The Panama Canal’s Declining Reliability
For more than 100 years, the Panama Canal has been a critical component of the overall trade within the world economy, and its profitability has reflected that status. Goods—worth an estimated $400 billion in 2022 alone—naturally tend toward the canal, which is why Mexico’s Inter-Oceanic Corridor also has a natural profitable direction: from the Pacific Ocean eastward to the Atlantic.
However, putting either route to work faces considerable challenges, which number and which are outlined in the articles that follow. The two articles take opposite perspectives. The first—to be sure, with a wink—is pro-Panama Canal. The second is pro-Inter-Oceanic Corridor. Both are right. The first route is being threatened; the second route is facing serious difficulty.
Mexico’s Inter-Oceanic Corridor: A New Opportunity
The global shipping industry is worth trillions. Cascading supply chain disruptions can have effects felt globally, including on economies and consumer prices. According to the World Bank, the volume of global trade is set to increase 4% a year—up from projections made just a couple of years ago. By 2030, the number of people living in emerging economies will equal the number of people living in developed economies today. Those billion-plus emerging economy consumers will want everything from smartphones to fast food, and that demand will have to be met by transporting goods efficiently across land and sea. Mexico’s planned Interoceanic Corridor might someday do a decent job of serving those transport needs—if it was set up to do that, which it isn’t. Convincing investors it’s viable is one challenge. Meeting the goals of alleviating poverty and creating equity for those affected by it is another.
Challenges Ahead for Mexico’s Shipping Ambitions
The concept of the Inter-Oceanic Corridor is over a century old. In 1907, it was built to transport what would be large quantities of cargo, such as Hawaiian sugar, quite a distance across the Isthmus of Tehuantepec from coast to coast. But it was never very successful. It was, in some ways, a half-hearted attempt by the Mexican government to develop Tehuantepec and connect the impoverished southern states of Mexico to the country’s economic mainstream. Now, the government, led by President Andrés Manuel López Obrador, a populist with a colorful history of using federal power to get his way, wants to revive the corridor. The idea is that a railway across the isthmus will connect the key ports of Coatzacoalcos and Salina Cruz and, with some between-the-lines reading, that it will help deepen the two ports and so connect the impoverished southern states of Mexico to the economic mainstream.
The corridor may promise faster shipping times, but its actual performance is less certain. The Panama Canal takes from 8 to 10 hours to traverse. The railway, when you add in the time to load and unload the freight at either end, could take as long as 15 hours. Even under the best circumstances, then, the corridor operates at, and can only aspire to operate at, something akin to the efficiency of the canal. And that might not be enough. Currently, the canal can fit vessels with a beam, or width, of 106 feet. The biggest ships in the world today have a beam of about 140 feet. Even if you don’t count the loading and unloading of the train from one side of the corridor to the other, we’re still talking about a project that could take up to 30 percent more time to get the same cargo to the same place on the other side of the route.
Potential Economic Impact and Community Concerns
Building the railway and the related industrial projects threatens the delicate balance of the local environment, especially the seemingly fragile ecosystems nearby. Barring any unforeseen disasters, the construction period will likely be marked by a little over two years of 722 local workers (mostly from the island of Cozumel), 7,300 Mexicans, and 1,600 foreigners working for consortiums. Like any other development, the potential downside must be balanced with the potential financing of 39,000 local jobs and 187,000 indirect jobs over 27 years, as the consortium expects to earn back its investment and start to turn a profit. In short, the local environmental impact is an up-for-grabs debate that is not likely to end before the corridor starts to function.
The average reader likely considers that the implications of the Inter-Oceanic Corridor go far beyond the shipping business itself. Everyday prices, jobs, and the ethics of development are at stake. The shipping industry and its customers in the global economy are demanding alternatives to the Panama Canal. Having said this, let us not underestimate the enormous challenges that the Inter-Oceanic Corridor faces if it is to make a plausible claim to being an alternative route. It is likely to enjoy some benefits over its principal competitor, but those benefits must be seen in the light of overcoming some serious difficulties. In the end, understanding these dynamics matters, because they have enormous potential consequences.
As global commerce changes course, Mexico finds itself at a key moment in history. The choices being made now about the Inter-Oceanic Corridor could reshape the nation’s economy and, just as importantly, the international shipping industry for a long time—maybe forever. Will Mexico take this opportunity to step on the gas and become a major player, or will it simply coast and let things happen to it? The whole world will be paying attention.