The Panama Canal, a vital economic artery connecting the United States and China, is facing its biggest crisis in recent memory due to an unprecedented water shortage in the region. This has resulted in a significant drop in revenues for the maritime corridor, with the Panama Canal Authority predicting an income decrease of between $150-200 million for the upcoming fiscal year.
The drought has forced the Panama Canal to limit the daily number of ships transiting through the waterway to just 32 from the usual 36-38, resulting in reduced trade capacity and income for the government-run agency. Panama Canal Administrator Ricaurte Vásquez said in a statement that “we are planning that we are going to transit between 30 and 32 ships per day (in fiscal year 2024), instead of the 36 to 38 ships that we transit regularly, when we have the water capacity,”. This, he added, was clearly reflected in the agency’s budgeting for FY2024, with the financial projections based on an expected draft of 44 feet and a maximum daily transit of between 30-32 vessels.
The Canal is heavily dependent on the rain-fed Gatun and Alajuela lakes for its water supply, and the extension of the dry season has greatly impacted the levels of these lakes. Unfortunately, the rainy season has only just started and it remains to be seen if this year brings enough rainfall to fill the reservoirs.
The Panama Canal serves as a key trade route between the US and China, with 3% of world trade passing through it every year. In order to cushion the effects of the drought and allow more ships to navigate the canal, the agency has increased the service capacity of the route, which saw the inauguration of a new set of locks seven years ago to accommodate the passage of larger vessels.
The Panama Canal Authority hopes that the situation will improve in the coming months, but has warned that if the crisis persists, the agency will be forced to take further restrictive measures to preserve the water levels of the canal. For now, the agency will continue to work hard to make sure that its revenue goals are met while carefully managing the resources of the area.
With information from AP
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