Blog Post 2

El Nino Impacts Panama Canal Too!

Despite being a passionately cultured country, Panama is also located in a very special area for trade. One of the first images that come to mind is the Panama Canal, which was built in 1994. As this canal connects the Atlantic Ocean to the Pacific, it serves a very important role for international trade. This 50 mile long canal saves very much fuel and a great amount of time to reach its destination. This canal route is preferred by almost everyone to avoid having to travel around South America, which is an extra 8,000 nautical miles. With the slow speed cargo ships travel in, this distance can be extremely time consuming, especially in a rough climate. Everyday, an average of 36 large cargo ships and 70 private owned yachts use this route.

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Although this may sounds life saving, it has its consequences too. Every few years, an El Nino’s impact is dealt with. Some years are more severe than others, for example, this year. Recently, on August, the government was obliged to impose new restrictions on how much cargo ships can carry. For a developing country like Panama, these small factors matter immensely. They hinder development and economic gain for the country. The restriction is that the maximum draught length can be 11.89 meters. The issue arose from limited rainfall in Gatun and Alajuela lakes. Rainfall is vital because the canal operates with water: as it consists of three different sections/locks, each section raises the ship to a higher level by compressing water under it. To raise such heavy ships to a higher water level, one can only imagine how much water and force is needed and for the moment, Panama lacks this quantity.

*Draught: the vertical distance between the ship’s hull and the water line.

An El Nino is a natural phenomenon that occurs every few years. This event affects many individuals in coastal areas all the way from floods and droughts to low fish catches. In other words, this phenomenon affects climate change immensely. During an El Nino atmospheric pressure switches (Southern Oscillation) and trade winds reverse, carrying warm water to the west coast of South America. The increase in surface water temperatures alters rainfall patterns.

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Although the authorities note that only six of the 36 daily passing ships will be affected, in the long run this could be economically harmful for Panama. Additionally, firms will not be able to export goods to their full extent; therefore, big ships will be futile for a period of time. Customers will be affected too: if they need large quantities of a good, so much that it exceeds restricted cargo weight, two ships will be needed, which will be economically disadvantageous for the buyer. If this problem affects more ships, this will be a problem for Panama. An average full cargo ship contains 3,800 full containers, each full container is charged 82 dollars; so, that’s 320,000 dollars already. Tugboats and ground assistant also account for another 30,000 dollars. In 6 months, if six ships were to change their route per day, this would sum up to 400 million dollars solely from cargo ships passing through the canal. In the long run, these numbers will become greater and result in great loss for Panama, especially when they are on the verge of economically developing. Also, Services account for 78.3% of GDP for the country; therefore, an economic loss in the area could be consequential.

Although the Panama government seems to be aware and has started to take some precautions by setting restrictions, the worry continues. Unfortunately rainfall cannot be regulated by the locals; therefore, circumstances for Panama may even get worse with need of further restrictions. After this issue, the locals should question whether the third lane for the canal, which has been in the process of building for the past few years, is appropriate or not.Without having the chance to use the third lane, the government may decide to drop to one lane use only if rainfall is limited.

 

Work Cited:

http://www.cbc.ca/news/world/el-nino-drought-spurs-new-cargo-limits-in-panama-canal-1.3184328

http://www.ctvnews.ca/business/panama-canal-to-temporarily-limit-cargo-on-bigger-ships-1.2507909

http://www.cheapestdestinationsblog.com/2013/07/19/how-much-does-it-cost-to-go-through-the-panama-canal/

http://oceanservice.noaa.gov/facts/ninonina.html

Categories: Economics

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