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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

February 12, 2024

How Much Is the Drought in Panama Disrupting Trade?

Drought has forced the Panama Canal Authority to restrict ship transits through the waterway, and a United Nations official said last month that the restrictions are crimping global trade. // File Photo: Panama Canal Authority.

Q

  • Drought conditions have forced government authorities to limit ship crossings through the Panama Canal, potentially costing the Central American nation between $500 million and $700 million in 2024, according to the canal’s administrator. A U.N. official said Jan. 26 that traffic through the canal is down 62 percent as compared to two years ago, disrupting global trade and increasing prices. How significantly are the limitations on ship transits through the canal affecting global trade, and which industries are most affected? How are shippers adjusting to the restrictions? Less than a decade after Panama expanded the canal, is there more they now must do in order to avoid future disruptions caused by environmental factors?

A

Joaquín Jácome Diez, senior partner at Jácome & Jácome in Panama City and former trade minister of Panama: “At its full capacity, the Panama Canal can handle roughly 36 daily transits. Due to the existing weather challenges (which we expect to be temporarily), the Panama Canal Authority was forced to impose draft restrictions to vessels and limits on the number of daily transits for the first time ever. Last month, the number of transits was increased to 24 from 22 (seven Neo Panamax and 17 Panamax). Due to planning ahead, container cargo vessels are less likely to affect global trade than vessels carrying oil, grains or other cargo. Some canal customers are opting for using multimodal Panama logistic facilities (train and highways) in order to unload cargo on both sides of the canal prior and after transit, reloading part of the cargo or feeding to some liners. The Panama Canal Authority’s 2024 budget was based on…”

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The Inter-American Dialogue publishes the Latin America Advisor every business day for a distinguished membership of informed corporate leaders, scholars, and government officials invested in Latin America’s development and future. The Advisor‘s highly regarded Q&A section covers questions submitted by subscribers themselves. Commentators regularly include heads of state, business leaders, diplomats, economists, analysts, and thought leaders from around the world. Many of the world’s largest and fastest-growing companies subscribe to the Advisor. To subscribe, click here. For terms and conditions, click here. For more information, contact Gene Kuleta, editor of the Advisor, at gkuleta@thedialogue.org.
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