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The American-built waterway across the Isthmus of Panama, connecting the Atlantic and Pacific oceans, is inaugurated with the passage of the U.S. vessel Ancon, a cargo and passenger ship.
The rush of settlers to California and Oregon in the mid 19th century was the initial impetus of the U.S. desire to build an artificial waterway across Central America. In 1855, the United States completed a railroad across the Isthmus of Panama (then part of Colombia), prompting various parties to propose canal-building plans. Ultimately, Colombia awarded rights to build the canal to Ferdinand de Lesseps, the French entrepreneur who had completed the Suez Canal in 1869. Construction on a sea-level canal began in 1881, but inadequate planning, disease among the workers, and financial problems drove Lesseps’ company into bankruptcy in 1889. Three years later, Philippe-Jean Bunau-Varilla, a former chief engineer of the canal works and a French citizen, acquired the assets of the defunct French company.
READ MORE: 7 Fascinating Facts About the Panama Canal
By the turn of the century, sole possession of the isthmian canal became imperative to the United States, which had acquired an overseas empire at the end of the Spanish-American War and sought the ability to move warships and commerce quickly between the Atlantic and Pacific oceans. In 1902, the U.S. Congress authorized purchase of the French canal company (pending a treaty with Colombia), and allocated funding for the canal’s construction. In 1903, the Hay-Bunau Varilla Treaty was signed with Columbia, granting the U.S. use of the territory in exchange for financial compensation. The U.S. Senate ratified the treaty, but the Colombian Senate, fearing a loss of sovereignty, refused.
In response, President Theodore Roosevelt gave tacit approval to a Panamanian independence movement, which was engineered in large part by Philippe-Jean Bunau-Varilla and his canal company. On November 3, 1903, a faction of Panamanians issued a declaration of independence from Colombia. The U.S.-administered railroad removed its trains from the northern terminus of Colón, thus stranding Colombian troops sent to crush the rebellion. Other Colombian forces were discouraged from marching on Panama by the arrival of U.S. warship Nashville.
On November 6, the United States recognized the Republic of Panama, and on November 18 the Hay-Bunau-Varilla Treaty was signed with Panama, granting the U.S. exclusive and permanent possession of the Panama Canal Zone. In exchange, Panama received $10 million and an annuity of $250,000 beginning nine years later. The treaty was negotiated by U.S. Secretary of State John Hay and Bunau-Varilla, who had been given plenipotentiary powers to negotiate on behalf of Panama. Almost immediately, the treaty was condemned by many Panamanians as an infringement on their country’s new national sovereignty.
In 1906, American engineers decided on the construction of a lock canal, and the next three years were spent developing construction facilities and eradicating tropical diseases in the area. In 1909, construction proper began. In one of the largest construction projects of all time, U.S. engineers moved nearly 240 million cubic yards of earth and spent close to $400 million in constructing the 40-mile-long canal (or 51 miles long, if the deepened seabed on both ends of the canal is taken into account). On August 15, 1914, the Panama Canal was opened to traffic.
Panama later pushed to revoke the Hay-Bunau-Varilla Treaty, and in 1977 U.S. President Jimmy Carter and Panamanian dictator Omar Torrijos signed a treaty to turn over the canal to Panama by the end of the century. A peaceful transfer occurred at noon on December 31, 1999.
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Panama Canal, Spanish Canal de Panamá, lock-type canal, owned and administered by the Republic of Panama, that connects the Atlantic and Pacific oceans through the narrow Isthmus of Panama. The length of the Panama Canal from shoreline to shoreline is about 40 miles (65 km) and from deep water in the Atlantic (more specifically, the Caribbean Sea) to deep water in the Pacific about 50 miles (82 km). The canal, which was completed in August 1914, is one of the two most strategic artificial waterways in the world, the other being the Suez Canal. Ships sailing between the east and west coasts of the United States, which otherwise would be obliged to round Cape Horn in South America, shorten their voyage by about 8,000 nautical miles (15,000 km) by using the canal. Savings of up to 3,500 nautical miles (6,500 km) are also made on voyages between one coast of North America and ports on the other side of South America. Ships sailing between Europe and East Asia or Australia can save as much as 2,000 nautical miles (3,700 km) by using the canal.
What is the Panama Canal?
The Panama Canal is a constructed waterway that connects the Atlantic and Pacific oceans across the Isthmus of Panama. It is owned and administered by Panama, and it is 40 miles long from shoreline to shoreline. Ships can cross going in either direction, and it takes about 10 hours to get from one side to the other. Ships from any country are treated equally with respect to conditions of passage and tolls.
Why is the Panama Canal important?
Before the Panama Canal was built, ships traveling between the east and west coasts of the American continents had to go around Cape Horn in South America, a voyage that was some 8,000 nautical miles longer then going through the canal and that took about two months to complete. All journeys between the Atlantic and Pacific oceans are shortened by thousands of nautical miles by going through the canal.
How was the Panama Canal made?
The Panama Canal was made by building dams on the Chagres River to create Gatun Lake and Lake Madden, digging the Gaillard Cut from the river between the two lakes and over the Continental Divide, building locks between the Atlantic Ocean and Gatun Lake to lift boats to the lake and another set of locks at the end of the Gaillard Cut to lower ships, and digging a channel to the Pacific Ocean.
Why does the Panama Canal need locks?
A mountain range runs the length of Panama, including through the Canal Zone, though it is lower there. In addition, the tidal levels of the oceans on either side of the Panama Canal differ. Locks raise ships to the level of the lakes (which account for about half the distance of the canal) and then lower them to sea level.
Who built the Panama Canal?
A French company headed by Ferdinand, viscount de Lesseps, started to build a canal in 1881 but failed by 1889. The United States, led by Pres. Theodore Roosevelt, negotiated the Hay–Bunau-Varilla Treaty, giving the U.S. control of the Canal Zone. Work under U.S. supervision began in 1904, and the Panama Canal was completed in 1914. Tens of thousands of people, mostly labourers from Barbados, Martinique, and Guadeloupe, worked on the project.
From its opening in 1914 until 1979, the Panama Canal was controlled solely by the United States, which built it. In 1979, however, control of the canal passed to the Panama Canal Commission, a joint agency of the United States and the Republic of Panama, and complete control passed to Panama at noon on December 31, 1999. Administration of the canal is the responsibility of the Panama Canal Authority (Spanish: Autoridad del Canal de Panamá [ACP]), which answers solely to the government of Panama.
