Panama votes on ambitious canal expansion

Cargo ships wait to cross the Gatun locks at the Panama canal in Colon. Picture / Reuters

PANAMA CITY - Panama voted today in a referendum seen backing an ambitious US$5.2 billion ($7.9 billion) expansion plan to give its famous canal its biggest ever face-lift in a move the government hopes will lift the nation out of poverty.

Opinion polls ahead of the simple "yes" or "no" plebiscite showed more than two-thirds of voters supported the project that will double the canal's capacity and allow mammoth modern cargo ships to pass between the Atlantic and Pacific oceans.

The expansion of the canal, which is one of the engineering wonders of the world and was opened in 1914, will create a job bonanza for Panama's 3 million people and boost economic growth, supporters say.

Critics warn the plan could bankrupt the small nation, which is already laden with huge debts and where most people live in poverty, if costs spiral. Taxpayers could be forced to pick up the tab and investors could lose money.

Lines of voters formed at polling stations across Panama City and in provincial towns under the stifling heat.

In Paraiso (Paradise), a small, neat town of mainly English-speaking Afro-Caribbeans on the canal's bank, retired police officer Crispin Mayers, 79, said he supported the expansion because it would bring in more cash.

"My parents came from Jamaica to dig the big ditch. This is an important vote ... and I'd like to see it come out on top," he said outside a polling station at the General Omar Torrijos school, with palm trees swaying nearby in the tropical breeze.

Torrijos was the populist military leader who helped clear the way in the 1970s for the canal's handover from the United States. His son Martin Torrijos is Panama's elected president.

David Guardia, a fish vendor in the poor town of Caillimito north of Panama City, was voting "no," saying it was too risky for a poor nation and the government was rushing into things.

"I believe in expansion but stage by stage, step by step," he said.

Opened in 1914 at a cost of US$375 million and 25,000 lives, the canal was dynamited and dug out by thousands of labourers who braved deadly malaria and yellow fever. It saves ships a long haul around South America's treacherous Cape Horn and carries around 4 per cent of world trade.

But its lock system is too small for many modern tankers and ships making the passage, mainly from the United States, Japan, China and Chile, also face longer waits to make the 80km inter-oceanic trip as global shipping grows.

The expansion plan would build wider locks and deeper and bigger access channels, and let ships with 12,000 containers pass through, up from around 4000 containers at present.

The Panama Canal Authority, which runs the waterway, warns the route will become log-jammed in seven years if nothing is done, meaning business will be lost to competitors like the US intermodal system of ports and cross-country rail links.

The project, due to start in 2008 and finish in 2014, needs US$2.3 billion in loans or bonds to be paid back with revenues from higher tolls from ships using the canal, whose upgrade will not interrupt traffic. Construction would create 7000 jobs and up to 40,000 indirect jobs.

France's Ferdinand de Lesseps, builder of the Suez Canal, started the Panama Canal in 1880 but abandoned it nine years later when the project went bankrupt.

The US government bought the canal in 1904 and 10 years later opened the waterway. With an eye on naval supremacy and control of the Western Hemisphere, the United States ran the canal for most of the past century.

In treaties signed in 1977 by then US President Jimmy Carter and Omar Torrijos, the United States agreed to hand over the canal to Panama in 1999.

- REUTERS