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PANAMA CITY - A few hundred years ago, Panama was a malaria-infested tropical swamp of no particular interest to anyone.
But then the Spanish conquered the New World, global trade was born, and suddenly it became very significant indeed.
For the past century, the country that has the
thinnest strip of land separating the Pacific and the Atlantic oceans has been identified with the eponymous canal that revolutionised the transport of goods from one side of the world to the other.
The construction of the Panama Canal in the first years of the 20th century marked the historic moment when the United States came of age as a global power and was perhaps the most potent symbol of US hegemony over the entire American continent.
Now its symbolism, and its role in international container shipping, looks set to take on new weight as the trading systems of the past century give way to the unbridled globalisation of our own century.
The Panama Canal is in severe danger of going out of date, and the local Government has decided to do something about it.
This week, Panama embarks on an ambitious seven-year project, at an estimated cost of well over US$5 billion ($7 billion), to expand the canal so it can accommodate the very largest classes of transport ships - the so-called "post-Panamax" generation which is expected to dominate shipping within the next decade or so.
The plan is to double the width of the two sets of locks that bring the shipping traffic up above sea-level, and thence across the 77km waterway separating the two oceans.
The projections are very clear. Without the expansion, the Panama Canal will be forced to turn away an anticipated 37 per cent of the world's container ships by 2011 because they will be too big to pass through.
That, in turn, is bound to cause a severe downturn in business as companies consider other routes, up to and including navigating the world in the other direction and taking advantage of the much larger Suez Canal instead.
Construction is booming in Panama City in anticipation of an influx of Americans, Canadians and Spaniards seeking second homes at cheap prices and to enjoy the benefits of a highly relaxed tax regime.
Oil companies from Qatar and the US, meanwhile, are looking into expanding the country's energy sector, starting with a projected big new oil refinery near the Costa Rican border.
The world has changed considerably over the past century, however, and the new Panama Canal can no longer count on the supremacy that it enjoyed for so long.
And it is almost certain to become just one sea passage among many as international shipping companies cast around for alternatives and lobby competing governments to embark on their own ambitious infrastructure projects.
One such project is already being floated in Nicaragua, where the distance between the Pacific and the Atlantic is 278km rather than 77 but where a brand new canal could be fully equipped for the most modern ships from the start.
That's far from a sure bet, not least because of last winter's re-election as President of Daniel Ortega, the father of the Sandinista revolution, which has caused an outbreak of the jitters among would-be international investors. There has even been talk of the effects of global warming on the Arctic ice pack and the possibility of one day using the Northwest Passage, assuming, somewhat unnervingly, that its icebergs melt into harmlessness.
The reasons for such talk aren't hard to fathom.
The Panama Canal is, in a word, overwhelmed. The volume of container shipping has tripled over the past 12 years, and increased more than 50 per cent over the past six. It's not uncommon now to see queues of up to 100 vessels on either side of the canal, enduring a long wait to make the nine-hour passage through the waterway.
Waiting is an expensive business, it can cost a large container ship up to US$50,000 a day to sit idle and that, in turn, has spawned a complex bidding system whereby ships can jump the queue for the right price.
Last year, a British oil tanker paid a record US$220,300 to jump ahead of 83 other ships.
What the next few years will bring is some kind of measure of the effects of the new globalised economy, in much the same way that the canal's construction did in the latter part of the 19th Century.
The canal has endured very well. A series of artificial lakes and dams has ensured a ready supply of water for the passage, solving what could have been a problem in a country where rainfall is highly seasonal, creating great disparities in the water level. One recent development that has been distinctly unwelcome, though, is the erosion of the rainforest around the canal zone, which has, in turn, made it much harder to retain water during the dry seasons.
It has also exposed the area to the risk of flooding. With ocean levels rising because of global warming, Panama could one day be at serious risk for much the same reasons that those shipping executives are asking questions about opening the Northwest Passage.
For now, though, the containers continue to line up, and the one-time malarial swamp is hoping to reap the benefits.
Shortcut through a continent
The Panama Canal was not intended to be an American project at all, but fell into the hands of France.
Ferdinand de Lesseps, who had built the Suez Canal, started work on a sea-level canal in 1880, a project that was soon to become a byword for imperial hubris.
Lesseps hadn't considered the swampy geography, and he certainly hadn't considered the risk of disease. Over the next 13 years, a staggering 22,000 employees died of malaria or yellow fever, eventually forcing the French to abandon the project.
The Americans, meanwhile, were weighing the relative merits of Panama or Nicaragua for the route.
This was the Gilded Age, a period of unparalleled growth in prosperity, but also the first flourishing of United States government corruption, and the Panama Canal project was a fine example of both of these tendencies.
Panama won over Nicaragua primarily thanks to the efforts of US lobbyists in the employ of French landowners in Panama.
On the eve of a crucial congressional vote authorising construction of the canal, the lobbyists distributed a Nicaraguan stamp featuring a smoking Mt Momotambo, the implication being that Nicaragua was too volatile and volcanic to be a safe investment.
But the stamp was deliberately misleading, since the volcano was dormant and almost 160km from the proposed canal route. The US law firm of Sullivan & Cromwell earned a staggering US$800,000 ($1.1 million) for that neat piece of skulduggery.
The project marked the rise of US technology, which solved the swamp problem by raising the canal and building locks, as well as key advances in medical science, which identified and isolated the causes of malaria and yellow fever just before construction began in 1904 - although a further 5600 workers died over the next 10 years.
The canal was completed in 1914, two years ahead of schedule.
- Independent