A one-stop weekly digest of politics, economics, technology, and culture in Latin America. Written by Rio de Janeiro-based journalist Catherine Osborn.
PANAMA CITY—In Panama’s presidential election, it’s what was left unsaid that resonates most.
The winner of the May 5 vote, Laurentino “Nito” Cortizo is a 66-year-old former cattle rancher. With swept-back hair, a gravelly voice, and a sharp black suit, he has the air of a late-era Johnny Cash. On TV, he walked the line: unleashing a few jabs at his relatively more corruption-tainted opponents and saying little that could jeopardize his lead. But there’s one topic that Cortizo and his opponents barely touched throughout the campaign: their country’s growing ties with China.
PANAMA CITY—In Panama’s presidential election, it’s what was left unsaid that resonates most.
The winner of the May 5 vote, Laurentino “Nito” Cortizo is a 66-year-old former cattle rancher. With swept-back hair, a gravelly voice, and a sharp black suit, he has the air of a late-era Johnny Cash. On TV, he walked the line: unleashing a few jabs at his relatively more corruption-tainted opponents and saying little that could jeopardize his lead. But there’s one topic that Cortizo and his opponents barely touched throughout the campaign: their country’s growing ties with China.
Following outgoing president Juan Carlos Varela’s unexpected decision to end diplomatic relations with Taiwan in order to establish formal ties with Beijing in June 2017, a tidal wave of Chinese investment is in the works. Major infrastructure projects and an imminent free trade agreement will allow Panama, a country of 4 million people, to maximize its potential as a hub for regional trade, manufacturing, and logistics and ease the strain on a financial services industry damaged by the Panama Papers. In return, for a relatively modest outlay, China is poised to become the most important commercial partner in a country that controls a key chokepoint of world trade.
It’s a win-win, both sides like to stress. But if tensions between the United States and China continue to escalate, Panama could become a key theater in their trade war.
For the seven presidential candidates in the recent election—all but one of whom were center-right, pro-business free-traders—Chinese cash is required to reinvigorate a stalled economy. The geopolitical effects and the long-term effect on sovereignty? Those are problems for future presidents. Cortizo, speaking to Reuters on Election Day, said the United States needed to pay more attention to Central America, saying, “While they’re not paying attention, another one is making advances.”
And that, said Carlos Guevara Mann, an associate professor in political science at Florida State University’s Panama campus, has “put Panama in the midst of the world’s biggest geopolitical rivalry: the trade war between the U.S. and China. No one has a plan.”
But Panama, given the United States’ history in the country and the unique importance of the interoceanic canal, could be where the two powers collide.
Recently, China has deepened ties with governments across Latin America and the Caribbean, 19 of which have officially signed up for Chinese President Xi Jinping’s signature $1 trillion Belt and Road infrastructure plan. It has encountered little pushback or competition from the United States. But Panama, given the United States’ history in the country and the unique importance of the interoceanic canal, could be where the two powers collide.
“The Panama Canal was the great work of the industrial age, as symbolic to the U.S. as the Great Wall is to China,” said Richard Koster, a novelist and historian who has been an analyst of Panamanian politics since he first set foot on the isthmus as a Marine in 1957. “The Chinese plan to develop a permanent presence in Panama.”
Xi’s designs on Panama are clear. In the nearly two years since the establishment of relations, China and Panama have signed over 30 bilateral agreements. In December 2018, Xi Jinping became the first Chinese premier to visit Panama, accompanied by an entourage of executives from dozens of companies in the country’s construction, telecommunications, and financial sectors. At the accompanying trade show in Panama City’s Atlapa Convention Center, outgoing president Varela was shown around stands representing firms including Huawei and China Railway Design Corporation—hawking a new $4 billion high-speed railway project for the country. At the event, copies of the Diario Chino Latinoamericano, a local paper serving the Chinese community, were handed out. On the cover, a giant photo of Xi was superimposed on an aerial shot of the Panama Canal.
Outgoing Panamanian President Juan Carlos Varela visits an exhibition for Chinese companies at Panama City’s Atlapa Convention Center following Chinese President Xi Jinping’s visit in December 2018. Mat Youkee
A century ago, U.S. President Theodore Roosevelt had his own Panama Canal photo-op: He was snapped at the controls of one of the colossal 95-ton shovels used to dig the passage. His two-week trip in 1906 was the first time a sitting U.S. president made a diplomatic trip abroad, and, in the words of the historian David McCullough, it was “one of those small, luminous events that light up an era.” That era could be coming to a close.
From 1903 to 1979, the canal’s surrounding region was an unincorporated territory of the United States, home to thousands of U.S. residents and dozens of military installations. U.S. battleships were designed to fit the dimensions of the canal. But after World War II and the creation of the Atlantic and Pacific fleets, the canal’s military importance subsided. In 1977, the U.S. and Panamanian governments signed a treaty to hand full control of the waterway to Panama by 1999.
Many Panamanians benefited from their country’s new role as a center for low-regulation shipping, offshore company formation, and international banking—all of which was made possible by the country’s use of the U.S. dollar and its correspondent relationships with U.S. banks. Untraceable money flooded into the country. Then, the Panama Papers scandal broke.
The April 2016 publication of more than 10 million documents belonging to the Panamanian law firm Mossack Fonseca shed light on the shady practices of the world’s businesses, politicians, and celebrities, but thanks to the alliterative naming, it was Panama rather than the perpetrators that took the brunt of the reputational hit. Offshore company formation dwindled, and U.S. banks, faced with higher compliance costs, cut 70 correspondent bank relationships.
The country only narrowly avoided a full financial meltdown. The European Union, the OECD, and the Financial Action Task Force, an anti-money-laundering watchdog, consigned Panama to various blacklists. Those wary of being under the microscope shipped out. On Avenida Balboa, home to some of Latin America’s tallest buildings, many luxury flats are unoccupied. In the cavernous basement casinos, dealers man empty tables.
For a decade, China had eyed opportunities to develop its own interoceanic trade routes in Latin America. But after the Panama Papers were released, the time was right to strike.
In a 2017 telephone conversation with then-U.S. Ambassador John Feeley, Varela warned that he would be announcing the opening of relations with China in a matter of hours. Feeley was surprised, but Varela saw an unprecedented opportunity.
