The Panama C made a lot of headlines after Trump's controversial statement on it
Has anyone ever heard of the Panama C? Because we're being ripped off at the Panama C like we're being ripped off everywhere else
Later, the Panama C Authority denied free passage for U.S. vessels and worsened the conflict
just for a short period. But while the world was focused on this fight
no one's talking about the plans already underway to break the Panama C's monopoly
and China's secret involvement. The legendary Panama C is an 82-kilometer or 51-mile
man-made waterway and is one of the most important trade routes in the world
It links the Pacific and Atlantic Oceans, handling 5% of global trade
which adds up to a massive $270 billion worth of cargo every year
But that's old news now, because the Panama C's in trouble, and Mexico's already preparing its rival. The nightmare of Panama
the Interoceanic Corridor. For the past few years, a severe drought has been sinking the
c's water levels, and the impact is massive. Recent reports say vessel traffic has dropped by
around 29%, and some sources claim global trade through the c fell nearly 32% in 2023-24
compared to 2022. While the Panama C is struggling to survive, Mexico is preparing its
rival. Technically, it's an old rival, but now it's making a huge comeback in a brand new form
This project is the 188-mile interoceanic corridor in the isthmus of Tuantepec
Mexico's ambitious project that's getting a $7.5 billion investment from the Mexican government
But the question is, why is the Panama C so important for the world
Why can the interoceanic corridor become its biggest rival? And most importantly
why is Trump so angry about the Panama C's dominance? And where does China come into the
picture? But before we begin, please take a second to help us by simply clicking on the
like button below. It helps us out a ton with the algorithm. Thank you
Now let's have a look at the map, and you'll see that the Isthmus of Panama connects North
and South America. Here, Isthmus simply means a narrow piece of land with water on each side
that joins two larger pieces of land. But the problem here is that there's no natural waterway
between them to link the Atlantic and Pacific Oceans. Before the Panama C existed, traders
and travelers had only one option, sailing all the way around the southern tip of South America
known as Cape Horn. This route was not just long but also dangerous and added weeks or even months
to their journey. For example, imagine a cargo ship traveling from Spain to California without
the Panama C. The ship would have to cross the entire South Atlantic Ocean, rounding Cape Horn
at the tip of South America to reach California. They have to cover approximately 31,500 kilometers
and it takes a minimum of 35 to 40 days to complete the journey. With fuel consumption
costing $30,000 to $35,000 per day, the total fuel cost for the ship would range between $1.2
million and $1.4 million. On top of that, the extended travel time not only increases costs
but also risks damaging the products due to the prolonged journey. This added time and cost would
make the goods more expensive for consumers. And even if you overcome all these challenges
the waters of Cape Horn won't be kind enough to let you pass. Why? Extreme weather conditions like
strong winds, large waves, and treacherous currents in Cape Horn make it a difficult area
for ships to navigate. In fact, it's often referred to as the most dangerous sailing area
globally. But with the Panama C, ships could cross it in just 8 to 10 hours and complete their
entire journey in 15-20 days. So a ship traveling from Spain to California via the Panama C
would spend $450,000-$700,000 on fuel, which is between approximately 40-70% cheaper. The traders back then understood this, and to cut down on time, cost, and risk
started looking for a shortcut, a way to connect the two oceans without having to sail around an
entire continent. And that's how the idea of the Panama C was born. In 1850, the US and
Britain signed the Clayton-Bulwer Treaty, basically agreeing not to fight over a c
in Central America. The plan was to build it through Nicaragua, but it never got past the
planning stage. Then came the French, led by Ferdinand de Lesseps, the mastermind behind the
Suez C in Egypt. In 1880, they started digging through Panama, which was then part of Colombia
But nature turned out to be brutal. Malaria, yellow fever, and terrible weather conditions
killed around 20,000 workers. After nine years, the project went bankrupt. By 1901, the U.S. had
its eyes on Panama. The Hay-Poncefoot Treaty scrapped the old agreement with Britain, giving
the U.S. full control over building and managing the c. After some serious debate, the U.S
approved Panama as the c's location on June 19th, 1902. But it had a problem, as Panama was
still under Colombian control. So the U.S. tried to negotiate. In 1903, Colombia's representative
in Washington, Tomas Heran, made a deal with U.S. Secretary of State John Hay. The U.S. Senate
approved it in March, but Colombia's government rejected it in August. But there was no way the
U.S. would stay silent on the Panama C, because they very well knew how critical this
would become once it gets operational. The U.S. decided to take action. Then President Theodore
Roosevelt wasn't about to take no for an answer. Panama had been ruled by Colombia, but the
Colombian government was reeling from a bloody civil war, so the Roosevelt administration saw
an opportunity. The U.S. offered to support Panama's independence in exchange for the right
