Caribbean & Central America - November 2022

Despite slowing global trade due to the war in Ukraine, shipping activity in the Panama Canal increased 8.2% from January-June compared to the same period last year.

During the period 7,263 ships used the Panama Canal, of which 792 small vessels and 6,471 were large vessels. There were 5,533 Panamax vessels and 1,730 Neopanamax, the largest that the Canal can handle. The Canal brought in US$1.49bn in tolls, up from US$1.46bn during the same period last year.

Commenting on the data, Enrique Clément, president of the maritime chamber of Panama, was cited by the media as saying that cargo shipments are increasing and will grow 4-5% this fiscal year compared to last. The fiscal year runs from September-October. Canal administrator Ricaurte Vásquez said that the Canal is on course to hit its goals for the year despite reduced trade in liquid natural gas, manufactured goods and vehicles. Edgar Urrutia, president of the Panama logistics industry association (COEL) added that, combined with “excellent numbers” for cargo flights at Panama’s Tocumen airport, performance in the first half of the year has been good. “We are recovering and, despite the overall situation of the shipping industry, the Canal is very active when it comes to regional trade as well as shipments to the east coast of the US,” said Urrutia.

At the end of September, Panama’s national assembly approved the Canal’s budget for FY2023, which forecasts a record-breaking US$2.544bn in contributions to state coffers. This is up from the US$2.497bn forecast for FY2022. Contributions to the public purse are made up of a percentage of income from tolls (US$3.384bn forecast for FY2023), other maritime services (US$1.175bn), and sales of electricity (US$39.8m) and drinking water (US$35.1m), as the Canal is also an important utility provider.

In recent years the Canal has made significant efforts to maintain its position as a global logistics hub. Six years ago it opened a set of larger locks that can handle Neopanamax ships, originally thought to be those with a capacity of up to 12,600 TEU (twenty-foot equivalent unit). However in July a ship named Zephyr with a capacity of 16,285 TEU transited through the Canal, the largest to do so. This shows the growth potential of the Canal, said administrator Vásquez at the time. The Canal has also implemented a raft of measures designed to save water at a time of increasing water stress in Panama, as falling water levels can affect the ability of the largest ships to safely pass through the locks.

The outlook for the Panama Canal seems positive as it remains the fastest route between the Pacific and Atlantic Oceans. However, while plans for a Chinese-funded rival in Nicaragua have gone nowhere, the Canal could face increasing competition if Mexico can successfully execute its planned trans-oceanic corridor, which would link the Pacific and the Caribbean via a 300 km railway across the Tehuantepec isthmus. The start of operations has been delayed but the scale of the project means it could eventually rival the Panama Canal, and it is significantly closer to US seaports.

That said, the Panama Canal has demonstrated an appetite for innovation that bodes well for its future. Under President Laurentino Cortizo, Panama has also embarked on wider infrastructure spending that should allow it to continue to grow as a logistics hub while Mexico attempts to develop its railway.