United States built a canal across the fifty mile wide Isthmus of Panama. It was considered the greatest construction project of its day if not of all time. The impetus behind the project was the desire of the United States to project naval power into both the Atlantic and Pacific Oceans. Thus a canal was built that would allow passage of the largest US warship as of 1914 on the eve of the First World War. The Panama Canal served its military purpose during two world wars and was run using a public utility model in between. When Panama took over the operation of the canal at the very end of 1999 it ran the canal for a profit. Today the canal pays a billion dollars a year directly into the Panama treasury and is the lynch pin of ports, container terminals, and the second largest free trade zone in the world. At the beginning of the 21 st century Panama decided to expand the canal which is where our brief fundamental analysis of investment and the Panama Canal expansion starts.

Bigger Locks, Bigger Boats, Double the Tonnage

The new locks will be 55 meters wide by 407 meters long. So called “cape size” vessels will soon be able to pass through the Isthmus of Panama and avoid the long and costly transit around Cape Horn, the southernmost point of South America. Investment and the Panama Canal expansion probably starts with considering which shippers (think Maersk Sea Land, etc.) will benefit from sending big boats through the new canal locks. Then think of East coast port investment and the Panama Canal expansion. From Newark to Buenos Aires, ports are building bigger cranes for off loading bigger ships. Channels are being dredged, roads improved, and rail connections upgraded. All of this activity falls into the general category of investment and the Panama Canal expansion.

New and Bigger Locks will Allow Larger Boats to Pass Through the Panama Canal
Panama Canal Lock courtesy - Canal Authority

Rerouting Shipments

The Colon Free Zone on the Atlantic/Caribbean end of the Panama Canal handles forty percent of shipments heading to South America. Shipping containers are offloaded, cargo redirected, and containers are reloaded to pass on to their final destinations. Investment and the Panama Canal expansion finds its home at the ports, container terminals, and business of Panama. In our article, Three Good Offshore Investment Ideas, we note that Panama and its local economy will be a direct beneficiary of the expansion. In fact, for someone interested in doing business offshore Panama is business friendly, speaks English as its second language (by law), and allows foreigners to own and operate businesses.

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