to build and control the Panama C in the U.S.-controlled zone, so U.S. warships were sent
to Panama City on the Pacific and Cologne on the Atlantic, preventing Colombian troops from
interfering. The thick Darien jungle also made it difficult for Colombian forces to advance
So, on November 3rd, 1903, with US support, Panama declared independence. A few weeks later, on November 18th, 1903, the new Panamanian government signed the
Hay Bono Verilla Treaty, giving the US a 10-mile-wide strip of land for the c
In return, Panama got a one-time payment of $10 million and an annual fee of $250,000
Although the deal was finally signed, no one could have imagined the thousands of innocent
lives this ruthless c would cost. You see, digging the Panama C was actually insanely difficult
Workers had to use dynamite, drills, and steam-powered shovels to remove over 200 million cubic meters of earth
This is so huge that it's almost twice the height of the Empire State Building if stacked up
Basically, they didn't just dig a c, they built a man-made mountain
And if that wasn't enough, workers faced brutal conditions. 40 degrees Celsius temperatures, rock slides, heat stroke, and deadly tropical diseases
All of this nearly killed 6 workers during construction but it still had the biggest technical issue the elevation The highest point of the c was 30 meters above sea level
so engineers had to create a system of locks and gates to raise and lower ships
allowing them to climb up and back down again. And this was actually an engineering marvel
The c cost the U.S. $375 million, which is about $12 billion today
After 10 years of construction, the Panama C officially finally opened in August 1914
and SS Ancon became the first ship to cross the c. Despite all the challenges, dangers, and sacrifices
the c became one of the most important trade routes in the world. For nearly a century, the U.S. controlled and operated the Panama C
But on December 31st, 1999, that changed because Panama officially took over
This was all part of a 1977 treaty signed between the U.S. President Jimmy Carter and Panamanian leader Omar Torrios
Under this treaty, the U.S. agreed to hand over control of the c by the year 2000
However, the deal still allows the U.S. to help maintain and operate the c
The c is open to ships from any country, and while the U.S. has influence
the treaty does not give it the right to take back ownership of the c. The newly elected U.S. President Donald Trump thinks it was a big mistake
During his inaugural speech, US President Donald Trump openly criticized the handover of the Panama C
He even went further and called the c's transfer a foolish gift to Panama and said
We've been treated very badly from this foolish gift that should have never been made
He added that Panama's promise to us has been broken. But what was he exactly concerned about
Actually, Trump was frustrated about two things. Firstly, the US military doesn't get free access to the Panama C
and even the US commercial ships, like any other ship, need to pay huge fees to pass through it
The second, and more concerning, was China's growing influence over the c
He claimed that China is operating the Panama C, and we didn't give it to China
We gave it to Panama, and we're taking it back. Now, although there's no public evidence that the Chinese government directly controls the Panama C or its military operations
Chinese companies have built a strong presence in the region. From October 2023 to September 2024, China accounted for 21.4% of all cargo passing through
the c, making it the second-largest user after the US. Beyond just trade, China's been
strategically investing in infrastructure near the c. When it comes to ports and terminals
two of the five ports near the Panama C, Balboa on the Pacific side and Cristobal on the
Atlantic side, have been operated by Hutchison Port Holdings since 1997. Hutchison is a subsidiary
of Hong Kong-based C.K. Hutchison Holdings, founded by billionaire Li Ka-shing. The company
runs port operations in 24 countries, including the UK. Although Hutchison is not state-owned by
China, some in Washington have raised concerns over Beijing's potential influence over the company
Chinese companies, both private and state-owned, have also invested billions of dollars into Panama
It's funding a cruise terminal, a bridge over the c, and a planned railway backed by a Chinese
grants, but the concerning ones was the Panama-Cologne Container Port Project by the Landbridge
Group, a Chinese investment firm, to build a container terminal in Panama's Cologne
The most concerning fact about this project is that the Landbridge had close links with
both the CCP and the People's Liberation Army. According to Andrew Thomas, a professor at the University of Akron who has studied the
c, said that the bids to operate these ports faced little competition and mentioned
that the US at the time didn't really care about these ports and Hutchison faced no
objection. Panama's location makes it strategically crucial for both the US and China. Over the past
decade, Beijing has worked to expand its influence in the country and across Latin America. A big
moment came in 2017 when a huge diplomatic shift occurred when Panama decided to cut ties with
Taiwan and recognize China instead. This was a huge turning point for Latin America, showing just how
much influence China was gaining in the region. This move was a major win for Chinese diplomacy
signaling a big shift in alliances across the region. By securing Panama's support
China strengthened its foothold in Latin America, expanding its influence over a strategically
