How Will The Panama Canal Expansion Affect Global Economy?

After 10 years of work and $5.4 billion in investments, the new access lane to the Panama Canal will open on Sunday, tripling the capacity of the original canal, which was inaugurated more than a century ago.

As readers might imagine, expectations have been building up for quite some time, and so have investments. In fact, so much money has been spent around the world, from New York to Brazil and even the Netherlands, that the $5.4 billion price tag suddenly seems insignificant.

For instance, in order to be able to welcome the mega ships that will go through the Canal, the Port Authority of New York & New Jersey spent $6 billion in harbor deepening tasks and related projects, Beth Rooney, an assistant director with the port, said.

Related Link: The Panama Canal Is About To Double In Capacity

Now, in the eve of the new lane's debut, a few questions arise. In a context of softness in the shipping industry, will the investments pay off? Will the expansion of the Canal have an impact on global economy that is comparable to the one the original Canal had?

One thing is for sure: Taking into account that the renewed Canal will allow ships to transport almost three times as many containers as they could before the overhaul, some products — like natural gas, which couldn’t be carried across the Canal — will be able to go from the Atlantic Ocean to the Pacific Ocean much faster.

Nick Pansic of MWH Global went on to explain, “It’s not just a matter of importing more stuff to meet our [the U.S.’s] demand, but there’s a real opportunity for the export of agricultural products more efficiently to Asia.”

“Panama Canal Authority officials are so optimistic the global shipping slump will end, they are thinking about how the canal will host even larger ships,” a USA Today article read. And, while such ships still represent a very small percentage of the total fleet, and thus, do not need immediate attention, the Panama Canal Authority has reserved some land, just in case they decide to build a fourth set of locks in the future.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.