One hundred years after the opening of the Panama Canal, the waterway is again the subject of a new controversy as Chinese investors seek to create an alternate path between the seas through Nicaragua.
Ironically, the original 1897 plans to construct this path between the seas were slated to go through Nicaragua, the preferred route.
But a last minute lobbying effort by those advocating the Panama route held sway in the United States Congress. Just before the vote a picture of a Nicaraguan postage stamp showing a volcano erupting persuaded members of Congress to opt for what they thought was a more stable route through Panama.
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The construction of a canal through Panama from 1904 to 1914 was not only a major engineering feat, but it was also one of the largest infrastructure investments of its time. Only the Suez Canal, opened in Egypt in 1869, was comparable.
The Panama Canal came with a $400 million price tag that also included a workforce of more than 56,000 people, the majority coming from the Caribbean, China, Spain, Greece, and Italy. More than 5,000 people succumbed to yellow fever, malaria or accidents during the canals construction.
Not only did the canal bring with it international intrigue and a legacy of U.S. interventionism in Central America, but it also represented one of the first efforts at nation-building.Panama was carved out of the South American nation, Colombia.
President Theodore Roosevelt thought that control over a Central American canal was in the strategic interests of the United States. Through some clever manipulation and support of the United States an insurrection in the Isthmus prompted the rebels to declare independence from Colombia in 1903. It is said that the U.S. drafted the nations constitution in a suite at the Waldorf Astoria hotel in New York City.
The 1903 Hay-Bunau-Varilla Treaty with Panama gave the U.S. exclusive rights over the Isthmus of Panama in exchange for $10 million.
But Panamanians never felt that the United States treated them as equals during the time that the United States remained in control of the Canal Zone. Riots in 1964 resulting in the deaths of 21 students launched a process that led to the end of U.S. control of the waterway.
By 1976, during the Presidency of Jimmy Carter, a successful treaty was negotiated with Panamanian President Omar Torrijos to transfer canal ownership to Panama. It was ratified by the U.S. Senate in 1977, abrogating the infamous Hay-Bunau-Varilla agreement, and ceding sovereignty over the Canal and its surrounding lands to Panama by 1999.
Today the Panama Canal is run by a separate authority which has proven to be a very successful business. Six percent of global commerce currently transits the waterway.
This group has undertaken an impressive expansion of the canal, including the creation of new locks, a $5.2 billion investment which will triple the volume of commerce that passes through the canal each day. Imagine 12,000 containers going from ocean to ocean on any given day. The expanded canal will be able to handle vessels that are as long as three football fields. The post-Panamax vessels are essential for carrying liquefied natural gas to Asia, something that is still impossible without the expansion.
If there is one place where the pivot to Asia is apparent it is in the daily struggle between competing Chinese firms to make sure that routes between the oceans expand.
Recently Nicaragua granted Chinese telecom tycoon Wang Jing a 50 year renewable concession to build a new canal in that country.
His Hong-Kong based HKND Group has raised concern not only in diplomatic spheres, but also among environmental groups, who consider the construction of a new canal to carry great risks to the Nicaraguan eco-system. Chinas interests in such plans despite Panamas nearcomplete expansion of its canal are based on Panamas ongoing diplomatic ties with Taiwan.
Panama is one of eleven states in Central America and the Caribbean that does not recognize the government in Beijing. At his July inauguration, Panamanian President Juan Carlos Varela had Taiwans President Ma Ying-jeou, as one of his honored guests.
But competition between the Panama waterway and a proposed passage in Nicaragua also takes on deeper political overtones as Chinese trade in the Americas continues to expand. Some estimates forecast that in 15 years, China will overtake the US to become Latin America’s largest trade partner. By 2016 Chinas trade with the region will surpass that of the European Union. Beijing based China Harbor Engineering Company is already eyeing the opportunities to expand in Panama, even though the work on the current project remains over a year away.
Nicaraguans are looking to a new canal with an eye to helping one of the regions poorest countries lift people out of poverty. At least that is the way President Daniel Ortega framed his request to the Nicaraguan Congress when he proposed the concession.
According to government estimates, a new canal would provide 400,000 new jobs, something that Nicaragua urgently needs. Many, however, feel that Ortega would be a main beneficiary of some of the contracts from the canal, stating that there was no real debate about the project before it was voted on in June. But building a canal could take more than a decade, leading opposition Congressman Eliseo Nunez of the Independent Liberal Party to call the recent announcement of the canal route “a propaganda game, a media show to continue generating false hopes of future prosperity among Nicaraguans.
Taking the longer historical view, if Nicaragua gets its canal it will be vindication that the wisdom of the engineers who, more than a century ago, preferred this route to Panama.
But with so much history and investment in Panama, the real test for the Chinese will be whether they are really willing to put their money down as a long-term investment in what is to become the Asian century. Right now, Panama is still the country to bet on for the real expansion of trade to the Pacific. You can be sure that the United States will have much to say as any future plans move forward in Nicaragua.
Johanna Mendelson Forman is a Scholar-in-Residence at the American University, School of International Service, and a Senior Advisor at the Managing Across Boundaries Program at the Stimson Center.