important part of the world. Months later, Panama became the first Latin America country to join
China's Belt and Road Initiative, a trillion-dollar global infrastructure project. Following Panama's
lead, several other countries in Latin America like the Dominican Republic, El Salvador, Nicaragua
and Honduras also cut ties with Taiwan and shifted their support to Beijing. China even decided to go
beyond business and diplomacy and decided to invest in Panama's culture and media. The first
Confucius Institute in Panama for Chinese Language and Culture Education was opened in 2017
Additionally, Chinese companies have been sponsoring media training programs for Panamanian journalists. The same Latin America that has long been considered the US's sphere of influence
is now seeing a major shift as China makes serious inroads economically, diplomatically
and culturally. And with the Panama C playing a crucial role in global trade
Beijing's rising presence won't go unnoticed in Washington. However, in a December 2024 statement
Panama's President Molino cleared that China does not own the Panama C, and every square meter
of the Panama C and the surrounding area belongs to Panama and will continue belonging
to Panama. But why is the Panama C so important for the US
The Panama C is crucial for the US as it handles 40% of its container trade, cutting
shipping time and costs. It's also vital for energy exports and military mobility, allowing quick naval movement between
the Atlantic and Pacific. Additionally, the US monitors it closely to maintain influence and counter China's growing
presence in the region. And as President Donald Trump's statement reignited the controversy, even Panama's President Jose Raul Molino jumped in and quickly rejected Trump's claims about the Panama C and said
On behalf of the Republic of Panama and its people, I must reject in a comprehensive manner the words outlined by President Donald Trump regarding Panama and its c in his inaugural speech
He also made it very clear that there is no presence of any nation in the world that interferes with our administration
But between this geopolitical controversy, there's something more scary for Panama, something that could end its monopoly, and that is the Mexico Interoceanic Corridor Railway
The Interoceanic Corridor of the Isthmus of Tuantopec, or CIIT, is a railway project located in the Isthmus of Tuantopec
a narrow strip of land in southern Mexico that connects the state of Oaxaca and Veracruz
And, just like the Panama C, it connects the Pacific Ocean to the Atlantic Ocean
The main feature of the CIIT is the Railway of the Isthmus of Tehuantepec, or FIT
which includes the 308 or 191 Z railroad This railroad connects the port of Coatzicolcos and Veracruz to the port of Salina Cruz in Oaxaca But what exactly is this interoceanic corridor and how is it a threat to the Panama
C? Surprisingly, the interoceanic corridor isn't a new project, and it actually dates back
to the 20th century. The interoceanic corridor was first established by the Spanish in the early
1800s to ship products to Spain from both the Philippines and Mexico, which were colonies at
the time. But the man who took this vision further was José de la Cruz Porfirio Diaz Mori
In 1884, Porfirio Diaz rose to power as president of Mexico. Hailing from Oaxaca on Mexico's
southern coast, he set out to build a railway connecting Oaxaca to Veracruz in the north
His goal was to create a direct link between the Atlantic and the Pacific
tackling the same challenges the Panama C would later address. Most people have never heard of it, but in January 1907, this new railway known as the
Tren Interoceanico officially opened its doors with the help of British entrepreneur Lord Cowdery
In fact, this was seven whole years before the Panama C. And guess what? Global traders started using the railway right away
Over the next few years, hundreds of thousands of tons of cargo were successfully moved along the passage
Mexico started to thrive economically as it played a vital role in international trade
But this success was short-lived. In 1914, when the Panama C opened, the amount of cargo traveling along the Mexican railway dropped by a third
A year later, it had dropped by almost 80%. This was despite the fact that the train line through Mexico was actually faster than the Panama C
It was closer to America, saving a few days for anyone who wanted to use it
But still, most shipping companies decided to stop using the tren interoceanico and switch to the c instead
Why? When the Interoceanic Railway was competing with the Panama C, Mexico was in the midst of civil wars due to the Mexican Revolution
which started in 1910 and lasted until 1920. Because of the armed conflicts, it became too risky for shipping companies to pass their cargo through the railway
with high chances of damage and robbery. Additionally, most of the shipping companies using this corridor were American-based
and they preferred to support an American project as opposed to a Mexican rival
The biggest drawback of the Mexican Corridor was that companies had to load and unload their cargo onto the railway to transport it from one port to another
While on the other hand, with the Panama C, ships could sail directly through without the need to unload and reload their cargo
This saved both time and money, making it the go-to route for global trade
With an average of 14,000 ships passing through every year, the Panama C plays a critical role in global trade
But the ships, loaded with billions of tons of goods, pay a toll to use the c