The Panama Canal had been expanded in 2016, but Panama still needed a new national logistics strategy aimed to capture greater value-added production. So Varela designed a plan that envisages vast assembly facilities in free trade zones, upgraded port facilities, and new road and rail links into Central America. The possibility of building a road to Colombia, connecting the only break on the Pan-American Highway from Alaska to Patagonia, was once again under discussion, having lain dormant as an issue for decades. But for all that, Panama needs Chinese investment.
That comes with significant risks, according to Rodrigo Noriega, a political analyst and editorial adviser to newspaper La Prensa. “In the long-term, Panama could become overdependent on China as a lender of last resort. In the immediate term, the country’s weak institutions make it vulnerable to bribes.”
So far, Cortizo appears to have stayed clear of any major scandal. He has promised to restructure the way public contracts are awarded to improve transparency. But the mismatch between China’s spending power and Panama’s weak institutions represents an “explosive and toxic combination,” according to Noriega.
The tugboat eases into the concrete cavern of the Panama Canal’s Miraflores Locks. At the end of the line, a mammoth Neopanamax ship—measuring over 1,200 feet in length and with a capacity of over 13,000 containers—pulls in. The locks close behind the ship, and the water rises. It’s a tricky maneuver made more difficult by design problems and staffing cutbacks. In 2018, there were a rash of accidents and collisions in the canal caused by tugboat masters falling asleep at the controls.
“The new locks are too short that there’s a risk that a sudden movement could squash the tug,” a local tugboat captain told me in an earlier interview. “In addition, the tugboat captains are being asked to do twice the work with the same resources as before. This is the worst labor climate since the canal was built.”
When U.S. officials talk about their worst-case scenario for Panama, it revolves around the possible loss of commercial neutrality of the services and infrastructure that surround the canal. Since the handover of the canal to Panama in 1999, the Panama Canal Authority, the government agency tasked with the canal’s management, has largely remained above national politics and provided steady revenue for the nation. In 2018, the canal brought in nearly $1.7 billion for the treasury. “The Panama Canal Authority is one of the world’s great technocratic institutions,” Feeley told Global Americans. “To their enormous credit they have kept Panamanian politics out of the canal.”
The Panama Canal Authority’s image has suffered in recent years, however. In 2009, the contract for expanding the canal was awarded to a consortium that was headed by the Spanish firm Sacyr—which was 14.5 billion euros in debt at the time due to the Spanish construction crisis—and included a Panamanian firm owned by the family of Alberto Alemán Zubieta, then head of the authority. Sacyr bid just over $3 billion for the project, but overspending and delays meant the project ended up costing nearly $11 billion.
The neutrality and public ownership of the canal is enshrined in the Panamanian Constitution, but Koster said he fears the current conflict between the tugboat union and the Panama Canal Authority could result in the latter bringing in outside contractors, setting a precedent for further privatizations of other services. Noriega said that Chinese development of port, bridge, and energy infrastructure in the canal region would enhance Beijing’s influence over the workings of the canal.
So too would the construction of a further set of locks by Chinese firms. In early 2015, representatives of China Harbour Engineering Company met with Panama Canal Authority officials to discuss a potential feasibility study for new locks to permit the world’s very largest vessels to travel through the canal. However, given that there is insufficient water to operate the current canal optimally all year, such expansion seems to be some way off.
Feeley said his real concern, however, is not privatization but industrial espionage. A detailed schedule of future ship passages, confidential information stored in the canal authority’s offline infrastructure, would be particularly useful to Chinese shipping conglomerates. “What happens if the Chinese drop a million bucks on an IT administrator and say, ‘Just walk out a USB every six months’?” Feeley said in the interview with Global Americans. “That could easily be accomplished. … I don’t trust the Chinese in that regard.”
For a long time, Feeley’s warnings fell on deaf ears in the State Department. “I get crickets,” the former ambassador said, “nothing.” But after his departure in March 2018, Washington finally reacted to the decisions—taken within months of each other—of Panama, El Salvador, and the Dominican Republic to drop Taipei in favor of Beijing. In September 2018, the U.S. mission leader in each of those countries was recalled for a strategy meeting. A month later, on a visit to Panama City, U.S. Secretary of State Mike Pompeo told reporters, “when China comes calling, it’s not always to the good of your citizens,” and he criticized the “predatory” activity of Chinese state companies.
Following that visit, under U.S. pressure, a Chinese plan to build a new embassy close to the entrance of the canal was canceled. In February of this year, the United States flexed its muscles, demanding that Panama revoke the registrations of 59 Iranian vessels operating under Panamanian colors, which will hamper their efforts to use ports and terminals. It then denied a U.S. visa to Varela’s choice to head Senafront, the border patrol that is the closest thing Panama has to an army, effectively excluding him from the position.
In February, Varela’s vice president, Isabel de Saint Malo de Alvarado, made an unscheduled visit to the United States to meet with Pompeo to “strengthen ties” and “promote opportunities for trade,” according to an official communique. To others it looked more like a dressing down after Varela’s friendliness to Beijing. The rapid pace of free trade negotiations between Panama and China has since slowed. “The United States can deny visas, cut banking ties, and threaten to put firms and individuals on blacklists,” Noriega said. “Above all, they will be monitoring for any evidence of graft, and they’ll come down hard.”
In the short term, however, Chinese money will continue to roll in. Chinese firms are finalists to build major metro and power projects, and in the past, dubious changes to the contracting process have worked in their favor. Panama could soon become the Latin American nation with the highest levels of Chinese investment on a per capita basis. China Railways has already established their regional headquarters in Panama City, while the telecoms giant Huawei has made the Colón free trade zone, on the Caribbean coast, a distribution hub for its electronic systems. With access to two oceans and one of the continent’s best-connected airports, it’s easy to imagine Panama as the center of a wheel, with spokes reaching out around the region.
Panama’s historical relationship with the United States may have seemed like an opportunity for Beijing to score a symbolic victory over Washington, but ultimately, it could prove the strategy’s fatal flaw. Panama’s strategic and symbolic importance makes influence-gathering there likely to provoke the greatest pushback from the United States.
Despite radio silence on the topic during the campaign, the overriding theme of Cortizo’s presidential mandate, and those of future candidates, has already been decided. In the coming decades, the country’s politicians will have to balance its negotiations with the United States and China.
