Panama plans huge canal expansion

The Panama Canal was opened in 1914

Panama has announced an ambitious $5.3bn (£2.9bn) plan to widen its famous canal to handle a new generation of giant container ships.

President Martin Torrijos described the project as a "formidable challenge" but necessary if the canal is to retain its place as a key route for global cargo.

The plan is due to be put to a national referendum later this year.

Polls suggest the majority of voters back the project, which is set to create several thousands jobs.

In a televised speech, Mr Torrijos said the plan was, "the most important decision about the canal and its role in the 21st century".

The 80km (50-mile) canal links the Pacific and Atlantic Oceans and plays a vital role in global trade.

Click here to see a map and cross section of the Panama Canal

Around 40 ships a day pass through its system of locks and lakes.

Sensitive issue

But, partly because of surging exports from China, the canal's capacity is now stretched.

It also faces the prospect of missing out on business from a new generation of super-ships, which can carry up to twice as much cargo as normal vessels.

PANAMA CANAL FACTS Handles an estimated 5% of world trade The main goods shipped are oil products, grain and container cargo Last year the canal handled 14,000 transits, shipping 200 million tonnes of cargo Traffic between Asia and the east coast of the US accounts for more than 40% of shipping

The Panama government fears its income from tolls will fall if ship-owners switch to alternative routes, BBC Americas editor Simon Watts says.

That is why they are proposing a new set of giant locks, measuring more than 50m wide, to create a third lane of traffic that is capable of handling wider loads.

"The Panama Canal route is facing competition," Mr Torrijos said.

"If we do not meet the challenge to continue to give a competitive service, other routes will emerge that will replace ours.

"It would be unforgivable to refuse to improve the capacity of the waterway."

The canal is a sensitive issue in Panama so Mr Torrijos has tried to take party politics out of his proposal, our correspondent says.

He has consulted widely, and the plan needs to be passed by parliament as well as through a referendum.

But Panamanians will want to know exactly how the plan will be financed, and Mr Torrijos will also need to address a widespread feeling that ordinary people have not seen any benefit from canal revenue, our correspondent adds.

The canal was opened in 1914 and run by the US until it was handed to the Panama government in 1999.

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