For larger vessels, the cost can reach half a million US dollars. The expense is well worth it as it saves them from having to travel
thousands of extra miles across the Strait of Magellan at the southern tip of South America
Since its opening, the Panama C has revolutionized global trade, making it faster and more efficient than ever before
But shockingly, some people are calling the Panama C a scam. You see, even though the Panama C was more efficient, cheaper, and easier to use than the Interoceanic Railway Corridor in recent years
the Panama C has been facing a severe crisis due to prolonged drought, driven by climate change and the recurring El Nino phenomenon
El Nino is basically a natural weather phenomenon that occurs every 2 to 7 years, affecting weather patterns and ocean currents in the Pacific Ocean
So it brings warmer and drier conditions to Central America, making it even harder to maintain the water levels needed for the c
If we look at the impact of climate change on the c, the average rainfall in the c's watershed has decreased by about 20% in the last two decades
At the same time, the average temperature has risen by around 0.5 degrees Celsius
These changes have led to reduced water levels in Gatun Lake, which is a key water source for the c, and increased evaporation rates from the lakes and locks
Due to the drought, the Panama C Authority, or ACP, was forced to reduce the maximum draft
and limit the number of daily transit slots available for ships. Panama C Authority reported a 29% drop in vessel transits during fiscal year 2024
The biggest declines were in LNG and dry bulk transits. LNG transits fell by 66% and dry bulk transit dropped by 107%
percent. Despite these challenges, the Panama C still managed to generate a net income of
3.45 billion in 2024, which is a 9.5% increase from 2023. But how is this actually possible
This is where some people say that Panama C authorities have been artificially lowering
supply to increase shipping fees to make more profits, because it wasn't actually much drier
than previous droughts. You see, after limiting the daily transit slots, the Panama C Authority
increased fees, knowing that companies had no other shorter route connecting the Pacific and
Atlantic. As a result, businesses were left with no choice but to pay the higher tolls to move
their cargo efficiently. The base transit tolls at the Panama C have been rising and are now
comparable to those at the Suez C. However, Panama's costs can be significantly higher for
vessel operators who must compete in auctions to secure a transit slot. In fact, the Panama C
utilizes an auction system to sell around one-third of the slots, which often results in
significantly higher prices compared to standard booking fees, particularly when demand is high or
during periods of limited availability due to factors like drought conditions. For example
the operator of a medium-range tanker traveling through the c with cargo would pay around
$279,764.87 in transit fees. Meanwhile, a fully loaded Very Large Gas Carrier, or VLGC
would face a whopping charge of $505,268.24, and that too without additional reservation costs
according to ACP estimates. In fact, the fees literally peaked when c slots had been
auctioned as high as nearly $4 million in 2023. Because it's the only dominant shipping route in
the region, ships have no other choice, but it finally got a reality check in 2018. For decades
the interoceanic corridor was way too expensive to maintain, eventually falling into disrepair
It stayed that way for nearly a century, until an ambitious new president came into power in Mexico
In 2018, President Andres Manuel López Obrador unveiled plans to revive Mexico's old railway
and establish a new interoceanic corridor, CIIT, or Interoceanic Corridor of the Isthmus of
to Wantopec, a modern alternative to the Panama C. A few months later, the project was officially announced, featuring three main rail lines
namely Line Z Line F and Line K Construction kicked off in June 2020 starting with removing overgrown vegetation replacing old tracks and installing brand new infrastructure Of the three planned
railway lines, Line Z is the crucial route that will directly connect Atlantic and Pacific Oceans
Spanning approximately 227 kilometers or 141 miles, this railway currently operates one trip
per day, completing the journey in about seven hours, with eight station stops along the way
For passengers, the train has an initial capacity of 400 people, offering seating across tourist, executive, and managerial categories
In the future, the Mexican government has ambitious goals for the corridor. By 2028, the project is expected to transport 300,000 containers annually
positioning the interoceanic corridor as a competitive alternative to traditional maritime routes like the Panama C
The entire railway system, including all three lines, Z, F, A, and K, is projected to span over 1,000 kilometers or 621 miles
significantly enhancing Mexico's logistics network and boosting its role in global trade
To boost economic activity, the government's also developing industrial parks along the railway route
President López Obrador took decisive action to ensure the project's success. In 2023, he deployed the army to seize a privately owned section of Old Railway
ensuring that the project wouldn't stall due to corporate resistance. The ports, railways, and related terminal infrastructure of the interoceanic corridor
are managed by Faro Corral del Istmo de Tuan-tepec, a state-owned enterprise under the Mexican Navy
On November 10, 2023, naval forces temporarily occupied part of the railway