“There’s no doubt that, economically, establishing relations with China made perfect sense for the country, but there were obviously important factors in play,” an employee of the Ministry of Foreign Affairs told me. “Panama has always surfed the waves created by the world’s major powers, but from now on we’ll have to walk a tightrope between the U.S. and China. Until when? Forever?”
Mat Youkee is a Panama City-based freelance journalist and analyst covering Latin American politics and economics. Twitter: @matyoukee
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Richard Halliburton: the lightest “ship” to ever transit the Panama Canal.
Question: In 1928, writer and adventurer Richard Halliburton paid a toll of 36 cents—the lowest in the history of this body of water—to complete what historic swim?
Answer: A full transit of the Panama Canal
Richard Halliburton made a career of traveling the world and writing books about his adventures. He famously said, in response to his father’s plea for him to settle down, “I’ll be especially happy if I am spared a stupid, common death in bed.” Indeed, his own death in 1939 was anything but. He perished in an attempt to sail a Chinese junk across the Pacific.
Before his demise, Halliburton’s pursuits included an around-the-world biplane flight and a Mediterranean journey that followed the path of Homer’s Odyssey. But despite the grand scope of many of his expeditions, history best remembers him for swimming the 48-mile length of the Panama Canal, which took 50 hours over ten days.
While Halliburton was neither the first nor the fastest swimmer to accomplish the feat, he was the first to travel through all three sets of locks. In doing so, according to newspaper accounts, “it required as much mechanical labor to bring Halliburton, the lightest ship in Canal history, through the locks as it did for the 40,000-ton airplane carrier Saratoga, the heaviest. Charges for the passage were made in accordance with the ton rate, and Halliburton, weighing 150 pounds, paid just 36 cents.” Today, the average toll is $54,000, and the most expensive toll in history—so far—was $375,600, paid by the Norwegian Pearl.
The possibility of swimming between two oceans has captivated many other athletes eager to make a splash in history:
- Incomplete passage: Swimming the canal for sport began in 1913, before the Culebra Cut was open to ship—or human—traffic. Therefore, the first attempt was actually just a partial transit. Professional endurance swimmer Captain Alfred Brown—also an assistant to Harry Houdini—and Elaine May Golding, “champion lady swimmer of America,” got permission to swim from Cristobal to Balboa.
- One day—and one week—at a time: A year later, once the canal was officially open, J.R. Bingaman and James Wendell Green, both Panama Canal employees, sought permission to make the full transit. The governor allowed it, but forbid them from using the locks, for fear that they’d disrupt ship traffic. Instead, they climbed the ladders at the end of each chamber. Their 26.5 hours of swimming time was actually spread out between August and October: As canal employees, they only swam on Sundays so as not to shirk their duties.
- No rest for the weary: By 1962, with shipping traffic greatly increased, canal officials had grown wary of further swimming attempts. So when oceanographer Albert Oshiver appealed for permission, his prospects of approval seemed dim. Nonetheless, he traveled to the Canal Zone to make a personal appeal—which was granted, provided he stayed outside ship channels. He became the first to complete the 29-hour swim without stopping.
- Just passing through: On March 22, 2016 (World Water Day), Slovenian swimmer Martin Strel—best known as the subject of the documentary “Big River Man”—planned to begin a historic around-the-world swim, starting in Long Beach, California. The 24,900-mile route will span 107 countries in 450 days, touching on the Atlantic and Pacific oceans, the Suez Canal, the English Channel, the Amazon, the Red Sea … and the Panama Canal. According to the swimmer’s website, his departure has been delayed due to “technical escort issues”—but for the man who has swum the Danube, Mississippi, Yangtze, Amazon, and more, the canal will likely be among the easier legs of a truly epic journey.
From Sea to Shining Sea
Impressive though the Panama Canal may be as an athletic feat, it is arguably the greatest engineering feat of the 20th century. But its completion was fraught with challenges before the first worker could even break ground.
Read story »
Panama is much more than its famous canal—as you’ll discover with Grand Circle Cruise Line during Panama Canal Cruise & Panama: A Continent Divided, Oceans United.
Early proposals in Panama Edit
The earliest record relating to a canal across the Isthmus of Panama was in 1534, when Charles V, Holy Roman Emperor and King of Spain, ordered a survey for a route through the Americas in order to ease the voyage for ships traveling between Spain and Peru. The Spanish were seeking to gain a military advantage over the Portuguese. 
In 1668, the English physician and philosopher Sir Thomas Browne speculated in his encyclopedic work, Pseudodoxia Epidemica, that "some Isthmus have been eaten through by the Sea, and others cut by the spade: And if the policy would permit, that of Panama in America were most worthy the attempt: it being but few miles over, and would open a shorter cut unto the East Indies and China". 
In 1788, American Thomas Jefferson, then Minister to France, suggested that the Spanish should build the canal, since they controlled the colonies where it would be built. He said that this would be a less treacherous route for ships than going around the southern tip of South America, and that tropical ocean currents would naturally widen the canal after construction.  During an expedition from 1788 to 1793, Alessandro Malaspina outlined plans for construction of a canal. 
Given the strategic location of Panama, and the potential of its narrow isthmus separating two great oceans, other trade links in the area were attempted over the years. The ill-fated Darien scheme was launched by the Kingdom of Scotland in 1698 to set up an overland trade route. Generally inhospitable conditions thwarted the effort, and it was abandoned in April 1700. 
Numerous canals were built in other countries in the late 18th and early 19th centuries. The success of the Erie Canal through central New York in the United States in the 1820s, and the collapse of the Spanish Empire in Latin America resulted in growing American interest in building an inter-oceanic canal. Beginning in 1826, US officials began negotiations with Gran Colombia (present-day Colombia, Venezuela, Ecuador, and Panama), hoping to gain a concession to build a canal. Jealous of their newly gained independence and fearing domination by the more powerful United States, president Simón Bolívar and New Granada officials declined American offers. After the collapse of Gran Colombia, New Granada remained unstable under constant government intrigue. [ citation needed ]
Great Britain attempted to develop a canal in 1843. According to the New-York Daily Tribune, August 24, 1843, the Barings of London and the Republic of New Granada entered into a contract for the construction of a canal across the Isthmus of Darien (Isthmus of Panama). They referred to it as the Atlantic and Pacific Canal, and it was a wholly British endeavor. Projected for completion in five years, the plan was never carried out. At nearly the same time, other ideas were floated, including a canal (and/or a railroad) across Mexico's Isthmus of Tehuantepec. That did not develop, either. 
