Panama City, March 3, 2015 --  

Panama's canal expansion project counts on shipping growth that may not come.

A series of phone booths lines the park in rhe small Panamanian town of Chitre. They are in great worling order despite being 20 years old. They all have paper phone books, updated to 2015 and work with smart phone cards invented in the late 1990s.

Bad infrastructure investment Photo © 2015 David G. Young

The same kinds of phones can be found all over Panama with stunning regularity and quantities. Somtimes they are full superman-like standing phone booths, more often smaller ones with mini partitions. While people are occasionally seen using them, not nearly as many as with their mobile phones stuck to their ear. And almost as numerous as the phone booths are the mobile phone stores found on nearly every commercial street in every town in the country.

The investment needed to build and maintain these phone booths was likely in the hundreds of millions. It probably seemed a good idea at the time, but less than two decades later, technology had passed them by. Either nobody could foresee major changes happening, or they dismissed the prospect as unlikely to happen.

Another massive infrastructure project is now taking place in the middle of the country. A huge expansion project promises to more than double the capacity of the Panama Canal by building a new and bigger set of locks that can fit much larger ships.

The project has been beset by delays and promises to finish it in 2015 look dubious based on facts on the ground near the Caribbean coast. Huge metal lock doors stand in a field towering over trees with no nearby ditch. The road to the existing canal's Gatun locks passes without going over any bridges. While satellite images show work progressing near Lake Gatun, the new canal is nowhere near ready.

Here's the lock. Where's the canal? Photo © 2015 David G. Young

Meanwhile, Chinese-backed competitors in Nicaragua have broken ground on plans for an even larger canal. Many say its chances of ever being completed are dubious -- even less than chances the expanded Panama Canal will be completed this year. But if the Nicaraguan canal is completed, it will be serious competition for Panama, undoubtedly affecting the profitability of the expansion project.

And what if something else happens?

Congestion in the canal is driven by East Asian manufacturing. Those container ships you see piled high in the Gatun locks are typically stuffed to the gills with Chinese goods heading to America's east coast.

Wal-Mart here we come Photo © 2015 David G. Young

But what if this trade flow slows? What if some of the hype about 3D printers proves to be true and people start manufacturing products near their homes? Too far fetched?

OK, what if rising wages in China shift much manufacturing elsewhere? That is already happening, much to other parts of Southeast and South Asia. But what if the process continues and manufacturing moves to Africa, the world's last large low-wage reservoir?

What if any of the above happen to some degree?

The folks building the new canals will tell you these things will never happen. Of course, the folks who invested in all those phone booths probably said the same thing, too.

Related Web Columns:

Murky Future, October 15, 2013