Anthony J. Pennings, PhD


Visiting the Future of the Panama Canal

Posted on | November 2, 2011 | No Comments

I recently went to Panama with a group of our students in New York University’s MS in Management and Systems degree program that I am chairing and two faculty members from the Stern School of Business. Kristen Sosulski and Harry Chernoff were developing a course called Operations in Panama examining global supply chain management, logistics, and real estate development. We met with business leaders and government officials and visited some small and large businesses. Panama is a study in contrast with some of the largest rain forests in the world surrounding its capital city which impressed me as one of the tallest cities I have ever seen (And I live in NYC!).

As one might expect, visiting the Panama Canal was the trip’s highlight. It had special relevance for me because when my parents immigrated to the US from the Netherlands, they went first through the Canal and on to California, where they caught a train to New York and settled to raise our family.

The Canal was being upgraded to handle more and larger ships. Panama charges ships by their size, with the largest vessels paying over a half million US dollars for the transit. As 60% of the world’s shipping is conducted through containers, it is worth noting that the upgrades planned for the Canal will allow ships carrying nearly 12,000 containers, more than twice as much as the current limit of 4,800 containers. Dr. Sosulski wrote this interesting blog about different ways to understand the Panama Canal through various modes of visualization.

Panama Canal We happened to be at the Canal the morning President Obama signed the trade agreement with Panama. The Panama – United States Trade Promotion Agreement or Tratado de Libre Comercio (TLC) entre Panama y Estados Unidos is a bilateral agreement that has been in the works for the last ten years. The deal is part of Panama’s plan to leverage the Canal to become a major commercial hub. Panama is striving to go beyond just providing passage between the great oceans to adding value by building infrastructure such as a major international airport nearby and fiber optic networks. It also is working to improve its educational facilities and enticing companies to set up operations centers. It hopes to become the Singapore of the Americas.

The agreement is controversial, but it opens Panama to many international financial, insurance, and IT services. As the country continues to become a logistical hub for trade in the region, it will continue to need increasingly sophisticated services. These will help better coordinate its shipping traffic, financial activities, and distribution operations. Hopefully, it will also enhance safe passage for goods and services.

Postscript 2022: Shortages and Inflation

The expanded canal began commercial operation in June of 2016. The project built two new locks, one on the Atlantic side and another on the Pacific side. It dredged new channels to the enlarged locks and deepened and widened existing waterways. As a result, bulk shipments such as Liquefied Natural Gas (LNG) increased immediately and container shippage also grew steadily.

A relevant question for 2022 is whether shipping ports have prepared sufficiently for increased container traffic? Have ports such as Baltimore, Charleston, Los Angeles, Miami, New York, Philadelphia, Portland, and Virginia, modernized their facilities to become “big ship ready”? Ships anchored offshore, containers piling up on docks, and long-haul trucks queued for hours to get to the containers suggest they have not.

East Coast ports, in particular, have not been prepared for shipments from the largest and busiest ports: Shanghai, China; Singapore; Hong Kong; and Busan, South Korea. Massive ships coming in from Asia through the Panama Canal may need deeper waterways, wider turning basins, longer berths, bigger docks, and taller cranes that could stretch across 20 or more containers.

The supply crisis contributing to the inflation surge of 2022 has shed light on many of these insufficiencies, resulting in increased public support for modernizing these shipping infrastructures.


Anthony J. Pennings, PhD has been on the NYU faculty since 2001 teaching digital economics, information systems management, and global communications. © ALL RIGHTS RESERVED


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