The Geopolitics of the Panama Canal

panama

This year the Panama Canal should see the conclusion of a huge expansion programme costing $5.2 billion that will allow ships double the size of the current maximum to pass through the canal, ushering into the world a new wave of Panamax class supertankers, which in turn will bring about even greater economies of scale in the shipping industry.

The troubled and lengthy construction of the Panama Canal helped to forge a new Central American nation as well as marking a crucial milestone in the USA’s journey to becoming a global power. The opening of the Canal helped reduce shipping times dramatically, as ships could avoid the long and arduous Cape Horn route at the foot of South America.

It was the French under Ferdinand Lesseps, the same man who had successfully built the Suez Canal that pioneered the construction of a link between the Atlantic and Pacific. At the outset Lesseps was supremely confident thanks to his experience in Egypt, but he severely underestimated the difficulties of the terrain, the mountains proved difficult to dig around and the tropical climate had thousands dying of disease.

Enter the USA

Eyeing the failing French effort the increasingly confident and out-going US government authorised the purchase of the project. However when negotiations with Colombia the host country at that point failed, it started a chain of events which led to the US supporting Panama’s independence. Panamanian rebels were assisted by a US naval blockade and overt political support, all of which allowed the new territory to split away from Colombia and then sign over the rights of the canal to Washington in the Hay-Bunau-Varilla Treaty, part in gratitude for helping them win independence, part in ignorance of the treaty’s consequences.  Once the Canal was finally complete in 1914 it gave the US control over the most important trade route in the Americas, but also helped to confirm Latin American suspicion over Washington’s motives in the region and it is often cited as a classic case of gun boat diplomacy.

The Canal rapidly became an increasingly significant international waterway, now seeing around 16% of US trade pass through it every year and one the country was willing to defend with arms, deposing the increasingly anti-American Panamanian President Noriega in 1989 with a swiftly executed military invasion. While the US finally relinquished control of the Canal in 1999 – on the condition it became a demilitarised zone, as the preeminent military power in the region it is unthinkable that Washington would allow a potentially hostile power to take any kind of control over the route.

The Prospect of a Rival Canal

China is now the major trade partner with much of Latin America and sees a significant chunk of its imports and exports pass through the canal, from Brazilian iron ore destined for the factories and workshops of the world’s foremost manufacturing nation, to toys and games bound for North American shops and malls going in the opposite direction. Fear of this vital route being compromised or cut off to Chinese shipping has led to outlandish schemes springing up such as a Chinese backed alternative waterway through Nicaragua or a “land” canal – a new rail line for heavy cargo cutting across Colombia to connect Pacific and Atlantic ports, so far these ideas have made no real progress and remain unlikely to be carried out.  But the confidence and ambition of China has been underestimated before, so nothing should be ruled it out. In this scenario it would be interesting to observe the US reaction; the idea of a major foreign power de facto controlling a trade route, comparable to the Panama Canal in Central America would not go down well in Washington at all. The US has already seen China take the economic initiative in its backyard, a Chinese controlled canal would I suspect be a step too far.



Categories: China - Latin America, Geo-Economics

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