The canal and its significance-
The Panama Canal is an artificial waterway running across Panama, connecting the Atlantic and the Pacific Ocean, dividing north and south America. It aids the ships in passing through the two oceans by avoiding the hazardous Cape Horn route around South America and reducing their time. It takes 8-10 hours to navigate the canal compared to a two-week journey around the South American continent.
This 82km long route was inaugurated in August 1914 and is considered one of the most significant and challenging engineering projects ever. It has also been ranked as ‘one of the seven wonders of the modern world’ by the American Society of Civil Engineers.
The canal is substantial due to its strategic geographical location. It has more than 1,700 ports connecting more than 160 countries. It is also a significant US trade route. 68.5% of its trade has its origin or destination in the United States. Furthermore, it handles 3% of the world’s maritime trade.
Earnings and contribution-
The canal welcomes around 13000-14000 ships each year, 35-40 each day. Due to increasing demand and high competition throughout the years, it has undergone constant improvements and expansion projects. In 1934, the maximum capacity of the canal was 80 million tons, and by 2015, its traffic reached 340.8 million tons.
The Panama Canal Authority regulates the Panama Canal. Its revenue is generated chiefly (roughly 80%) by the transit toll paid by the vessels. Tolls are based on the vessel type, size, and type of cargo. The average transit toll is around $54000.
The canal generates about $2 billion a year, and approximately 40% ($800 million) goes to Panama’s General Treasury each year. The proceeds contribute to around 3% of Panama’s annual GDP.
Also Watch The World’s Shortcut: How the Panama Canal Works
The revenue generated by the canal was $2.7 billion in 2020, witnessing a 7.2% growth from the previous year. In the same year, 13,369 ships passed through the channel with a gross tonnage of 255.7 million.
Due to a vessel surge, the canal continuously improves and expands. The New Expansion Project of the waterway will increase its capacity from 330 million tonnes to 600 million tonnes. To cover the expansion expenses, we can expect the tolls to increase by 100% in the next few years.