In 1846, the Mallarino–Bidlack Treaty, negotiated between the US and New Granada, granted the United States transit rights and the right to intervene militarily in the isthmus. In 1848, the discovery of gold in California, on the West Coast of the United States, generated renewed interest in a canal crossing between the Atlantic and Pacific oceans. William H. Aspinwall, who had won the federal subsidy to build and operate the Pacific mail steamships at around the same time, benefited from the gold discovery. Aspinwall's route included steamship legs from New York City to Panama, and from Panama to California, with an overland portage through Panama. This route with an overland leg in Panama was soon frequently traveled, as it provided one of the fastest connections between San Francisco, California, and the East Coast cities, about 40 days' transit in total. Nearly all the gold that was shipped out of California went by the fast Panama route. Several new and larger paddle steamers were soon plying this new route, including private steamship lines owned by American entrepreneur Cornelius Vanderbilt that made use of an overland route through Nicaragua.  [ page needed ]
In 1850 the United States began construction of the Panama Railroad (now called the Panama Railway) to cross the isthmus it opened in 1855. This overland link became a vital piece of Western Hemisphere infrastructure, greatly facilitating trade. The later canal route was constructed parallel to it, as it had helped clear dense forests. [ citation needed ]
An all-water route between the oceans was still the goal. In 1855 William Kennish, a Manx-born engineer working for the United States government, surveyed the isthmus and issued a report on a route for a proposed Panama Canal.  His report was published as a book entitled The Practicability and Importance of a Ship Canal to Connect the Atlantic and Pacific Oceans.  [ page needed ]
In 1877, Armand Reclus, an officer with the French Navy, and Lucien Napoléon Bonaparte Wyse, both engineers, surveyed the route and published a French proposal for a canal.  [ page needed ] The French had achieved success in building the Suez Canal in the Mideast. While it was a lengthy project, they were encouraged to plan for a canal to cross the Panamanian isthmus. 
French construction attempts, 1881–1894 Edit
The first attempt to construct a canal through what was then Colombia's province of Panama began on January 1, 1881. The project was inspired by the diplomat Ferdinand de Lesseps, who was able to raise considerable funds in France as a result of the huge profits generated by his successful construction of the Suez Canal.  Although the Panama Canal needed to be only 40 percent as long as the Suez Canal, it was much more of an engineering challenge due to the combination of tropical rain forests, debilitating climate, the need for canal locks, and the lack of any ancient route to follow.
De Lesseps wanted a sea-level canal (like the Suez), but he visited the site only a few times, during the dry season which lasts only four months of the year.  His men were totally unprepared for the rainy season, during which the Chagres River, where the canal started, became a raging torrent, rising up to 10 m (35 ft). The dense jungle was alive with venomous snakes, insects, and spiders, but the worst challenges were yellow fever, malaria, and other tropical diseases, which killed thousands of workers by 1884, the death rate was over 200 per month.  Public health measures were ineffective because the role of the mosquito as a disease vector was then unknown. Conditions were downplayed in France to avoid recruitment problems,  but the high mortality rate made it difficult to maintain an experienced workforce.
Workers had to continually widen the main cut through the mountain at Culebra and reduce the angles of the slopes to minimize landslides into the canal.  Steam shovels were used in the construction of the canal, purchased from Bay City Industrial Works, a business owned by William L. Clements in Bay City, Michigan.  Bucket chain excavators manufactured by both Alphonse Couvreux and Wehyer & Richemond and Buette were also used.  Other mechanical and electrical equipment was limited in capabilities, and steel equipment rusted rapidly in the rainy climate. 
In France, de Lesseps kept the investment and supply of workers flowing long after it was obvious that the targets were not being met, but eventually the money ran out. The French effort went bankrupt in 1889 after reportedly spending US$287,000,000 an estimated 22,000 men died from disease and accidents, and the savings of 800,000 investors were lost.   Work was suspended on May 15, and in the ensuing scandal, known as the Panama affair, some of those deemed responsible were prosecuted, including Gustave Eiffel.  De Lesseps and his son Charles were found guilty of misappropriation of funds and sentenced to five years' imprisonment. This sentence was later overturned, and the father, at age 88, was never imprisoned. 
In 1894, a second French company, the Compagnie Nouvelle du Canal de Panama, was created to take over the project. A minimal workforce of a few thousand people was employed primarily to comply with the terms of the Colombian Panama Canal concession, to run the Panama Railroad, and to maintain the existing excavation and equipment in salable condition. The company sought a buyer for these assets, with an asking price of US$109,000,000. In the meantime, they continued with enough activity to maintain their franchise. Phillipe Bunau-Varilla, the French manager of the New Panama Canal Company, eventually managed to persuade de Lesseps that a lock-and-lake canal was more realistic than a sea-level canal. 
United States acquisition Edit
At this time, the President and the Senate of the United States were interested in establishing a canal across the isthmus, with some favoring a canal across Nicaragua and others advocating the purchase of the French interests in Panama. Bunau-Varilla, who was seeking American involvement, asked for $100 million, but accepted $40 million in the face of the Nicaraguan option. In June 1902, the US Senate voted in favor of the Spooner Act, to pursue the Panamanian option, provided the necessary rights could be obtained. 
On January 22, 1903, the Hay–Herrán Treaty was signed by United States Secretary of State John M. Hay and Colombian Chargé Dr. Tomás Herrán. For $10 million and an annual payment, it would have granted the United States a renewable lease in perpetuity from Colombia on the land proposed for the canal.  The treaty was ratified by the US Senate on March 14, 1903, but the Senate of Colombia did not ratify it. Bunau-Varilla told President Theodore Roosevelt and Hay of a possible revolt by Panamanian rebels who aimed to separate from Colombia, and hoped that the United States would support the rebels with US troops and money. [ citation needed ]
Roosevelt changed tactics, based in part on the Mallarino–Bidlack Treaty of 1846, and actively supported the separation of Panama from Colombia. Shortly after recognizing Panama, he signed a treaty with the new Panamanian government under terms similar to the Hay–Herrán Treaty. 
