Increased water levels in the early months of 2024 gave encouragement to the Panama Canal Authority, so much so that half-way through April, the Authority indicated that it intended to ease restrictions by increasing the limit of daily transits. The new limit will see Panama Canal transits back to 32 ships per day.

Given the losses and upheavals in the world of commerce generated by its regulatory restrictions, which reduced daily transits to 27 a day, this announcement in
mid-April 2024 brought some relief to importers, exporters, and freight consolidators across the Americas and the Caribbean. 

In November 2023, the Panama Canal Authority (ACP), having just experienced the driest October ever recorded, had to reduce transits from 32 a day at the start of November to 24. The ACP then indicated that slots would be further reduced to 22 and then to 18 by February 2024, causing real concern across the Americas. However, although nowhere near the 40+ ship transits during normal times, this most recent increase to 32 per day was welcome news.

Panama needs rain

If only the rain would fall in Panama, and lots of it. Of course, lots of rain in a short period of time is of little help in these particular circumstances. To the contrary, it is more likely to cause disastrous flooding and displacement. What Lago Gatún needs at the least is sufficient precipitation across 12 calendar months to adequately compensate for increased evaporation induced by Climate Change. Given the evidence that Mother Earth is now presenting, it does not seem likely that the Panama Canal will be transiting 40 ships per day and more per year very soon. Weather stories are now leading television evening news all around the planet. Increasingly, the weather has become as unpredictable as… the weather.

As congestion and dysfunction caused by weather and human conflict increasingly challenged port systems across the Americas and the Caribbean, exchange of ideas about response strategies and appropriate solutions came to the fore. Ideas long put to rest were revisited. Images of hundreds of cargo ships turning on their anchors offshore in Panama waters, waiting for days, even weeks, for a transit slot, painted a depressing yet dramatic picture of a maritime bottleneck of extreme proportions. 

Nicaragua Canal 

Even with a casual look at a map of Central America, it is obvious that there is no quick fix for getting high volumes of cargo quickly and safely across land from the Pacific to the Atlantic and vice versa.

Thoughts and action relative to the development of Canal de Nicaragua had been informally put to rest by the end of April 2018. That Nicaragua Canal project, estimated to cost US$50 billion, was the brainchild of Wang Jing, a Chinese investor. It had the full support of the Nicaraguan government, which entered into an agreement with the Chinese firm HKND Group in 2013. However, with the demise of the firm and its closure in 2018, the Nicaraguan Canal project is now widely regarded as moribund, if not dead.

Mexico coast to coast

An 1884 Mexican initiative, now renamed the Inter Oceanic Corridor of the Isthmus of Tehuantepec, or CIIT, was again back at centre stage as the first quarter of the 21st Century came to an end.

In December 2023, Mexico commissioned its new railroad spanning the shortest distance between the country’s Pacific and Gulf (of Mexico) coast. The railroad service will move passengers and cargo in a three-hour ride from the port at Salina Cruz on Mexico’s Pacific coast to Coatzacoalcos in Veracruz. The activation of this service, announced with some fanfare by a government then about to face the electorate, presents a range of economic opportunities in Mexico’s southern region. Indeed, initiatives to attract investors and to stimulate industrial expansion in the region have been continuing.

The idea of linking both coasts has a long history, dating back to the late 19th Century when Jose Porfirio took control of Mexico. By 1907, a railway line, Tren Interoceánico, was in operation, effectively opening the doors for international trade involving both the Pacific and the Gulf coasts. This investment initially yielded great results as high volumes of cargo moved between both coasts. However, with the opening of the Panama Canal less than a decade later, cargo volumes moving across the Mexican hinterland fell significantly, 80% by one estimate. It soon got to the point of decline where it was no longer feasible to operate the service. 

For more than a century, this railroad facility remained broken and unused, that is until 2018 when Mexico’s President, Andrés Manuel Lopez Obrador announced plans to resuscitate it. His stated intention was to compete for cargo being moved through the Panama Canal.

Plans for the CIIT included the clearing of a century’s worth of vegetation and the laying of new tracks. Three (309 km) primary tracks, for a total of more than 1,000 km were planned. Site works began in earnest by mid-2020, and the Mexican President was determined that nothing would halt or hinder its progress.

Indeed, in the third week of May 2023, military personnel physically took control of a 120-km section of the railroad tracks (between Medias and Coatzacoalcos) which was then operated by a private group of companies, Grupo Mexico Transportes. This military takeover sent shockwaves through Mexico’s private sector, generating immediate assurances from the government that the move was in the public interest and only temporary. Despite the declared intentions to compensate the corporate group, the response was hardly comforting to the private sector, perhaps because it was not the first time that the government had been accused of seizing transportation infrastructure.

The Mexican government’s objective in offering compensation may have been to prevent progress on this major public works being stymied by the collective action of private sector interests. Notwithstanding, it had to deal with public protest, including that emanating from indigenous communities seeking to protect the environment from exposure and degradation caused by tree removal. In other areas, local families who, over many generations, had established settlements on or close to the old railroad tracks were reportedly forced to relocate, despite their protests.

By the end of August 2023, the first of the three lines was completed and freight operations began in September 2023. That month, President Lopez Obrador personally led the group that rode the first passenger train across Mexico from coast to coast in more than a century. The journey reportedly took less than nine hours, quicker than an average transit time going through the Panama Canal. 

Referred to as Line Z, the upgraded railroad, inaugurated on December 22, 2023, can accommodate freight trains of up to 65 wagon lengths, and double-stack trains hauling up to 260 containers. Line Z will also move bulk cargo, including grains and chemical products. The rehabilitation work included extensive repair to four railway stations and construction of two new ones. Trains will have the capacity to accommodate up 400 passengers in three classes.

Given the high volume of cargo moved across the isthmus of Panama, the CIIT can hardly be expected to provide any serious challenge to the operations of the Panama Canal. However, to the extent that the Panama Canal is subject to continuing issues related to Climate Change and the welfare of some 50% of Panama’s population that depend on the water of the Lago Gatún, the CIIT does offer an alternative option for various regional economic sub-sectors, especially at this time when the weather has become as unpredictable as the weather. 

© MSLJarrett 2014-04-29