UK Peers witness effects of El Niño during visit to Panama Canal
No visit to Panama would be complete without a look at the Canal Locks in action.
We met with the President of the Canal Authority, Aristedes Royo Sanchez, who is a former President of Panama and father of the current Ambassador to London, Natalia Royo, and Victor Vial, the VP for Finance.
The Canal is very important for the Panamanian economy, accounting for over 2% of national income. But this figure fails properly to convey the importance of the Canal to the nation. The Canal, which this year celebrates its 110th Anniversary, has brought significant economic advantages. About 15 per cent of world shipping traffic, including about 30 per cent of global container trade, transits the Canal’s 50 mile stretch of water. As a result Panama has become a regional distribution hub, with huge warehouses located in the canal zone freezone (including one owned by the major British company London & Regional); it is moreover a centre in the provision of some maritime services. Panama is also one of the largest ship registers, with some 8,000 vessels globally under Panamanian flag. With all of this comes employment for financiers, lawyers, technical specialists, etc. The country has a voice at the highest levels of international maritime. In the recent election their candidate, Arsenio Dominguez, was elected Secretary General of the International Maritime Organisation, located here in London.
However the Canal Authority currently faces serious difficulties. The country which, we were told, is rated the fifth wettest nation on earth is currently experiencing exceptionally low rainfall as a result of the current el niño year. Each time the locks at one end or the other of the Canal is opened for a ship, some of the precious water (which also has to supply drinking water to two cities) is lost into the Pacific or the Caribbean. In a normal year, there would be 36 vessel transits daily. However this was reduced to 32 transits in late July 2023, and lowered again to 24 in November and 22 in December. We were told in the meeting (19th January) that they were currently managing 24 daily. All of this is most unfortunate for the Canal business, which has been working on expansion plans, but also unfortunate for the world, at a time when transits through Suez are seriously impacted by the Houthi attacks in the Red Sea. The impact on some freight rates, notably for container ships, has been marked.
The Canal authority is studying what can be done to reduce the loss of precious water into the ocean whilst also seeking to mitigate possible future el niño effects. The Canal Authority and the nation take very seriously their responsibilities as a critical ocean transport artery; much thought and effort is going into resolving current difficulties, and the ambition remains to increase the Canal’s capacity in the future. They are also looking at means to reduce the climate change impact of the Canal wherever possible, including providing LNG supply in the canal and ordering new fuel efficient tugs, as well as looking at the supply potentially of green hydrogen for ships.
A highpoint of the visit to Panama was visiting the old locks at Miraflores on the Canal. The Authority has built a splendid viewing facility and we were fortunate to see a tanker of around 45,000 dwt going through the locks and about to exit into the Caribbean. As the ship was about to depart, cheers rose from the crowd watching. This elicited further cheers, waves and tooting of the ship’s horn from the ship’s side. Clearly the crew were delighted to see their work recognised, a touching moment of contact for the hard-working crew who, when at sea, in all probability have limited opportunity to react with wider humankind.
Delegation walking alongside the Panama Canal
Delegation in the British Embassy in Panama City
Meeting on Trade, Investment and Industry in Panama