On November 2, 1903, US warships blocked sea lanes against possible Colombian troop movements en route to put down the Panama rebellion. Panama declared independence on November 3, 1903. The United States quickly recognized the new nation.  This happened so quickly that by the time the Colombian government in Bogotá launched a response to the Panamanian uprising US troops had already entered the rebelling province. It should also be stated that the Colombian troops dispatched to Panama were hastily assembled conscripts with little training. While these Conscripts may have been able to defeat the Panamanian rebels, they would not have been able to defeat the US army troops that were supporting the Panamanian rebels. The reason why an army of conscripts was sent was because that was the best response the Colombians could gather due to the fact that Colombia was still recovering from a civil war within Colombia that was between Liberals and Conservatives from October 1899 to November 1902 known as the “Thousand Days War.” With the US being fully aware of these conditions and even incorporating them into the planning of the Panama intervention as the US acted as an arbitrator between the two sides with the peace treaty that ended the “Thousand Days War” being signed on the USS Wisconsin on November 21, 1902. While in port the US also brought engineering teams to Panama, with the peace delegation, to begin planning for the canal's construction before the US had even gained the rights to build the canal. All these factors would result in the Colombians being unable to put down the Panamanian rebellion and expel the United States troops occupying what today is the independent nation of Panama. 
On November 6, 1903, Philippe Bunau-Varilla, as Panama's ambassador to the United States, signed the Hay–Bunau-Varilla Treaty, granting rights to the United States to build and indefinitely administer the Panama Canal Zone and its defenses. This is sometimes misinterpreted as the "99-year lease" because of misleading wording included in article 22 of the agreement.  Almost immediately, the treaty was condemned by many Panamanians as an infringement on their country's new national sovereignty.   This would later become a contentious diplomatic issue among Colombia, Panama, and the United States.
President Roosevelt famously stated, "I took the Isthmus, started the canal and then left Congress not to debate the canal, but to debate me." Several parties in the United States called this an act of war on Colombia: The New York Times described the support given by the United States to Bunau-Varilla as an "act of sordid conquest." [ citation needed ] The New York Evening Post called it a "vulgar and mercenary venture." [ citation needed ] The US maneuvers are often cited as the classic example of US gunboat diplomacy in Latin America, and the best illustration of what Roosevelt meant by the old African adage, "Speak softly and carry a big stick [and] you will go far." After the revolution in 1903, the Republic of Panama became a US protectorate until 1939. 
In 1904, the United States purchased the French equipment and excavations, including the Panama Railroad, for US$40 million, of which $30 million related to excavations completed, primarily in the Culebra Cut, valued at about $1.00 per cubic yard.  The United States also paid the new country of Panama $10 million and a $250,000 payment each following year.
In 1921, Colombia and the United States entered into the Thomson–Urrutia Treaty, in which the United States agreed to pay Colombia $25 million: $5 million upon ratification, and four-$5 million annual payments, and grant Colombia special privileges in the Canal Zone. In return, Colombia recognized Panama as an independent nation. 
The Panama Canal, with its unique location at the narrowest point between the Atlantic and Pacific oceans, has had a far- reaching effect on world economic and commercial developments throughout most of this century. By providing a short, relatively inexpensive passageway between these two great bodies of water, the Canal has influenced world trade patterns, spurred growth in developed countries, and has been a primary impetus for economic expansion in many remote areas of the world. For example, a vessel laden with coal sailing from the east coast of the United States to Japan via the Panama Canal saves about 4,800 kilometers (3,000 miles) versus the shortest alternative all-water route, and for a vessel laden with bananas sailing from Ecuador to Europe the distance saved is about 8,000 kilometers (5,000 miles).
By far, most of the traffic through the Canal moves between the east coast of the United States and the Far East, while movements between Europe and the west coast of the United States and Canada comprise the second major trade route at the waterway. Other regions and countries, however, such as the neighboring countries of Central and South America, are proportionately more dependent on this vital artery to promote their economic development and expand trade.
Since the Canal first opened on August 15, 1914, the waterway has provided quality transit service to more than 815,000 vessels. Despite the increase in the number and size of transiting vessels in recent years, the total average time spent by a vessel at the Panama Canal still remains at slightly less than 24 hours. This remarkable level of performance can be attributed to the team of professionals trained to provide rapid transit service and to the timely implementation of improvements designed to interface with traffic demand. Some $10 million dollars is spent each year on training programs to prepare Panamanians for the operation and maintenance of the Canal. Today, Panamanians comprise more than 95 percent of the Canal's seasoned work force, and occupy positions in high-skill areas vital to the Canal organization.
Of the thousands of vessels transiting the Canal each year, about 30 percent of the total oceangoing transits are by PANAMAX- size vessels, the largest vessels the waterway can accommodate. An optional transit reservation system is available upon request to provide a guaranteed priority transit. The nature of improvements to the Canal keenly reflect the ever increasing role of PANAMAX vessels in the movement of world commerce. Use of the all-water route through the Panama Canal will continue to be an important, cost-effective transportation mode for a significant segment of world trade.
The Trip Through the Panama Canal
Almost any boat or ship can travel through the Panama Canal, but space is limited and strict regulations apply, so making the trip is easier said than done. The canal runs on a very tight schedule and ships cannot just enter as they please.
The Panama Canal's Locks
Three sets of locks—Miraflores, Pedro Miguel, and Gatun (from the Pacific to Atlantic)—are located in the canal. These lift ships in increments, one lock at a time, until they go from sea level to 85 feet above sea level at Gatun Lake. On the other side of the canal, ships are lowered back to sea level.
Locks make up only a very small portion of the Panama Canal. Most of the journey is spent navigating both natural and man-made waterways. Each lock chamber is 110 feet (33.5 meters) wide and 1000 feet (304.8 meters) long. Each lock chamber takes roughly eight minutes to fill with about 101,000 cubic meters of water. The Panama Canal Authority estimates that each transit through the canal uses 52 million gallons of water.
Sailing From the Pacific Ocean
Starting from the Pacific Ocean, here is a brief description of the journey ships take through the Panama Canal.
1895: Opening of the Kiel Canal – German waterway with more traffic than the Panama and Suez Canal
It is interesting that the canal bore the name Kaiser-Wilhelm-Kanal after Emperor William I (the first emperor of the German Empire and the grandfather of said William II in whose time the channel was opened) until 1948.
Kiel Canal was of great strategic importance to imperial Germany because its warships could pass from ports on the Baltic Sea into the Atlantic Ocean, and vice versa, without the need for going around the whole of Denmark.
