Shaping Shipping: the Panama Canal

Shaping Shipping: the Panama Canal

conservation economics CSF strategy fund

One of CSF’s central ideas is that we can change the world by grabbing levers connecting to very big things, and pulling at the right time. The Panama Canal qualifies as a very big thing. The hundred-year-old waterway has been the most transformative piece of infrastructure in the Western Hemisphere and, in 2000, was set to transform Panama all over again. That’s when CSF helped a small, local organization pull on one of those levers for change.

It all started with a discussion over dinner at our very first course, in 1999. A young Panamanian lawyer named Eyra Harbar, who worked for the local non-profit law firm Centro de Asistencia Legal Popular (CEALP), was concerned about a plan to dam three rivers and pipe the water into the Canal as part of a scheme to expand it.

The plan was designed to permit the passage of today’s huge “Post-Panamax” ships, which have lowered the cost of global shipping, but don’t fit through the canal’s aging locks. Those locks work as a set of elevators, lifting ships over the isthmus on a pillow of fresh water supplied by the surrounding jungle. Locks big enough for Post-Panamax vessels would need four times as much water as the old ones, and the plan was to siphon the water from rivers to the west of the Canal’s physical watershed.

CSF and CEALP showed that the plan didn’t add up.

For starters, the project’s budget estimates ran as high as $8 billion. Our 2001 report, “Economic Considerations on the Panama Canal Watershed Expansion,” calculated that interest payments on such a debt could easily outstrip new revenues from expanding the canal. The plan had other costs, too: The massive diversion of freshwater, and three dams that would flood rainforests, crops and villages, displacing over 10,000 people. Resettling people would likely require deforesting part of the Mesoamerican Biological Corridor, an ecological link between North and South America.

The head of Panama’s Canal Authority hotly contested Conservation Strategy Fund’s conclusions in the press. But, amid protests, the ill-conceived plan was shelved, and our findings were eventually vindicated. The Panamanian people voted for a very different plan to expand the Canal. It used recycling pools instead of dams to supply the needed water, costing up to $3 billion less than the original expansion plan, displaced no one, left rivers free flowing and caused zero deforestation. A tug on the right lever at the right time delivered a victory for Panama’s taxpayers, rural villages, the rainforest – and even for global shipping.

Since 1998, Conservation Strategy Fund has been committed to making conservation efforts smarter through the use of economics. To celebrate, we're going to be sharing 15 stories of success throughout our history. The above story is #2 on our timeline. To start from the beginning, click here. Continue the series with "All That Glitters is Grass"