By: Staff Writer
December 6, 2024
The Panama Canal drought of 2024 is possibly one of the worst catastrophes to have hit the Central American country in decades, and us as a Western Hemisphere as a group.
With the Panama Canal Authority having to reduce transits to under 30 just a few months ago, the Canal is making plans to mitigate the risk of trade damaging drought happening again.
Authorities in charge of the waterway, which accounts for over 3 percent of Panama’s GDP, are rushing to find solutions. The canal’s deputy administrator, Ricaurte Vazquez, told Reuters a $1.6 billion project to build a reservoir on the Rio Indio would be the “most complete solution [to more frequent droughts] in a 50-year horizon”.
The problem? Building a dam would require the relocation of some 2,260 people and could intensify battles between the canal and canalside communities for freshwater supplies.
If it wins approval the project could be completed by 2031. Time is ticking: last year was the third driest in the canal’s 110-year history.
The Authority believes the Rio Indio reservoir project is the most complete solution to more frequent droughts.
Vazquez also said: “We understand that this is the most important challenge to maintain the canal’s sustainability in the long term in the face of demand, due to Panama’s population growth, which will require fresh drinking water for its consumption and that leads us to the national conversation of how to tackle this problem.”
Panama’s President Jose Mulino has said the discussion will be completed next year, but the shipping industry is watching with some trepidation after delays and suspensions of major projects in recent years, including a controversial mining contract with Canada’s First Quantum Minerals. After broad public opposition, the Supreme Court last year declared the contract unconstitutional, and the government ordered the mine to be closed.
Although the number of people facing relocation for the dam is relatively small, they are backed by an activist group called Countrymen Coordinator for Life, which was instrumental in blocking First Quantum’s mining contract.
Cesar Petit, senior economist at BancTrust & Co, an investment bank specializing in emerging markets, said there was political consensus in Panama behind the dam project but the government would need to establish a credible plan for compensating people who will be displaced and affected in nearby areas.
“There are significant risks that the project to build the multipurpose reservoir on the Rio Indio will be postponed or suspended indefinitely,” Petit told Reuters. “The communication strategy of the benefits of the plans and an adequate incentive and compensation program for those affected will be key to successfully implementing this plan.”
The Panama Canal is vitally important to the Western Hemisphere. It’s stability for trade routes is crucial to development needs in the region.