On the eve of World War I, the Germans widened the canal in order to allow the passage of the largest battleships.
Today, with about 43,000 vessels traversing a year, the Kiel Canal is the busiest artificial waterway in the world.
It is nearly 100 kilometers long. Kiel Canal saves as much as 460 kilometers by not going around the Jutland Peninsula.
Moreover, there is an additional advantage of safer transiting in terms of weather conditions. Interestingly enough, the Kiel Canal has more traffic than the Panama and the Suez Canal.
Kiel Canal connects the city of Kiel on the Baltic coast with Brunsbüttel on the river Elbe near where the river empties into the Atlantic Ocean.
Kiel had a key role for the Imperial German Navy and later for Hitler’s Kriegsmarine. For example, the German Naval Academy, where naval officers were trained, was located near Kiel.
The Panama Canal Expansion: Changes Beyond the Waterway
With the opening of the long-awaited Panama Canal expansion project this June, all eyes are on the impact the $5.25 billion engineering marvel will have on maritime traffic across the vital international lanes that link the Pacific, the Atlantic and the Gulf of Mexico. However, the transformation it will bring to Panama’s domestic economy and society have been largely overshadowed by the historic expansion.
The expansion has already bolstered Panama’s efforts to become the Singapore – or perhaps Dubai – of Central America. It also promises to help to transform the role that Panama is playing for many U.S. and other foreign firms that are doing business in Central and South America.
There are several factors that make Panama’s prospects promising for many multinationals. Blessed with a unique geographical position, Panama is one of the fastest-growing economies worldwide. According to the World Bank, between 2001 and 2013, its average annual growth rate was 7.2%, more than double the average in Central and South America. In 2014, growth slowed to 6.2%. It was 5.8% in 2015, a year in which virtually all the region’s economies either slowed down or contracted.
The growth rates in Brazil, Chile, Argentina, Venezuela and elsewhere were hit by commodity price declines. Among all the economies of Latin America, Panama has been least sensitive to commodity prices. It helps that “Panama made a very intelligent choice shortly after becoming independent from Colombia in 1903 to adopt the U.S. dollar as its legal tender,” says C.E. Maurice Belanger, executive director of the American Chamber of Commerce & Industry of Panama. Although Panama’s official currency is the balboa, it does not print any paper money and only has a small amount of Panamanian coins the same size and denomination as U.S. coins. Belanger explains that “this provides a very convenient base for international trade and tourism.”
“When there is a $25 million investment in New York, Buenos Aires or Mexico City, nobody sees it. In Panama, an investment of this amount, the restaurants, the stores and even the taxi drivers [feel] the impact.” –C.E. Maurice Belanger
Furthermore, the banking system has at times been compared to the Swiss banking system, and widely lauded by many for being very “conservative.” “Even during the last world financial crisis in 2009, Panama still had a positive GDP of 3.2%,” recalls Belanger. Panama managed to reduce its poverty rate from 39.9% to 26.2% between 2007 and 2012, despite the global financial crisis, notes the World Bank, while reducing extreme poverty from 15.6% to 11.3%.
Attractive for FDI
In the 2015-2016 Global Competitiveness Report published by the World Economic Forum, Panama scored 4.4 points out of seven, slightly below South Africa but just above Turkey and Costa Rica, India and Mexico. In other key indicators, Panama’s unemployment rate is projected to drop from 2.88% in the first quarter of 2016 to 2.06% by 2020, according to government economists. Inflows of foreign direct investment (FDI) have also risen dramatically from an average of $1.258 billion between 1990 and 2012, to a total of $4.653 billion in 2013, according to the national census bureau. Reports the World Bank: “Panama continues to be an attractive country for FDI. The prospects of sustained high growth are also supported by emerging opportunities in transport and logistics, mining, financial services, and tourism.” Panama is a dollar-based economy, with no central bank of its own. Inventories in its warehouses are denominated in dollars, further simplifying the customs compliance process for companies when they export or re-export from Panama.
“Being a small country of just under four million inhabitants and about the size of the state of South Carolina contributes to our statistics,” says Belanger. “When there is a $25 million investment in New York, Buenos Aires or Mexico City, nobody sees it. In Panama, an investment of this amount, the restaurants, the stores, and even the taxi drivers [feel] the impact.”
That doesn’t mean that Panama has been completely immune to the ill effects of global financial contagion and the steep drop in global commodity prices over the past year. Henry Kardonski, managing director of London & Regional Panama, project leader of the huge Panama Pacifico development project, says that Panama has “not been directly affected” by the current global slowdown, but “the downturn in commodities affects the currencies of these countries” and changes in the value of currencies — such as the decline of the Colombian peso versus the U.S. dollar — “affect those countries’ ability to import and do other things.” However, the current crisis began last year, and “my clients have adapted to it. They’ve done their adjustments but it affects them because they are doing business regionally.”
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The expansion of the Canal will enable longer, wider and heavier ships to transit it is expected to open for commercial traffic on June 26. Although that’s far behind the original target date of August 2014, the delay has given U.S. East Coast ports and businesses more time to get ready. The expansion includes two larger sets of locks on both the Atlantic and Pacific sides, new access channels, dredging and improved water supply along the length of the 50-mile waterway.
Observes Philip Nichols, professor of legal studies and business ethics at Wharton: “You can’t help but notice that the roads [in much of Panama] are very modern, and it’s a substantially different experience from driving around Honduras or Nicaragua. There is clearly something going on all over Panama, not just at the two cities at the terminus [of the Panama Canal].” More than ever, Panama is determined to exploit its natural advantage — the Canal. “The Canal is the advantage that Panama has over everyone — and it always will [have],” notes Nichols. “They know that they have an income, no matter what. It’s like having a good, solid lead tenant when you’re building a development.”
It’s not just the predictable flow of income from the Canal, says Nichols, a frequent visitor to Panama. “It’s the security that Panama is always a good bet” and that the Canal is “a resource that a lot of people with a lot of money are interested in. During World War II, the U.S. devoted considerable resources to protecting the Canal. It’s like oil, but it’s even better than oil.”
To be sure, there are competitors to the Canal — such as large container ships that operate on multi-modal supply chains. These ships dock in California, and then use rail to carry their goods across the U.S. Later, those vessels are picked up again in New Jersey or Florida or Georgia and then taken to Europe. There are also new competitors, adds Nichols: The trans-Arctic routes that are going to open up to traffic in response to global warming. “There are technologies that can compete with the Panama Canal but the Canal will always be important as long as we are moving things physically.
