Panama hopes to sail into 'first world' by enlarging its waterway

Advocates say it is vital, but critics fear the ambitious plan will sink the state in debt
Panama canal
A ship passes along the Panama canal. Photograph: Getty

The first efforts to build the Panama canal more than 120 years ago led to some 30,000 deaths, landslides and personal humiliation for the legendary French engineer, Ferdinand de Lesseps. Now an attempt is being made to launch a vast venture which would carve a new lane through the country and catapult Panama from "the third world to the first" in the space of less than a decade.

The expansion is being vigorously promoted by the president of Panama, Martín Torrijos, son of Omar Torrijos, the subject of Graham Greene's book Getting to Know the General. It was Omar Torrijos who, in 1977, successfully negotiated with the US president Jimmy Carter to transfer control of the canal from America to Panama, which eventually took place in 2000.

To its supporters, the expansion is a magical solution to the ills of a country where 40% live below the poverty line. To its detractors, it is a risky venture with unknown environmental, social and economic risks.

Yesterday, Samuel Lewis Navarro, the Panamanian vice-president and foreign minister, arrived in London on the first leg of a world trip to promote the plan to governments and businesses. The project will be put to a referendum in Panama, probably in November, and work could start as soon as next year.

The moves to expand the canal are due to the vast increase in trade and the size of container vessels now transporting goods. Currently, nearly 15,000 vessels go through every year, carrying more than 200m tonnes of cargo, figures that have been steadily increasing. In addition, the size of container vessels has been growing. Currently the canal only permits ships up to 965ft long by 106ft wide and with a draft of 39.5ft. At the current rate, the canal will reach its capacity by 2012.

Panama is also motivated by the fear that other countries may want to take advantage of the 4% of the world's trade that goes through its waters. Nicaragua has long examined the possibility of an alternative route and Mexico and Colombia have studied plans to shift goods transcontinentally by rail or road.

President Torrijos has warned: "If we do not meet the challenge to continue to give a competitive service, other routes will emerge that will replace ours." His aim is to increase the size of the canal to allow it to cater to larger vessels. The project is costed at $5.25bn (£2.85bn).

Currently, the plan put forward by the Panama Canal Authority (ACP) enjoys majority support in Panama. A poll in yesterday's La Prensa indicated that 58% favoured it, 20% were opposed and the rest were undecided. Other political factors may come into play, however, as Mr Torrijos has introduced unpopular social security reforms and the vote could be used to show opposition to this. The poll showed 50% of Panamanians did not "trust the integrity of the ACP" on managing the project.

Opponents, such as the organisation Campesinos Coordinator Against the Dams, have suggested that the move could land the country in crippling debt and would lead to displacements and environmental damage through flooding. One campesino protester, Digna Benítez, was quoted in the Panama News online yesterday, saying that the expansion would force people to move to the city, and that the referendum would be unfair because of the unequal resources of both sides.

Panama's foreign minister, Mr Lewis Navarro, said that the project would be financed by toll increases and commercial loans. Toll charges will double in 20 years. "There is no need for any displacements", he said of claims that people would have to move, "and there will be no need for any flooding of any new areas." He denied reports that the US favoured the expansion so its aircraft carriers would have greater mobility.

The scheme, he said, would "help Panama move from the third world to the first world". It is suggested that 7,000 jobs would be directly created.

Two "new lanes" in the 50-mile canal would be created for a distance of around eight miles at the Pacific end and three miles at the Atlantic end.

The canal remains one of the great engineering feats of modern times. Conceived by De Lesseps, the initial French attempt to cut a passageway between 1881 and 1889 foundered with the loss of thousands of lives through illness and landslides. De Lesseps was humiliatingly convicted of mismanagement in a French court.

The US, under the presidency of Theodore Roosevelt, took over the contract and completed the project between 1904 and 1914.