SUNS  4344 Monday 14 December 1998



PANAMA: PREPARING FOR THE UNSHACKLING OF THE PANAMA CANAL

Panama, Dec 10 (IPS/Silvio Hernandez) -- Panama aims to transform its inter-oceanic canal from a mere transport route to a competitive supplier of services that it had been blocked from providing for the 84 years it has been under U.S. administration

The canal, administered by a U.S.-Panamanian commission until 31 December 1999 when it will be handed back to Panama, produces more than 3.8 million kilowatts of electricity and 100 million litres of potable water, but little is used outside the Canal Zone, the corridor through which the waterway runs. It also has workshops for repairing ships.

"The canal will become one of the biggest businesses in Latin America," said current canal administrator Alberto Aleman.
The Panama canal made $545.7 million in tolls the past fiscal year, and obtained 197.3 million dollars in revenue from other services. But the provision of services beyond the transit of ships is limited by a 1977 treaty that prevents the canal's earnings from exceeding the expenditure budget adopted by its board of the directors, five of whose members are from the United States and four from Panama.

Aleman said Panama had already drawn up legal instruments, such as an article in the constitution that proclaims the canal an autonomous enterprise - that will allow for "a modification of the institution's mentality".

"Panama has been preparing since 1977 to dismantle the military structure that exists in the canal and to replace U.S. laws and regulations with Panamanian legislation," said Foreign Minister Jorge
Ritter. Ritter, who is also minister for Canal Affairs, said that under Panamanian management "the canal should be competitive, because it is only one route and one element within the entire network of global transportation".

He was referring to the competition the Canal faces from a variety of sources, such as the Suez Canal and a multimode U.S. transport network that links the Atlantic and Pacific coasts of the United States.

"The Panamanian inter-oceanic passage is not a static enterprise," said Ritter. Under the exclusive administration of the US from 1914 to 1977,
the canal - whose technology dates back to the early 20th century - was used mainly as a strategic route for US warships and American economic expansion into the Pacific.

"We Panamanians must understand the importance of the canal as a forum for development," Aleman stressed, explaining that "the canal has been pretty much indifferent (to the needs of local development) because the treaties prevented us from taking part in some aspects".

One of the areas in which the canal could compete with a certain comparative advantage is in the generation of electricity. Its three plants - two hydroelectric and one thermoelectric - together produce a surplus of close to two million kilowatt/hour. Of the approximately 3.8 million kilowatt/hour its generators churn out, barely half is used for the canal's operations and to supply six U.S. military bases in the area.
The rest is eventually sold to three distributors which this year took over the operations of the former Institute of Hydraulic and Electric Resources (IRHE) of Panama, from which the canal administration receives $27 million a year.

The canal authority also provides drinking water for other parts of Panama and repair and maintenance services for ships in the dockyards located beside the canal. However, existing regulations prohibit its administration from investing in modern equipment for the hydroelectric
plants, and for other services it could offer the local market. Nor do they allow it to compete under the same conditions as other companies that provide energy.

IRHE ex-manager Fernando Aramburu warned that if the energy plants owned by the canal administration are not modernised "they will become very inefficient" in the competition with the local electricity service's new operating systems. "If it wants to have a share of the local electricity market, the canal must invest in its plants," said Aramburu.

Aleman pointed out that the strategists for the future expansion of the canal enterprise "are conscious of that". He added that in addition to what it already produces, "the canal has great potential for services and we are trying to gauge its installed capacity for generating additional revenue to tolls".