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Project Name: Panama Canal Expansion
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Country: Panama
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Highlights:
- The World Bank Group’s first direct engagement at the subnational level in Panama without a sovereign guarantee.
- The Panama Canal is an important element of the global marine transportation industry, handling 5% of all maritime trade and servicing trade between all major economies in the world.
- In 2005, Canal operations generated, either directly or through multiplier effects, some 18.6% of Panamanian GDP, 41.2% of its export volume, and 28% of fiscal revenue.
- The existing Canal is currently operating close to capacity and is unable to handle the larger, more efficient, post-Panamax container ships that have become the new industry standard.
- The Project would increase the annual capacity of the Panama Canal from 330 million tons to 600 million tons.
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About the Panama Canal:
Panama gained full control of the Panama Canal on December 31, 1999. As constitutionally mandated, the Canal is administered by the Panama Canal Authority (“ACP”). ACP itself is an autonomous legal entity of the Republic of Panama with exclusive responsibility for the administration, operation, conservation, maintenance and modernization of the Panama Canal and related services.
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Financing objective:
IFC financing supports the expansion of the Panama Canal with the objective of substantially increasing the Canal’s capacity and efficiency. The expansion includes the construction of a new set of locks with water-saving basins and improvements to navigational channels. Total investment needs have been estimated at US$5.2 billion.
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The structure of the project :
IFC provided a loan of US$300 million, with a maturity of 20 years and a grace period of 10 years. The loan is unsecured and not guaranteed by the government. IFC financing is part of a US$2.3 billion loan package provided in partnership with four other international agencies.
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The expected outcome:
Project implementation will ensure long-term sustainability and growth of the Canal, a key national and global economic asset.
The project would stimulate international trade and reduce global transportation costs as it will increase the Canal’s capacity and allow passage of post-Panamax ships. The project will also reduce the environmental impact of increased shipping volumes.
The expanded Canal is expected to boost Panamanian GDP and fiscal revenue, providing the government with substantial additional resources to implement its development program.
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