Caribbean & Central America - October 2025

The Panama Canal Authority (ACP) has started the process of selecting a partner to build a planned interoceanic gas pipeline, which is a key part of a newly published 10-year plan to secure future revenue growth.

President José Raúl Mulino announced the start of the process to build the pipeline during a visit to Japan on 3 September, calling the project “a strategic bet by Panama to remain a key country in the global economy, generating development for Panamanians and ensuring the sustainability and competitiveness of the Panama Canal”.  Then on 18 September the ACP officially launched the concessionaire selection process at an event attended by representatives of more than 20 global energy companies including US firms, ExxonMobil and Shell and Japan’s Mitsubishi. The ACP said that the pre-qualification of interested parties will begin this year, while the final concessionaire selection stage is scheduled to close in the fourth quarter of 2026.

The 76km pipeline will link Panama’s Pacific and Atlantic coasts and constitute “a cornerstone of a new interoceanic energy corridor” which will also boast two sea terminals, said the ACP. It will provide an estimated 45,000 jobs during the construction phase and 11,000 when it comes online, with capacity to transport up to 2.5m barrels of fuel products per day, facilitating the movement of propane, butane, and ethane between the Gulf of Mexico and Northeast Asia. It will thereby increase the canal’s capacity without requiring additional water supplies, which have come under increasing pressure due to changing weather patterns as a result of climate change.

The energy corridor is one of the most significant infrastructure projects for the canal since the expansion of the third set of locks, which was completed in 2016, and forms part of a new revenue diversification strategy. The 10-year roadmap has two main pillars: improving water security by increasing storage capacity and achieving sustained growth for the canal through diversification. 

It envisages a total investment of over US$8bn in strategic projects such as a new reservoir on the Río Indio, which will provide drinking water for more than a million Panamanians while improving the canal’s resilience in times of drought. Other projects include container transshipment terminals, storage areas, and a new road running between the Centennial Bridge and the Atlantic Bridge along the west bank of the canal

The canal plan is “designed to reinforce its strategic role in global trade, safeguard long-term sustainability, and deliver tangible benefits to the nation,” the ACP said in a statement dated 16 September. “With this vision, the Panama Canal will evolve beyond an interoceanic passage and become a logistics hub, strengthening Panama’s competitive edge in world commerce,” it added.

These ambitious plans are a response to falling revenues at the canal, which has been affected by drought and global trade uncertainty leading to a drop in the number of vessel transits. For example, the canal’s budget for fiscal year (FY) 2026, which runs from October 2025-September 2026, forecasts revenue of US$5.21bn, down from US$5.62bn in FY 2025. According to the ACP, the 2026 budget “marks the beginning of a new period focused on strengthening the canal’s business model and protecting the long-term value of the waterway”.

It also comes at a time of increased geopolitical wrangling, with US President Donald Trump threatening to “take back” the canal earlier this year after criticising the decision by former US president Jimmy Carter (1977-1981) to cede control of the waterway to Panama as part of the 1977 Carter-Torrijos treaty. Trump has pushed Panama to roll back its recent deepening of relations with China due to concerns about the extent of Beijing’s influence over the canal, which is vital to the US economy.

One key example is pressure to force the sale of ports at either end of the canal, currently owned by Hong-Kong based firm CK Hutchison, to a US consortium led by hedge fund Blackrock, although the deal has been held up amid opposition from Beijing. This demonstrates how Panama is caught in the middle of great power competition at a time of shifting geopolitical dynamics. Some argue that this could benefit the country if it can manage to turn this competition into a wave of investments from global powers keen to exert influence over the waterway, but it also constitutes a headache for the government. 

Mulino is not only having to dedicate considerable time and energy to managing relations with the US and China, but he also having to balance their interests with domestic political concerns. For example, concerns that a new bilateral security agreement would lead to an expanded US military presence [SSR-25-05] sparked widespread protests and raised memories of the 1989 US invasion for many Panamanians. Despite these sensitivities, Mulino has so far thrown in his lot with Trump, despite China’s significant investments in the country in recent years. Chinese firms were notably absent from the roll call of companies that attended the gas pipeline tender launch. 

Capitalising on the current interest in the canal to secure investment in the pipeline and the other strategic infrastructure projects laid out in the 10-year plan seems a sensible way to build new revenue streams and secure the future of the canal in the face of a changing climate, in turn ensuring that it can continue to make hugely significant contributions to the public purse. However, Mulino’s political future will more likely depend on what Trump asks for in return, and whether these decisions are perceived to be in the interest of the majority of the Panamanian population, many of whom will be quick to protest controversial developments due to the unmet demands of the recent protests.

New slot allocation programme

On 29 September the Panama Canal Authority (ACP) announced the launch of a new slot allocation programme which allows companies to commit in six-month blocks rather than 12 months, offering more flexibility. It says that the ACP has “refined the model by adjusting the average daily slots from 4 to 3 to offer a more balanced allocation and by introducing new service attributes to attract and retain customers”. Under the changes customers can reserve their transit date and provide their vessel name up to 15 days before the transit date, among other benefits. The first six-month cycle will begin on 4 January 2026.

Slowing GDP growth

According to the latest figures from Panama’s national statistics institute (Inec) Panama’s GDP grew 3.4% in the second quarter of 2025 compared with the same quarter in 2024. This compares with growth of 5.2% in the first quarter of 2025 year-on-year, 4.8% in the fourth quarter of 2024, 2.0% in the third quarter of 2024, and 2.2% in the second. While Panama Canal operations posted a 24.1% increase in revenue from tolls, notable declines were posted in sectors such as banana exports which were down 69.1% in the second quarter year-on-year – indicative of the impact of strike action earlier this year by banana workers, as part of a general strike [EB-25-05].