Panama Canal chief unfazed by Colombia rail competition

Panama Canal chief unfazed by Colombia rail competition

Monday, February 21 2011 @ 12:25 PM EST
Contributed by: Don Winner
Views: 78
PANAMA CITY (AFP) – The administrator of the Panama Canal dismissed the notion the key waterway could be under threat from a Chinese-backed project to build a new rail link across northern Colombia. ”I don’t see that as a competition issue,” Alberto Aleman Zubieta, the head of the Panama Canal Authority, told AFP. ”We are a very important freight shipment hub, and shipping by sea is the most efficient (method).” The Financial Times reported on Sunday that China was looking to construct a new 220-kilometre (136-mile) railway from the Pacific to a new city near Cartagena in northern Colombia. Chinese goods would be assembled for re-export throughout the Americas and raw materials would make the return journey to China, the report said. ”It’s a real proposal… and it is quite advanced,” Colombian President Juan Manuel Santos was quoted as saying in Monday’s Financial Times. ”The studies (the Chinese) have made on the costs of transporting per tonne, the cost of investment, they all work out.” China has ramped up investment and lending to the developing world, including Latin America, a strategy widely viewed as aimed partly at securing access to the raw materials needed to fuel its fast-growing economy.
Trade between China and Colombia in the first eight months of 2010 reached $4.8 billion, an increase of more than 73 percent over the same period in 2009, according to the Chinese commerce ministry. The Panama Canal — long considered an engineering marvel — was built between 1904 and 1914 by the United States after an initial French attempt failed. It was returned to Panama’s control 11 years ago. Each year, around five percent of all international trade passes through the 80-kilometer (50-mile) man-made artery linking the Atlantic to the Pacific, with around 40 ships passing through the canal each day. Last year, work began on a 5.2-billion-dollar project to enlarge the canal by constructing a third set of locks to ensure that today’s super-size container ships, cruise liners and oil tankers — many of which are too wide for the canal — will be able to navigate the waterway in the future.

Editor’s Comment: When the project to expand the Panama Canal is completed in 2014, a single ship carrying 15,000 cargo containers will be able to make the transit from the Pacific to the Atlantic in about twelve hours at a very cost efficient price. It would be physically impossible to match that feat with any kind of overland rail network at any price, much less one that could compete with the Panama Canal. The business model the Chinese are proposing might work for them – meaning, they could build it and make a profit. However the ACP administrator is absolutely correct. This project does not compete with, or in any way threaten, the fundamental business model of the Panama Canal. Every now and again someone pops up with some kind of an alternative – like going through the Northern route for instance. We haven’t heard much about that one, in the middle of one of the coldest winters in a long time, have we. Hugo Chavez likes to say they’re going to build a new canal through Nicaragua. Of course the really sane people who own the billions of dollars it would take to build such a thing don’t jump on board, precisely because it makes for a great headline, but really bad math when you do the numbers. Nope, the Panama Canal will continue to have a monopoly for a long time, and the various multi-modal overland routes won’t even take a nick at the bottom line. Case in point – just look how the entire internal overland shipping model is going to be abandoned in the United States, in large part because with an expanded Panama Canal, now the cargo container ships can go straight to Baltimore, Houston, or Tampa for example – instead of having to drop the cargo from Asia into Los Angeles and then ship it overland on trains or trucks. Why? Overland is more expensive and less efficient, that’s why.

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