Jeffrey A. Newman
The speedy growth of transpacific shipping and size of the newest shipping vessels are causing investors to consider the creation of another canal from the Pacific to the Atlantic in Nicaragua as well as a separate project by Mexico. There have been plans considered and one Chinese Company from Hong Kong, (HKND Group) was retained to help develop plans. In late 2014, a route was officially retained, which is divided into two segments connecting Lake Nicaragua. The West Canal from the Pacific crosses the Isthmus of Rivas at Brito, a segment of about 26 km. One lock system is expected to be built midway along this segment. Then, Lake Nicaragua is used for 107 km. The East Canal connects Lake Nicaragua to the Caribbean Sea over 127 km and will also require the construction of a lock. On both sides of the expected canals, new ports were planned. This canal could easily accommodate all existing and planned container ships, 320,000 DWT VLCC (very large crude oil carriers), 400,000 DWT bulk carriers, and other mega vessels with these water depth conditions. The Nicaragua Canal would thus surpass by far the capacities of both the Panama Canal and the Suez Canal in terms of nautical characteristics.
However, recently the U.S. and some of its major companies have started to focus on helping the U.S. retain control over shipping from Asia through to the Atlantic to our ports. The project considered ten years ago Nicaragua, was set aside due to costs, however the economics of the world has been changing and many U.S. companies in concert could create this alternative that would enhance trade and create substantial potential for the U.S. The funds collected from the cargo ships is significant and the need is so great that ships are backed up for days waiting to pass through the Panama canal. In addition, projections reveal that this is only going to increase. Also, The Panama Canal drought began in late 2022 and was described as the worst in the canal’s history by January 2024. Bottlenecks were created when long cues of vessels waited to pass through the canal as a result of a drop in vessel transits in an effort to conserve water.Under normal circumstances, the Panama Canal handles about 3% of global maritime trade volumes and 46% of containers moving from Northeast Asia to the US East Coast. The channel is Panama’s biggest source of revenue, bringing in $4.3 billion in 2022
PANAMA CANAL INCREASING NEW TARIFFS FOR SHIPS
Panama is going to impose new tariffs for crossing ships seeking passage through the Panama Canal. Over 70% of traffic in the critical waterway comes from U.S. naval and merchant ships each year.The canal’s tariff changes come after an extreme drought substantially reduced water levels and limited the channel’s capacity for crossing ships. Due to the resulting revenue loss, authorities hiked the fees per vessel. Shippers will be charged 1% of the reservation tariff if they swap slots within 14 days or less. Additionally, any ship that arrives at the canal and needs a last-minute reservation will face even higher penalties. A regular vessel will face a $25,000 tariff, more than double the normal rate.
NEW PROJECT IN MEXICO
Another project that will have implications for global trade, is a project being developed by Mexico. which has decided to accelerate efforts to build the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT). This high-speed railway passage, stretching approximately 300 kilometers, is set to receive a $7.5 billion investment from the Mexican government to establish itself as a key player in global trade. The project has received $6 billion in funding from the Mexican government, with an additional $2 billion from international institutions. However, this funding is already insufficient to develop a high-speed rail and road connection and, most importantly, to modernize and make the two exit ports truly competitive. This too has gotten the attention of U.S. companies to take over the venture or partner witht he Mexican Government.
CONSTRUCTION OF A NEW CANAL OR MAGLEV TUNNEL IN NORTHERN COLUMBIA
Constructing a new canal in northern Colombia for larger container ships faces significant technical, financial, and socio-environmental hurdles, despite innovative proposals like the Puerto Internacional Las Américas (PILA) Maglev tunnel project. Here’s a breakdown of key challenges and considerations:
Proposed Solutions and Technical Viability
- PILA Maglev Tunnel:
This $75 million project aims to create an 80-mile underground tunnel using magnetic levitation technology to transfer containers between automated ports on Colombia’s Atlantic and Pacific coasts1. While theoretically capable of moving ships faster and with zero emissions, the concept relies on unproven applications of Maglev for cargo logistics. Experts criticize the cost estimate as unrealistically low, with electromechanical equipment alone likely exceeding $75 million1. - Comparison to Panama Canal:
The Panama Canal handles 40,000+ annual transits but struggles with droughts and ship-size limitations5. PILA’s proponents claim it would bypass delays for 13,000+ TEU ships, but similar past proposals (e.g., Nicaragua’s $40 billion canal) failed due to cost overruns and environmental concerns2.
Economic and Logistical Challenges
- Cost Realities:
Even conventional canal projects face steep costs. Panama’s 2016 expansion cost $5.25 billion5, while Colombia’s 1996 canal proposal was ridiculed for underestimating expenses (estimated at $45 billion vs. $1.65 billion claimed)6. PILA’s budget appears insufficient for tunneling, port infrastructure, and maintenance. - Demand Uncertainty:
Post-Panamax ships (too large for the Panama Canal) represent a niche market. Only 35 such container ships existed globally in 2023, with 60 more under construction—many not requiring transoceanic routes2. Revenue from transit fees may not justify the investment.
Environmental and Social Risks
- Ecological Damage:
Colombia’s history of infrastructure projects, like the Magdalena River canal upgrades, shows how sediment mismanagement can devastate ecosystems (e.g., coral reef destruction in Cartagena Bay)3. A new canal could threaten freshwater systems and rainforests. - Community Opposition:
Northern Colombia’s La Guajira region has seen protests against large projects (e.g., wind farms), with Indigenous Wayuu communities demanding improved access to water, education, and infrastructure4. A canal project would likely face similar resistance without robust community engagement and benefit-sharing.
Political and Regulatory Hurdles
- Ownership Transfers:
PILA’s plan to transfer port ownership to Colombia after 25 years introduces long-term governance risks, especially amid political instability1. - Climate Vulnerabilities:
The Panama Canal’s current drought-related capacity reductions (30% lower transit volume)5 highlight the need for climate-resilient designs, which would further increase costs.
Jeff Newman JD MBA, represents whistleblowers in tariff fraud cases concerning imported Chinese goods as well as Medicare and Medicaid fraud cases under the False Claims Act (Qui Tam), and SEC, IRS and FINCEN whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217