that was operated under a concession by Faro Sur, a subsidiary of Grupo Mexico
This dispute was later resolved when the government in Grupo Mexico agreed to transfer 127 kilometers or 79 miles of railway lines to the Navy
The affected routes include El Chapo, Coatzicolcos-Coatzicolcos, Bidia-Saguas, and Jabueras-Midatitlan. In exchange, the government granted Ferrocer a free eight-year extension for its railway concession
linking the Isthmus of Tuantepec to the port of Veracruz. The company was compensated, but only after the government secured full control of the railway
The primary objective of the CIIT project is to offer a more efficient and cost-effective alternative to the Panama C
Beyond trade, the interoceanic corridor is also designed to combat poverty in Mexico
Running through the states of Veracruz and Oaxaca, both of which have high poverty rates
the project is expected to attract investment and improve local infrastructure. The railway will have 10 stops across these two states, with ports on both the Atlantic and Pacific coasts
The Mexican government has invested $6 billion, with an additional $2 billion coming from private investors
However, not everyone supports the project. Several indigenous communities in Oaxaca have protested, raising concerns about deforestation
habitat destruction, and environmental damage caused by the corridor's development. In some areas, families have even been forcibly relocated, making the project a source of controversy
Tensions escalated when some protesters, allegedly armed with machetes, clashed with construction workers, leading to brief arrests
Despite the backlash, many believe that the benefits will outweigh the negatives
Experts estimate that the CIIT could create 500,000 jobs for locals and attract $50 billion in international investment, transforming the entire region
And this economic transformation is exactly what Lopez Obrador was betting on
By August 2023, Line Z was officially completed. In September, the former Mexican president himself rode the first passenger train along the full route
It was a journey taking under nine hours, officially making it faster than crossing the Panama C
By December 2023, passenger trains began operating, carrying locals between Mexico's Atlantic and Pacific coasts
and the remaining two lines are set for completion by the end of 2024. But before the CIIT can handle international cargo
Mexico still needs to upgrade the ports at both ends of the railway. One of the biggest projects underway is the construction of a massive breakwater
at Salina Cruzport built from hundreds of thousands of tons of rock
to protect cargo ships from harsh storms and waves. Work on the breakwater is still ongoing
but once complete, Mexico's interoceanic corridor could become a serious competitor to the Panama C
And as we discussed earlier, China has gained significant influence over the Panama C through its private ventures in recent decades
However, the U.S. remains the c's largest user. And this is where things could go bad for the Panama C
You see, 40% of U.S. container traffic passes through the Panama C each year
This makes the U.S. a key player in the c's revenue stream. But if the U.S. decides to divert a significant amount of container traffic to Mexico's Interoceanic Railway Corridor
the U.S. could save a lot of money. However, the impact on Panama's economy could be severe
Panama's c revenue could drop sharply and would result in a massive reduction in traffic
In fact, it could significantly impact Panama's GDP. According to reports, c revenue contributes around 4% of the country's total GDP and even more to government
finances. So, a major loss in revenue would destabilize Panama's economy. So, once the
project is ready, everything is set to be good for the US and Mexico, right? Well, actually
the situation isn't entirely one-sided. While Mexico's interoceanic railway offers a compelling
alternative, it also comes with its own set of challenges. Unlike the seamless transit of the
Panama C, the railway requires cargo to be unloaded at one port, transported by train
and then reloaded onto ships at the other end. This additional handling increased costs, time
and logistical complexities. On top of that, security concerns along the railway route
potential delays, and infrastructure limitations could also deter some companies from making the
switch. Also, when it comes to the U.S. Navy, the railway doesn't help the U.S. Navy to go from the
Atlantic to the Pacific. So, although it's helpful for Panama to have competition instead of a
monopoly, ensuring its fees stay competitive, in the end, some may find the railway's shorter
transit time and geopolitical advantages appealing, while others might stick with the
Panama C for its simplicity and reliability. In fact, we might also see a new c or even a
new railway built between the Atlantic and Pacific by other countries in Latin America
In 2013, a Chinese company called HKND made a deal with the Nicaraguan government. They were
given a 50-year right to build a new c linking the Atlantic and Pacific Oceans
with an option to extend for another 50 years. The goal was to create a whole new trade route
But things didn't go as planned. After some initial excitement, the project never took off
In 2015, the Chinese stock market crashed and the whole thing fell apart. By 2018
HKND had shut down its office in Hong Kong. But as of now, only the interoceanic corridor
seems like a strong contender to dethrone the Panama C. But whether it can truly do so is something only time will tell