Chinese waterway in Central America

Why America got rid of mosquitoes in Panama

Malaria has been one of the most deadly tropical diseases over the course of human history. The WHO estimates that approximately 200m people contracted malaria in 2013. The economic toll is significant too: one study suggests that malaria reduces Africa’s GDP by around $12 billion each year.  This disease is also present in some parts of Latin America. But thanks to the US Army, the risk of catching the disease in and around the Panama Canal Zone is pretty low. How come?

In 1904 the US Army was tasked with helping construct a canal to connect the Caribbean Sea to the Pacific Ocean, to speed up the shipping of goods between the east and west coasts of the US. America was not the first country to attempt this deed. The British contemplated the same thought, but were deterred by the hostility of the politics and geography. The French, encouraged by the successful construction of the Suez Canal in Egypt, decided to take on the project. But the deadly mosquitoes hampered another French success.

When the US government bought the land in 1904, thousands of American troops were sent in with orders to destroy every habitat that could harbour the mosquitoes. The scale of the operation was huge and successful, at least in relative terms.

Panama Canal (Source: http://www.everyculture.com/No-Sa/Panama.html))

Picture 1: Panama Canal in 1914 (Source: http://www.everyculture.com/No-Sa/Panama.html))

 

 

 

 

 

 

A good investment for America

Shipping distance for certain US cities

Chart 1: Shipping distance for certain US cities

There was almost no commercial traffic on the canal during the First World War. However, from 1921 onwards the gains were quick.  This was largely due to the lack of competition in the region surrounding the Panama Canal. The the dawn of an American century gave way to the US west coast enjoying an oil boom and wanted a cheaper way than the steam train to move goods and fuel between the Pacific and Atlantic (refer Chart 1). By 1922 real shipping rates on some routes had dropped almost one-third. American taxpayers quickly recouped their investment.

The canal also had strategic value. After the Spanish-American war in 1898, the United States needed a naval route between Atlantic and Pacific. In the later years, the canal was central to America’s economic penetration into Asia, Europe and Africa. As indicated in the Picture 3 below, the canal was pertinent to not only reinforce US trade dominance in the Americas region, but to also assert its economic power in previously untapped Asia and Europe.

After the Second World War, America’s trade with Asia soared much more than that between its east and west coasts. As indicated in the Chart 2 below, over the history of the Panama canal’s life, a large part of the traffic growth is due to the increase in US-Asia trade.

Panama Canal Traffic

Chart 2: Panama Canal Traffic

Changing dynamics – China has its eye on the canal

With the canal soon to complete its first expansion in a century, there are again hopes that it will transform interoceanic trade. Although approximately 100 years have passed, numerous commercial and geopolitical interests are still at play, more so now than before. On the eve of the anniversary of the Panama Canal’s opening in August 2014, the Egyptian government announced a plan to upgrade the Suez Canal for the first time in its 145-year history, backed by some Chinese investors. In addition, Nicaragua once considered too earthquake-prone for a big canal, is trying to rekindle its 19th century dream. Its government has endorsed a 278 km (173 miles) route for a $40 billion canal linking the Atlantic to the Pacific, financed by an agreement between a little-known Chinese magnate and the country’s government.

To add to the intrigue, in August 2014, a delegation of Chinese businessmen from the state-owned China Harbour Engineering Company visited Panama to explore the idea of building and financing a fourth set of locks—even before the third set (part of the existing expansion plan) are in place. All of these indications reflect China’s intention to have a bigger say in Americas region, which has been to-date dominated by the US. Some would also say this is an extension of the China’s motives to dominate trade and commerce through its strategic involvement in ports and canals along the “silk route” and therefore will have greater implications for international relations in the medium to long-term.

Conclusion

While time will indicate the directions of the geopolitical power play between the two biggest economic super powers in the Americas regions, two conclusions can be drawn. Firstly, China will have a foothold in central America as it is in its economic and political interest to do. In recent years, China has invested in strategic infrastructure projects throughout Latin America and so it of no surprise of its interest in the Panama Canal expansion.

Secondly, Panama should focus on the long-term.  The country has done a good job of running the canal so far. In a fiercely competitive shipping market, the key to country’s competitiveness may be issues like the size of its tolls. Further, contemporary Panama is better placed to reap the benefits of potential FDI flowing in. The public employees of the ACP have shown they can earn money honestly and effectively. If the state’s other servants follow their example in spending it, the rising waters of the newly expanded canal may truly lift all Panamanian boats.

Sources:

http://www.porttechnology.org/images/uploads/technical_papers/PTI-3.pdf

http://useconomy.about.com/od/tradepolicy/p/Panama-Canal-Expansion-Impact-On-U-S-Economy.htm

http://businessroundtable.org/media/blog/panama-canals-centennial

http://www.ibtimes.com/panama-canal-anniversary-2014-world-changing-economic-impact-canal-1656834

http://www.economist.com/node/15014282

http://www.miamiherald.com/news/business/article1979570.html

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One Response to Chinese waterway in Central America

  1. Isla says:

    Hi there, after reading this amazing post i am too cheerful to share my familiarity here with
    colleagues.

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