How serious are the alternatives to the Panama Canal?

By Jean-Paul Rodrigue.

Old Ideas, New Context

The expansion of the Panama Canal is triggering renewed interests about the role of function the canal is playing in global trade as well as its alternatives. To better assess these alternatives, it is worth having a look at which routes were considered in the past and why the Panama alternative was retained and developed in the first place. Through the centuries of European and American involvement in Central America several routes were considered and eventually discarded as an option to link the Pacific and Atlantic oceans. The first surveys were done by the Spanish in the 16th century and recommended routes that would remain for centuries the most viable options for a transoceanic canal. The Panama and the Nicaragua routes were the top contenders. All these routes also served to some extent as portage routes.

By the mid 19th century the commercial (growth in trade and larger ships) and technical (heavy machinery) conditions incited renewed interests and more comprehensive surveys of the canal routing options that are depicted on Figure 1.

Figure 1: Central American Canal Routes Considered

By order of interest and potential these routes were:

1. The Panama Canal route that was selected as the most suitable because of the shortest distance and thus the lowest construction cost (highest elevation at Lake Gatun, which is 85 feet / 26 meters above sea level).

2. The Lake Nicaragua route, which was also considered a possibility, particularly in 1884 when the governments of the United States and Nicaragua agreed upon a memorandum to build a canal. However, the project was abandoned in part because of prohibitive construction costs but also because in 1904 the United States acquired the failed French concession in Panama. There were also concerns about the volcanic activity of mount Conception that sits in the middle of Lake Nicaragua and that has been recursively active. Lake Nicaragua is 107 feet (32.7 meters) above sea level. However, access to the Pacific Ocean from Lake Nicaragua must pass through a coastal mountain range where the lowest point is around 185 feet.

3. The Isthmus of Tehuantepec Route, which represents the shortest distance between the Gulf of Mexico and the Pacific Ocean. Several routes were investigated in the 19th century to build a canal, but the distances involved made this option less attractive than the others. In the 1880s, a plan was devised to build a transoceanic ship railway through the Isthmus that would carry ships on a six tracks rail corridor, but such a plan was abandoned. In 1907 the Tehuantepec National Railway, which linked the ports of Coatzacoalcos (Gulf of Mexico) and Salina Cruz (Pacific), was opened. It offered an efficient transoceanic alternative that at its peak (1913) carried 850,000 tons of cargo. However, after the opening of the Panama Canal in 1914, the railway lost its competitiveness and ceased to be used as a transoceanic option.

4. The Darien route. In the 1850s an expedition sponsored by England, France and the United States was sent to survey a potential canal route across the isthmus of Darien, from Caledonia Bay, on the Caribbean coast, to the Gulf of San Miguel, on the Pacific. Although both sides were judged to have excellent harbor facilities, a practical path across the 65 km isthmus could not be effectively assessed.

5. The Gulf of Uraba route. An option that was surveyed, but judged to be too expensive, particularly since it would have necessitated the construction of a ship tunnel.

The Short and the Long Routes

At the macro level, due to the world's geography, there are two intercontinental connectivity alternatives; those linking Asia and Europe and those linking the Pacific and Atlantic Oceans. The Panama Canal is obviously the shortest operational route between the Atlantic and Pacific oceans. After close to one century of existence, the Panama Canal which emerged as the most suitable alternative to build a transoceanic canal is itself facing its own alternatives that are existing (that are currently competing) or potential (that could eventually compete), maritime or overland-based (see Figure 2).

Figure 2: Main Routing Alternatives between the Pacific and Atlantic

The maritime alternatives are those involving a continuous maritime segment. The Magellan Route circumnavigating South America imposes a substantial detour but offers the opportunity to pick up or drop off cargo along the way (e.g. Brazil, Argentina, Chile). The Northwest Passage, along with other Arctic routes, is the shortest route between the North Pacific and the North Atlantic, but remains hazardous to navigation and does not offer any significant opportunity to pick up or drop off cargo along the way. The Suez Canal is also an alternative to Panama, particularly in light of economic growth in South and Southeast Asia. Singapore, the world's second largest container port, is often considered as the "line of indifference" between the use of the Panama or the Suez routes to reach the U.S. East Coast, so any cargo transiting through Singapore has the Suez option. The Cape Route through South Africa is also offering an alternative to the increasing trade relations between Brazil and Argentina with China. 

From Routes to Landbridges

The overland alternatives are more numerous. The first and often less obvious alternative is the Panama Canal Railway that has experienced a notable growth, but not necessarily as a competing route. The growing role of Panama as a transshipment hub is supported by the complementarity the railway offers in quickly repositioning containers across the isthmus. The North American landbridges composed of the Canadian, American and Mexican landbriges are operational realities. Still, their role is not necessarily to offer an alternative to the Panama Canal, but options to shippers servicing North American supply chains with a faster alternative. Their diversion effect remains limited, particularly since in recent years the Panama Route was able to gain some market share over the landbridge route. Other landbridges in Central or South America are simply projects of unknown market potential, such as the Central American Landbridge through Nicaragua. Since the 16th century, the Nicaragua route was considered as an alternative with interests coming and ebbing as the idea it represented to see if it can generate commercial interests. In 2013, the government of Nicaragua announced that a 50 years concession has been signed with a Hong Kong firm with the goal to develop a canal able to handle ships in excess of 250,000 tons. Such a project would require massive infrastructure and capital investments with uncertain commercial potential. The last relevant overland alternative is the Colombian land bridge, which should be considered less as an alternative to the Panama Canal than as a Colombian national strategy to improve the accessibility of its hinterland to both the Atlantic and the Pacific.

Therefore, the alternatives to the Panama Canal has different level of impact, most of them relatively marginal. Some, like the North American landbridge, the Suez and Cape routes, are serious alternatives offering routing options to shippers, while others like the Nicaragua Canal face great challenges and remain an open question. Their respective advantages, like Panama's, are related to the constantly shifting patterns of global trade they service. When trade relations and volumes change, so does the fate of transoceanic passages.

Jean-Paul Rodrigue. With a Ph.D. in Transport Geography from the Université de Montréal, he has been a professor at Hofstra University (New York) since 1999. Rodrigue's research interests cover the fields of transportation and economics as they relate to logistics and global freight distribution. He is a member of the PortEconomics.eu initiative and of the World Economic Forum’s Global Agenda Council on Advanced Manufacturing (2011-13). He was commissioned by UN-Habitat to write a chapter about urban freight distribution for the 2013 Global Report on Human Settlements.