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At the IDB, we believe that together we can go farther. Our partnership network is making positive differences in Latin America and the Caribbean every day, and this blog is our channel for telling that story. Stay tuned for literature on partnership perspectives, stories from the field, changing trends, outlooks for development and the region, information on ways and opportunities to partner, and more. Thanks for stopping by.

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The View from the Stern: Looking Back, Moving Ahead

By - Aug 15 2014


A Charm of Adventure

“There is a charm of adventure about this new quest…” the New York Times wrote in the late 1800s, referring to the seedling of an idea then buried deep in the imagination of a French entrepreneur and the ambitions of a Southward-looking United States Navy.  A few decades later, the seedling manifest in a manmade marvel, a feat of human engineering unlike the world had ever seen before, “the greatest liberty,” to quote James Bryce, British Ambassador to the United States at the time of construction, “that man has ever taken with nature.”

Unveiled a century ago Friday, the world that cut the ribbon on the Panama Canal was a very different place. Democracy was young, European imperialism waning, and US Dollar Diplomacy gaining speed. Industrialization had begun transforming the face of commerce, trade and life in general, but no one could fathom the leaps and bounds this technological revolution would take in the century to come. At its completion on August 16, 1914, the Canal stood as a triumph of man over nature, and an ode to human ingenuity at the turn of the 20th century, a milestone whose implications for trade, geopolitical relations, medicine, engineering and more marked the dawn of a new era.

The Price of Progress

But though the fruits of the canal were undeniably plentiful, their harvest came at quite the cost. Construction of one of the world’s longest shortcuts meant moving mountains (literally – the Cordillera de San Blas sat smack in the way), taming impenetrable jungle, escaping bouts of malaria and yellow fever, and facing the impossibility of building a sea-level canal. As David McCullough so plainly states it, the capital, sweat, and blood invested in the Canal represents “apart from wars, the largest, most costly single effort ever mounted anywhere on earth.” By July 1914, construction had culminated in $7.5 billion (in 2007 dollars) spent, 268,000,000 cubic yards excavated, and at least 25,000 lives lost to disease, injury, and more.

Today however, it’s clear that whatever the cost, the Canal cemented the region’s position as the crossroads of international commerce, as the realization of a 400 year old dream for a gateway to the Pacific. In more concrete terms, the transoceanic route positioned Panama as the fastest growing regional economy, with a growth rate trumping even that of its Asian counterparts. It makes a direct annual contribution of $1.2 billion (or 8%) to the Panamanian government budget, and indirectly influences about 25% of GDP. Its impact on world trade is equally impressive. Measuring about 80 kilometers in length, more than a million vessels from around the world have traveled the waterway via any of 144 maritime routes that link more than 80 countries. In a single day, an average of 38 ships transit the Canal, transporting about 5% of total global cargo.

Into the Horizon

Yet despite these figures, it’s clear that technology has outgrown this 1914 marvel. As the introduction of “megaships” and increased commerce threatened to render it obsolete, the Inter-American Development Bank (IDB) began working with the Panamanian government in the 1990s to evaluate and design alternatives for the Canal’s expansion and watershed management. Conducting environmental and social studies, the Bank launched a sustainable development project for the Canal watershed in 2005 and carried out community outreach efforts in the Canal’s surrounding area.  Work on expanding the Canal officially began in 2009, a $5.25 billion project that brought the IDB and several of its partners together to finance one of the largest infrastructure projects in the world. Contributing $400 million in loans, the IDB is joined by the Japan Bank for International Cooperation, the European Investment Bank, the International Finance Corporation, and Corporación Andina de Fomento in this endeavor, which is scheduled for completion in the year to come.

Thanks to these investments, the Canal offers the region more growth than ever as it approaches its 100th birthday. Construction continues to showcase large-scale and urban mobility infrastructure progress in Panama, as well as the strong and entrepreneurial government needed to manage this massive undertaking. Direct work on the Canal is slated to generate 45,000 new jobs, increasing employment on the Canal by 10-15%. By 2025, the Canal is projected to earn more than $6 billion annually.

A century later, the region’s largest infrastructure project promises the same charm of adventure as it did to an 1800s world to whom a waterway to the East seemed an impossibility, a dream. As hundreds of millions are invested and 130 million tons of earth are excavated, the Isthmus of Panama will once again transform the fortunes of tens of thousands, connect the distant corners of the world, and make waves in the spheres of trade and engineering that will change the tide for the century to come. The manmade marvel revealed to the world 100 years ago was the match that illuminated a century of innovation, ingenuity, and inventiveness. Let’s hope its expansion triggers 100 more years of all that, and more.

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