Caribbean & Central America - December 2024

Ricaurte Vásquez, the administrator of the Panama Canal Authority (ACP), has announced that officials are evaluating plans for a gas pipeline between the Pacific and Atlantic coasts as part of plans to diversify operations beyond ship crossings.

Vásquez discussed the plans at the International Maritime Conference in Houston, US, on 12 November. “We are evaluating different options for diversification, including forms of transport such as gas pipelines, which will allow the canal to look beyond maritime transport and take advantage of its privileged geographical position in order to find alternative sources of income, he said.

This marks a turnaround for Vásquez, who said that he would prioritise ship transfers when he took over as ACP administrator in 2019. He decided against pursuing projects such as a container port and logistics centre which had been considered previously. It comes amid mounting concerns over the future viability of the canal as water availability has decreased due to prolonged drought linked to climate change. This has led to increasingly severe restrictions on the number of ships that can pass through the canal, leading some shippers to seek alternative routes. In his speech, Vásquez underlined that canal operations depend on rainfall. “We don’t control that and that’s why we see an opportunity to diversify our operations and serve the shipping industry in a different way,” he said. A gas pipeline would allow the fuel to move along the canal route without being on board a ship, which would reduce this reliance on rainfall.

The ACP is also looking into other solutions to secure future operations, including reviving plans to dam the Rio Indio and create a new reservoir that would feed the locks on the canal. The project is controversial due to its potential environmental and social impacts, but it would appear to be a key piece of the puzzle in maintaining operating levels at the canal, which is a major contributor to the Panamanian economy. On 25 October the ACP reported total revenues of US$4.99bn for fiscal year (FY) 2024 (October 2023-September 2024), up 1% on FY 2023, despite the severe drought. However, climate change is expected to intensify and continued restrictions on crossings by the largest ships, which fell 21% in FY 2024 compared to the year before, would encourage shippers to seek alternative routes.

These issues have encouraged other countries in the region to build their own routes. Mexico is pouring resources into the interoceanic corridor of the Isthmus of Tehuantepec, an isthmus with the shortest overland distance between the Pacific Ocean and the Gulf of Mexico, and Honduras is seeking investment to build its own coast-to-coast railway.

Nicaragua’s Gran Canal plans

On 18 November, Nicaragua revived plans for its own canal at the XVII China-Latin America and the Caribbean Business Summit in Managua. Although a concession granted to a Chinese businessman in 2014 was cancelled earlier this year, this latest plan comes amid increasing investment from Beijing after the two nations formalised relations in 2021. The new proposal should be taken more seriously than the last, particularly as a contract for the construction of a deep water port in Bluefields, which would sit at the Atlantic end of the proposed route, was signed with Chinese firm CAMC Engineering on 18 November.