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Business & Economy Briefs

Shipping industry complains about PanCanal toll hikes

by Eric Jackson, mainly from other media

At a March 14 public hearing and in a series of press releases and other statements, many of the Panama Canal's customers and other influential business and governmental organizations have objected to or questioned the Panama Canal Authority's (ACP's) decision to front-load the toll increases it had said would be made in order to finance the canal's expansion. This past February the ACP announced a new set of tolls which, according to the type of vessel, would beginning on October 1 of this year increase the cost of going through the canal by 26 to 34 percent over a three-year period. During last year's referendum campaign, the ACP said that tolls would go up an average of 3.5 percent every year for 20 years in order to pay for the third locks project.

The Singapore Shipping Association, which represents some 300 shipping companies that are mainly located in a place where the Suez Canal provides convenient alternatives to the Panama Canal on routes to Europe and the Atlantic side of the Americas, complained that the increases are too steep and sudden and "will only exacerbate the current economic pressure which the shipping industry is currently facing and could have negative and unacceptable consequences on the world economy.”

The Suez Canal management has announced that it will lower its tolls on routes in which it competes for business with the Panama Canal.

The International Chamber of Shipping, the International Association of Dry Cargo Shipowners and the International Association of Independent Tanker Owners submitted a joint statement to the ACP, similarly complaining of the sudden and steep toll hikes.

The governments of Latin American countries that heavily depend on the Panama Canal have also expressed concern, though generally not as stridently as they did when the ACP last increased its tolls.

The ACP and its supporters in the local business community generally brushed off the complaints. The authority claims that its toll hikes were proposed after careful studies of shippers' actual costs and with the knowledge that even with the higher tolls it will still be cheaper for them to use the Panama Canal. That is almost certainly true over the short term if one rules out new alternative routes and lower costs on existing competing routes. But over a longer term higher costs here may promote the creation or expansion of other alternatives elsewhere, and at that point the calculations become much more complex and speculative.

That longer term uncertainty was probably part of the ACP's calculation. If the authority doesn't know whether its present customers will still be doing business with Panama a decade from now, it might just be prudent to charge them as much as possible while it's reasonably certain that they have no other place to go.

Jailed over a contract dispute: Bobby Hammond's and Tammy Pace's story
A competitive service sector: presentation at the recent Caribbean Business Forum
World shipping industry objects to steep rise in Panama Canal tolls