Panama Outlines 10-Year Canal Plan
Even as court fights continue over the status of contracts for the operation of ports in Panama held by a Hong Kong-based company, Panama is planning an ambitious 10-year upgrade to the Panama Canal, including a new reservoir, to deal with recurring drought conditions that have significantly reduced vessel transits.
According to Panama Canal authorities, vessel transits dropped by 29 percent during fiscal year 2024. Liquefied natural gas (LNG) transits were down 66 percent, while dry bulk transits were down 107 percent. LNG transits have not returned to pre-drought activity.
In September, canal authorities rolled out a transformation plan backed by a $5.21 billion fiscal allocation for 2025-26 and reported preliminary FY2025 revenues near $5.7 billion with 13,404 transits. They said that enables major new works, including a $1.6 billion Rio Indio reservoir to secure water for lock operations.
The strategy was presented at a September media event chaired by Minister for Canal Affairs Jose Ramón Icaza; Canal Administrator Ricaurte Vásquez Morales; and Deputy Administrator and Sustainability Officer Ilya Espino de Marotta.
The plan packages more than $8 billion in strategic investments spanning water security, port and LPG infrastructure and an interoceanic gas pipeline tender. Together, the projects aim to diversify revenue streams while protecting canal throughput from climate variability.
Those plans face many obstacles. Construction for the dam is expected to begin in 2027 and would not be completed until 2032, with a cost estimated at $1.6 billion. The proposed large earthworks and reservoir flooding will require resettlement and could face legal challenges even as planners argue the measures are needed to preserve annual capacity and avoid shipping detours.
In the meantime, the legal and regulatory future of the Panama Canal remains tangled. A subsidiary of Hong Kong-based port operator CK Hutchison Holdings holds a concession (through its Panama Ports Company) to operate the ports of Balboa and Cristóbal at either end of the Panama Canal. That 1997 contract was renewed in 2025 for another 25 years, but it has been challenged in court for alleged “irregularities” by Panama’s attorney general and was sued in July by its comptroller general. Panama’s president has said that if the contract proves invalid, the state may have to run the canal itself.
As soon as he took office, President Donald Trump began tweeting about his desire to “take back” the canal, alleging “Chinese control.” He negotiated a deal announced March 4 in which CK Hutchinson would turn over its interest to American investment firm and asset manager BlackRock Inc. for $22.8 billion. However, that deal is stuck in legal and regulatory limbo, and CK Hutchinson has said it will not close this year.
