So what’s up with the Canal expansion?

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Panama-Canal-Expansion-e1389401264230UPDATED BELOW -  [dropcap type="circle" color="#ffffff" background="#e53b2c"]N[/dropcap]o doubt you've heard by now about the giant clusterfuck that the project to expand the Panama Canal with a huge new set of locks has become. And since we are Panama's leading experts in schadenfreude here in the Bananama Republic newsroom, let's just for the hell of it sum up what the predictions were by those who opposed the project in 2006 and how they all came through!

Critics: The design has major flaws.

Engineers had doubts about the plan to save water by using giant holding tanks to pump water in and out instead of releasing it into the ocean. The idea was, they said, a reckless and unproven scale-up from a much smaller version in Germany. Then there were doubts about how the new enormous post-panamax ships would be maneuvered in and out of the locks. And guess what? In leaked email conversations published by The Panama News, pilots and tugboat captains recently expressed serious worries about such flaws:

I did a week on the latest simulator training at the ACP before retiring this year. We had 6 senior pilots and 6 senior tug masters. I really think the tug masters were more worried about the whole lockage-maneuvering scenario(s)…than the ACP management was! Most of the pilots, including myself, had a very difficult time making safe entries into the new locks. Then you have issues about navigating across Gatun Lake…and making either entrance or egress from the new Atlantic lock. In the Dry Season with 25-30 knts of wind…a VLPP( say 1100ft by 150ft…with a deep draft of even 55ft…will still have an exposed aerial surface( total…including the 8-9 high container stack configuration)…of about 100ft ..perhaps more. So, if one takes essentially the 1000 by 100( pretty conservative numbers I feel_)…that is 100,000 sq ft of sail area. The wind of 25 kts…will produce a side-thrust force( at max of 90deg angle…a bit less at reduced angles obviously)…but at the 90deg angle.. the “side force” will amount to almost 400tons of wind pressure! Given that the projected ACP tugs will have an anticipated bollard pull/power of about 75-90 tons( ideally)…it is easy to see that 3 or perhaps even 4 tugs would barely be adequate to simply offset the vector force of wind pressure on the windward side of the vessel. I, as well as many of the other pilots at the seminar( and after the seminar!)…asked the ACP folks conducting theses exercises …if they realized that with the effects of sea-entrance currents…along with the potential of the wind pressure dynamic…if they realized that more likely a form of the very powerfull and maneuverable “rotary tugs” such as exist up in the pacific north west and in some areas of Europe…that this type of tug should be considered for the manuevering of these VLPP’s.. container vessels in particular. Of course we were told that these tugs were “too expensive”…and not deemed to be really necessary. Period.

And so on. Conclusion: What the critics said is now reality.

Critics: The project has been budgeted too low.

No, said the ACP, we will be able to finish the project within the stated budget. Well, then came the extra costs because they suddenly discovered that one set of locks sits on a major geological fault line. Then cement prices went up. And now the consortium doing the actual work says it needs an extra $1.6 billion to finish the project. Conclusion: The critics were right.

Critics: The financial projections of the ACP are bollocks.

The Canal Authority based its entire scheme to finance the project on the unproven theory that growth in transits and revenues over the years before 2006 would continue the same during the next 5 to 10 years. These projections were based exclusively on guesswork and, needless to say, things went horribly wrong. In 2008 financial markets crashed, economies tanked, trade went down, and transit growth through the Canal stagnated. Not even the ACP itself dares to mention its own projections any more, instead covering the dealings and financial details in clouds of secrecy. Conclusion: The ACP and the Torrijos government were wrong; the critics were right.

Critics: There is a serious risk of corruption.

Maybe most laughable of all were the endless statements that the expansion project was immune to corruption - bizarre claims that were actually widely taken as gospel by the business community, the AMCHAM crowd, politicians and even transparency activists such as Angelica Maytín. Panama, they said, had done a stellar job managing the prestigious Canal since it was handed over in 2000 and therefore it would be impossible that any corruption would occur, or so the logic went. The ACP was, they said, an island of transparency and good governance in an otherwise thoroughly corrupt country. Thus blinded by their faith in operators like Alemán Zubieta, they failed to notice how Ricardo Martinelli, as soon as he was elected, sent his bagman, the Colombian hoodlum Salomon Shamah, to Spain to work things out in such a way that a consortium that included the construction company of Canal chief Alemán Zubieta would win the bid for the construction of the new locks. Never mind that the main participant in the consortium, Sacyr, was on the verge of bankruptcy. The consortium won the contract with a bid that raised more than a few eyebrows because it was so ridiculously low. Even Panama's own vice-president said the project was a "disaster" and questioned the ability of Sacyr, CUSA et al to finish it. We are now supposed to believe that the demands from the consortium for an extra $1.6 billion came completely unexpected instead of what seems like a much more likely explanation: Let's all agree to bid low, secure the contract, and we'll squeeze more money out later for the benefit of all. Conclusion: The critics were right again. The aforementioned dealings would be reason for investigations in any serious country.

