Caribbean & Central America - October 2026

Ilya Espino de Marotta has taken over as administrator of the Panama Canal Authority (ACP) at a time when the Canal is facing myriad challenges, mitigated in the short-term by increased revenues due to high transit prices.

Espino de Marotta took up her post on 7 September, becoming the first woman to hold the position after previously serving as chief sustainability officer and deputy administrator during a four-decade career at the ACP. She took over from Ricaurte Vásquez Morales and will serve until 2033. She will be in charge of implementing the 2025-2035 strategic roadmap, which aims “to ensure water security, strengthen the reliability and resilience of Canal operations, diversify its services, and consolidate Panama’s position as a global logistics, maritime, and energy hub,” according to an ACP press release.

Reliability and resilience refer to ongoing concerns around the future viability of the Canal after prolonged periods of drought have led to repeated transit restrictions in recent years. One way that the ACP is attempting to do that is by securing more water supplies by building a new reservoir on the Río Indio basin. During her inaugural speech, Espino de Marotta called the reservoir “the most important project” in the country, and identified water supplies as the most significant issue facing the Canal and Panama more widely. “The biggest challenge we are facing today is securing future water supplies for more than 2m Panamanians, the functioning of the Canal, and the most important economic and commercial activities of the country,” she said.

As well as working to increase water availability, the ACP is also trying to drive down water use by building an energy corridor, which will allow the movement of liquified petroleum gas (LPG) and other products through pipelines, rather than by ship, as well as by building new port terminals at either end of the Canal to facilitate transfers. The aim is to maintain the Canal zone’s strategic position in interoceanic trade while reducing its exposure to changing weather patterns.

While the strategy appears sound, these projects will require billions of dollars in investment and take many years to come online, at a time when climate change is intensifying and its effects are becoming increasingly apparent. From May-August rainfall in the Canal watershed was 34% lower than average, and the ACP already announced tightening restrictions from an average of 35 daily transits as of 30 June FY2026, to 32 in September. On 28 September it announced that the cap would be raised to 33 from 15 October. However, risks remain as forecasts suggest that the El Niño climate phenomenon, which is associated with drought conditions in Panama, is expected to be particularly strong this year. The US National Oceanic and Atmospheric Administration (Noaa) is predicting a more than 90% probability that El Niño will reach a very high intensity during the northern hemisphere’s fall and winter 2026-2027, likely intensifying the annual reduction in water levels at the lakes during the December-April dry season and increasing the likelihood that stricter restrictions will be reimposed as water levels in the lakes that feed the Canal locks diminish. 

Nonetheless, demand for Canal transits is high, as conflict in the Middle East disrupts shipping routes in the region. This has pushed up prices, providing something of a windfall for the Canal, and by extension the Panamanian government. Toll revenue from the Canal was up by 13.6% in the first six months of 2026 compared with the same period in 2025, according to figures from Panama’s comptroller general’s office published on 16 September. If this disruption persists, it will give the Canal some breathing room to implement its infrastructure plans, both in terms of time and by boosting income. 

However, there are other important considerations that affect the outlook for the Canal, including the effects of great power competition between the US and China for influence over the strategic waterway. President José Raúl Mulino has so far acquiesced to Washington’s demands to reduce Beijing’s perceived influence at the Canal. And in January, Panama’s supreme court struck down port concessions operated by Hong Kong-headquartered CK Hutchison Holdings, eliciting a strong response from Beijing, which has promised to punish Panama for the move. Chinese authorities have reportedly told state firms to pause talks on infrastructure investment in Panama, for example, which will make it more difficult to secure the necessary financing and execution partners.

Increased sensitivity around security at the Canal has also led to heightened military cooperation between the US and Panama, including a delivery of advanced surveillance drones worth US$6m in mid-September and the creation of a new special economic fund for the “security and protection of specific areas of the Panama Canal”, under the administration of the aeronaval service (Senan) and the supervision of the security ministry (Minseg). The fund, paid for by the ACP, is linked to a new joint command (CCSCP) announced in August. However, the fact that all information, documentation, plans and accounts linked to the execution and operations of the special fund are to remain confidential to “protect national security” has sparked concerns around transparency. The fund has been criticised by opposition deputies such as independents Betserai Richards and Luis Duke, and Grace Hernández and Ernesto Cedeño, both from Partido Movimiento Otro Camino, who could help maintain scrutiny of its activities. This increases the likelihood that questions around the fund and its role will intensify, particularly as legal questions around the mechanism by which a ministry can draw on the ACP budget have so far gone unanswered.

Even if the necessary funds can be found, there are other factors at play including the potential for protests and social unrest. For example, there are considerable hurdles to completing the planned Río Indio reservoir, including a court challenge from local families that would have to be resettled. Some sectors of Panamanian society have also shown a willingness to take to the streets to protest large development projects, such as the Cobre Panamá copper mine, which was shuttered in 2023 following mass protests. Even if these concerns around Río Indio can be resolved swiftly, the ACP doesn’t expect construction works to start until 2028 and has previously said it expects the project will take six years. As a result, the Canal won’t be adding any new water resources from this source until 2034 at the very earliest, and delays to the timeline are certainly possible. 

Looking ahead, ACP financial controller David Sedda was cited by local media in mid-September as telling  business lobby Asociación Panameña de Ejecutivos de Empresas (Apede) that El Niño may cost the Canal up to US$400m in lost revenue, with higher transit prices partially offsetting a lower number of transits. This means that financial losses may be relatively small, but Sedda has pointed out that there is a long-term risk in a growing perception that the Canal is unreliable or prohibitively expensive. “If this route becomes unstable, shippers won’t plan in the medium- or long-term to cross Panama if they know that it’s not certain that they’ll be able to transit,” he said. 

Other routes

Amid the Canal’s various challenges, alternative shipping routes, such as interoceanic corridors in other parts of Central America and Mexico, may become increasingly attractive to shippers, at least until the Canal can secure sufficient water supplies and build enough alternative infrastructure to reduce the number of transits while still moving products from coast to coast. One saving grace for Panama is that overland routes will struggle to compete with the Canal at scale, unless significant infrastructure projects such as interoceanic railways and pipelines are built in other parts of the region.