Hi, I'm Sarah Holder. I'm a new host for The Big Take, and I'm thrilled to be in your feed this week along with Salaiah Mosen in Washington, d C. And Juanha in Hong Kong. Each day we'll share one big story on money from all around the world. Today, we travel to Panama, specifically to the Panama Canal. The Panama Canal is an artificial waterway that connects the Atlantic Ocean with the Pacific Ocean. It cuts right through the middle of Panama, and for more than a century it's
been one of the main routes for global trade. And almost everything that touches our lives have one thing in common.
It comes through the Panama Canal.
And when they say almost everything that touches our lives, they mean everything.
Cars, refrigerators. You have a lot of produce coming from South America, from Chile, Peru that uses the canal.
The Panama Canal moves a total of roughly two hundreds of any billion dollars worth of cargo annually, and forty percent of all US container traffic travels through the canal. But lately there's been a bit of a traffic jam. Extremely low water levels in the canal have forced it to limit the number of ships passing through. Peter Millard, our senior correspondent in South America, recently went to Panama to see the problem up close.
Normally they do thirty six to thirty eight vessels a day through the canal. That's kind of the normal standard. Right now they're at about twenty two to twenty four.
The Panama Canal uses three times as much water as New York City in a single day. Ships need these high volumes of water to be able to float efficiently through the canal, and right now there's not enough water for all of them.
The Panama Canal has been having troubles with water throughout twenty twenty three, and in October the situation got a bit more critical.
As the line of ships grows in the canal, the consequences that this backlog could have for the global and local economy grow too. On Today's show, What's happening to the Panama Canal and can it be fixed? The Panama Canal first opened in nineteen fourteen as a man made waterway. It was a feat of engineering.
There's the Panama Canal from the underside. One of the greatest pieces of man made construction ever known.
Creating it required cutting down a forest and damming up water from nearby rivers. These rivers were then routed to Lake Katoon, which is the main reservoir that feeds water into the canal. When Peter went down to visit the canal, he saw that the water levels at Lakatoon were incredibly low, so low he could see the remains from the forest that was once there.
You can see tree stumps coming out of the ground just a few hundred feet from where the boats pass. I look pretty out of place.
You can see the stumps poking up from the lake at certain times of the year, like the dry season around May, but Peter says seeing them at this time of year is not normal.
This is November, at the end of the rainy season, and they're not supposed to be there.
The low water level in the lake is happening for a few reasons. Panama has been experiencing a drought that has intensified with the Alminio climate phenomenon. The drought has significantly reduced Panama's rainfall, which the canal's reservoirs rely on, and the problem is being made worse by an expansion of the canal that was completed in twenty sixteen. For this expansion, the canal's authority added more slots to the canal in order to accommodate more ships and bigger vessels.
Officials at the canal hope that this would bring more business, but there was a big problem.
When they did that, they did not secure another source of water to pump into the lake.
In other words, they invited more people to the party, but forgot to buy the extra keg. Now the canal is seeing the consequences.
So you had a really dry year, and also you had the increased usage of the canal without enough water on hand for it to function properly.
Without enough water, the Panama Canal Authority has been forced to put in place the kind of restrictions we are seeing now which limit the number of ships that can pass through in a day. And these restrictions on how many ships can go through, I mean all of them have to wait longer. So the stuff on these cargo ships is taking longer to reach its destination.
Longer is to get the products to market.
Which can be a real problem if the ship is carrying something like fruit that needs to be shipped out at a certain time of year, and so to help with this, the canal authority came up with a band aid solution to charge ships that wanted to cross the canal faster an expedited fee. In November, we reported that shipping companies have paid a total of two hundred and thirty five million dollars in these expedited fees, and the clients that are paying the most are petroleum and gas producers.
The thing is they have to pay a huge fine if they reached their client late, and so they've decided that, okay, well just going to pay whatever we have to. They are the clients that are been paying them most to jump in line.
But this is not a sustainable solution. Some shippers who aren't willing or able to pay to jump the line are already moving their cargo to other routes. They're now sending their ships around the southern tips of Africa and
South America or through the busy Suez Canal. These other routes take longer, and at the Suez there are security concerns, But with these kind of delays at the Panama Canal, shippers are increasingly willing to look for other ways to go, and if fewer and fewer ships go through the canal, that is a real problem for Panama. The canal is Panama's biggest source of revenue, bringing in four point three billion dollars in twenty twenty two and thousands of jobs.
They said, the most recent fiscal year probably like a half a billion dollars less in revenue than the previous fiscal year.
After the break, Panama looks to longer term solutions for fixing the canal, then finds other challenges.
There's about ten thousand people that live in the area that they want to flood.
We'll be right back. Hey, we're back. Before the break, my colleague Peter Millard was telling us about how the low water levels have created a crisis in the Panama Canal. This is frustrated shipping companies to the point where they are returning to older routes or paying millions of dollars in expedited fees. As we enter twenty twenty four, I asked Peter if there are other more long term solutions on the table, and he told me that the idea that seems most possible seems to be creating a brand
new reservoir for the canal. For this canal, authorities have eyed the Indio River. The project would involve damming up the river and then drilling a tunnel through a mountain to connect it to the canal. It's a process that looks a lot like how the canal was created in the first place, by modifying the land and allowing the water to break in flooding the area. The problem is that there's already people living there.
There's about ten thousand people live in the area that they want to flood.
When visiting the community near the Indio River, Peter met Elizabeth Delgado.
She lives on the access road to the Indio River and she's like kind of like the closest house to the river, so she would be one of the first people to get flooded. And she lives out there with their family. They farm rice, they farm planting casava. She says, Okay, we're set up. We can kind of live off of what we produce here, and you know, this is how we know how to live.
And Elizabeth, of course is not the only one in her community who is concerned.
The people that live alongside the lake, they don't want to move. They're already polding community meetings and figuring out how they're going to oppose this.
Canal officials are aware of the tension that this creates, but this is the primary solution being looked at to combat the low water levels.
I went to meet with Eric Cordoba, you know, that was at the headquarters for the Panama Canal Authority.
Eric is the head of the water division at the canal.
You walk in the main entrance and they have the first bell from the first boat that went through the canal back in nineteen fourteen Brazil.
He says that they will need everyone to agree in order for the project to gain government approval, and so.
You know, they can do the engineering, but they can't do the politics behind it.
In the meantime, other decidedly more experimental measures are being taken to bring more water into the canal, like creating clouds.
These are desperate times for Panama, and so they're looking into desperate measures. As a company based in North Dakota that does cloud seating, a test airplane went down there in November.
Cloud seating is a technology that's been around for decades, but.
Where it's used and been used successfully are in very dry climates, so it's not something that has been deployed in the tropics like what they're trying to do in Panama.
But whether it's through expanding the Indio River or creating more clouds, the canal authority need to come up with something because the situation in Panama has become increasingly urgent and shippers are getting impatient.
A miracle could come, but that won't be lasting. We've seen more and Nino events, and if you look at the climate models for Central America, it's expected to get drier over the course of this century, and so everything points to more problems. The solution is political more than technical, and then that's the decision that Panamanians need to make. Do they want to flood another part of their country to be able to keep this main industry operating a capacity.
That's the decision that the country has to make.
Thanks for listening to the Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by Adrianna Tapia. It was edited by Caitlin Kenney. Our senior producers are Jilda Di Carli and Naomi Shadan. We get editorial direction from Elizabeth Ponso. It was fact checked by Summersati. It was mixed by Alex Sugira. Sage Bauman is our executive producer and head of Pop Podcasts. Thanks for tuning in, We'll be back next week.