Critics: The expansion can't be finished at the schedule the ACP has set.

This also led to vehement denials by the ACP and other promoters of the scheme. Until it turned out that there were delays, and then more delays. And then eventually we should be lucky if the project is finished two years behind schedule. If at all. Conclusion: The critics were right.

The only thing that gives Panama a little more status in the world than other Central American backholes is the Canal. However, not even the fiercest promoter of this country can continue to maintain with a straight face that Panama is doing such a stellar job managing the waterway - that myth lasted about 10 years, and it's over. What's left is just another run-of-the-mill banana republic, with a tropical Berlusconi for president who steals millions of dollars in between attending bunga bunga parties. And that then all ties into another point the skeptics made in 2006: Panama is too small to take on such a huge project. Boy, if ever anything was true....

To top it off: The Nicaraguans will be building a competing canal. The more Panama screws up, the more likely it becomes that the Nica project will succeed.

UPDATE: Go read this piece here, by Carlos E. Rangel Martín, a retiree from the US corps of engineers. He makes a very good argument saying that the supposedly incorruptible system for contracting that the ACP has is not incorruptible at all, and debunks some myths about the ACP system  having been held as an international example for how to manage these bidding affairs - Martín reveals that to be simply false ACP propaganda.

11 thoughts on “So what’s up with the Canal expansion?

  1. This was long predicted to happen and without a crystal ball so it should come to no surprise to no one. No matter what side you choose to be on regarding this topic. And yes the pilots have been talking about this long before the latest revelations including the continuous corruption that is not even included in the expansion but in the day to day operations. Especially you guessed purchasing and contracts.

  2. The only silver lining to this is the discovery of the geologic fault; there was finally motivation to do a real geological survey of that area whose history over the last 10 million years or so is hazy and still debated. Other than that… wow.

  3. They were reckless. They KNEW that to do a clusterfuck right, they had to hire experts from Mongolia. But NOOOOO, they they gave that job to the pimps who ran Berlusconi’s bunga bunga parties. No doubt there were kickbacks involved.

    • That’s the whole point. Despite the fact that most of these large projects go over budget and schedule, the ACP and its supporters would have us believe that somehow they would be above such risks, and refused to calculate for them.

      • That too is nothing new either. It is what they always promise. Government promises, not worth the paper it is written on. So I’m not surprised. IF they manage to complete it with less than two years delay I’d be impressed. Besides, not all their claims are complete bs, the price of cement did go up 50% in 3 years, and the value of the dollar goes down 10% every year. The tugboat issue will be resolved by shipowners and insurance companies, if they deem passage unsafe than no boat will go through. And on a positive note, they didn’t lose 22.000 workers.

  4. ¿Pero es que alguien duda que a los panamonos no les da la cabeza para nada? todo lo dañan y nada de lo que hacen está bien hecho, para muestra un botón, las empresas que aprovechan la exportación de productos por el TLC con Estados Unidos son de extranjeros y sus productos son hechos con base en tecnología de otros países, asi que no te extrañe que el Canal lo mal manejen y haya corrupción, yo prefiero que los gringos lo manejen y le den las sobras a estos monos que no se merecen el crecimiento de PIB que tienen, que eso es solo eso, crecimiento porque desarrollo no hay ni habrá en esas cabezas que sin inteligencia alguna a causa de escuchar reguetón.

    • Martín Torrijos was acting as an agent of the construction, building materials, construction equipment and banking industries at the time. But the contract at hand was a low ball bid reportedly (by Spain’s El Confidencial) engineered by one Ricardo Martinelli via Salo Shamah and that’s the cause of the immediate crisis. Notice the lack of denials about El Confidencial’s reports by either Martinelli or Shamah. If El País or someone bigger in the corporate mainstream produces other information backing El Confidencial’s version, THEN we will hear a stream of vilification, part of which will be categorical denials. But what El Confidencial alleges is a president-elect’s manipulation of ACP functions that are constitutionally supposed to be kept apart from politics and there ought to be widespread indignation about that.

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