“The Canal is the advantage that Panama has over everyone…. It’s like oil, but it’s even better than oil.” –Philip Nichols
“Oil often has an adverse effect on governance,” adds Nichols. “There is an incentive for bad governance because, if a government can get a monopoly over oil, it pays off big. With the Canal, it’s kind of had the opposite effect in two ways: First, because the Canal is so important, the world has taken a stronger role in administering it. So, no matter what else was going in Panama, there was accountability and responsible administration of the Canal there was a model for governance. People could just look over to the Canal Zone and say ‘our government should be working the way that’s working.’”
Ties with Outsiders
The Canal has long provided huge opportunities for Panamanians to establish personal ties with outsiders that are rare in most of the region’s small, natural-resource poor nations. Says Nichols: “There were tons of relationships created. If an American had to choose between investing in Nicaragua and Panama, most people in the U.S. would think of things like the Sandinista-Contra civil war [in Nicaragua], and would think negative. Whereas with Panama, they might think, ‘My uncle lived there for 10 years while he worked in the Canal Zone.’” Indeed, U.S. Sen. John McCain was born into a U.S. military family at the Coco Solo Naval Air Station in the Panama Canal Zone, which was U.S. territory between 1903 and 1979. “You can’t underestimate the importance of those kinds of relationships,” Nichols says. “Economists are now looking at behavioral economics — and Panama had those relationships in abundance, unlike other countries in the region. Those relationships affect economic decisions just as much as numbers do.”
In part because of strong linkages between the U.S. and Panamanian private and public sectors, “innovation and entrepreneurship are currently playing a very important role in Panama,” says Nicolaj Siggelkow, management professor at Wharton. “The current government, through liberalization of immigration laws and low taxes, has created an environment very conducive to innovation and entrepreneurship.”
Siggelkow points out that one way to gain permanent residency in Panama is to start a new enterprise. “In addition, since the Canal became Panamanian property in 1999, the government has spent considerable resources in upgrading infrastructure. Given its central location, it has developed into a key mode of transport and logistics of goods and services.” This makes it easier for entrepreneurial startups to source and distribute their components and the products that they ship from Panama.
Looking Inward for Further Growth
Given the Canal’s historic role as a critical pathway between the Pacific and the Caribbean, Panama has traditionally been a country that “looks from the coast outward,” says Kardonski, project leader of Panama Pacifico since it was conceived in 2005. Panama Pacifico exemplifies a growing awareness of Panama’s potential to change its mindset and “look inward,” Kardonski notes. Gradually expanding, Panama Pacifico’s 3,450 acres of land assets are home to the International Business Park and the PanAmerica Corporate Center, where 140 companies have a presence, including 3M, Caterpillar, Dell, Grainger, Cable & Wireless, Avon and BASF. There, and elsewhere in Panama, a total of 117 multinationals have established their regional headquarters for Central and South America.
“[Because of strong linkages between the U.S. and Panama], innovation and entrepreneurship are playing important roles.” –Nicolaj Siggelkow
Beyond using Panama’s convenient location for managing regional distribution, an increasing volume of manufacturing takes place here. At Panama Pacifico, 3M produces lines for its automotive division, including paint guns and plastic bottles. Other firms make diapers, and operate high-tech printing technology to turn out such magazines as Esquire, notes Kardonski. Because Panama is well-equipped with infrastructure, such firms now “have the ability to reduce their presence in Peru, Colombia” and other Latin American locations that lack Panama’s transportation, distribution and just-in-time manufacturing capabilities. It helps that Copa Airlines, the country’s national flag carrier, has been pursuing an aggressive expansion path, already operating direct flights to over 50 of the biggest cities across Latin America and more than a dozen cities in the U.S. and Canada, including a new direct service between Panama City and New Orleans. In an effort to facilitate trade between Panama and the oil-rich nations of the Middle East, Dubai-based Emirates Airlines recently began nonstop services from Dubai to Panama City billing the flight as the longest nonstop in the world. “We have combined first-world infrastructure, first-world buildings and first-world services” in one convenient location, says Kardonski.
Tourism is another sector growing at a rapid rate. According to Panama’s comptroller general directorate, income from tourism is now nearly double what the country earns from the iconic Panama Canal itself. Much like their counterparts in Dubai, Singapore and Hong Kong, Panama’s high-end malls draw large numbers of fashion-conscious travelers to the country.
In 2015, the number foreigners who visited Panama grew by 10.7%, reaching 2.5 million, according to the Tourism Authority of Panama. Nearly half — 46.1% — came from South America, led by Colombia (288,569), Venezuela (260,145), Brazil (88,348), Ecuador (74,043), and Peru (50,275). Collectively, the three nations of North America (the U.S., Mexico and Canada) accounted for only 24.1% of all incoming tourists, followed by Europe with 13.6%, Central America 10.3% and the Caribbean with 2.3%.
The wide range of new initiatives demonstrates that the Panamanians are aware that the best way to take advantage of the expanded Canal is “to build around it to complement it,” says David Lewis, a Latin American investment consultant, and vice-president of Manchester Trade in Washington D.C. “Over and beyond just ships coming in and out, there is going to be [further] growth of ancillary services.” He adds: “Companies are realizing that Panama is a very attractive location to set up America hubs, because of Panama’s [multiple] free-trade agreements that get you everywhere. And with its dollarized economy, they don’t have to worry about foreign exchange risk.” While Panama’s population is small, “what really counts is the companies coming in to do their operations” in the country.
Lewis notes that at least 75% of the capital that has left troubled Venezuela recently seems to have gone to stable Panama. (Within the Latin American market, the rest has largely gone to the Dominican Republic). A lot of foreign companies that once had successful operations in Venezuela have moved them to Panama. In uncertain terrain, it’s a better bet.
The lock chambers: They are 33.5 meters wide,320.0 meters long, usable length of 304.8 metres. These dimensions determine the maximum size of ships which can use the canal this size is known as Panamax.
The Panamax vessel dimensions are as follows:
Displacement: 65000 MT approx.
As you can see, the Panama Canal played a vital role in the shipping industry. It has also become an important tourist spot. Plans for making the canal wider and longer in order to accommodate super-tankers and post panamax vessels are in the planning stage and once re-constructed, the Canal will be able to host even larger ships.