Tuesday, December 14, 2010

Taxpayers Fund Disasters in Panama

(AP Photo/Arnulfo Franco)

You may already be concerned about the Panama Canal expansion and other projects in Panama, but the report below clearly outlines how the Panama Canal's future is hostage to financial freewheeling that has caused the collapse of our global economy, and now of infrastructure across Panama.

The rainfall last week in Panama -- a tropical deluge that lasted well over 50 hours non-stop -- collapsed roads, bridges and other infrastructure throughout the country, threatened dams, flooded villages, closed the canal, and sharply highlighted what unchecked and relentless corruption can do. Numerous lives have been lost as a result, along with shared dreams of "modernization". Further destruction of Panama's freshwater resources is threatening survival, not only if the expansion remains unchanged, but from uncontrolled and poisonous mining, hydroelectric and other unrestrained illegal activities.

Banks and other financial institutions must immediately implement their compliance procedures and insist on the necessary engineering changes to the expansion project which will remove the enormous risks being built in to this waterway of such far-reaching impact, to safeguard it, Panama and all who depend on it, both economically and environmentally. More about the results of independent engineering reviews are at www.crucestrail.com in English and Spanish.

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Gatun Lake Defense Committee

Taxpayers Fund Disasters in Panama

Bert G. Shelton, Research Scientist and Professional Engineer

All indications are that massive amounts of hard-earned tax dollars, euros, and yen – and who-knows-what other kind of currency – are being funneled into the hands of corruption in the Republic of Panama by way of Development Bank loans to countless questionable projects.

Approved for development in little Panama, in addition to the highly-publicized Panama Canal Expansion, are scores of hydroelectric projects plus a multitude of open-pit mines – to cover 44% of the country's surface area – along with many other projects of equally negative impact and doubtful benefit.

Development loans are supposed to be for funding projects that improve people’s lives, not eliminate livelihoods and chase folks out.

Yet, in virtually all cases in Panama, the destruction of flora and fauna and of quality-of-life for residents are seen by those in power as secondary issues – irrelevant to project bottom lines.

Therefore, projects seeking such loans are carefully promoted on the basis of the “jobs” they will create (the vast majority being short term) and on their “high” rate-of-return (that ignore third party and environmental damages).

Insofar as hydroelectric projects are concerned, Panama has neither an existing nor a projected shortage of electric power generation that would justify developing so much of this resource simultaneously.

With respect to mining, why on earth would a small country of just over three million people aspire to be the world leader in mining – as Panama's leaders claim – and want all possible mines operating at once? Perhaps it is for the same reason that so many hydroelectric projects are being built. Powerful, greedy people are looking to maximize returns from sales abroad at the expense of the defenseless, less fortunate, whose losses are treated as inconsequential.

As for developed nations, do their taxpayers intend for developing nations to be exploited, cultures and ecology decimated and the poor oppressed? Probably not, but the bankers managing their money are doing just that! What those most affected actually need, i.e. what is in this case best for most of Panama’s population, is consistently being disregarded.

With so much easy money to be had, the Panama Canal Expansion's sudden burst onto the scene is of no surprise.

The Panama Canal has been shown to be a very good business. Even with tolls having been increased more than ten-fold – since it was gifted to the Panamanians – no reduction in numbers of ships has occurred, with about 36 ships continuing to transit it daily.

Where do those increased earnings go? To graft and corruption all over Panama, with no end in sight!

The Panama Canal Expansion Project has been touted as the most well-planned and well-executed project of its magnitude in modern times. However, that claim does not stand up to closer scrutiny.

It is becoming apparent that accessing and pocketing the cash value of that asset has been the real plan all along, accomplished by borrowing money for “improvements”,miss-spending it and leaving the people of Panama with the responsibility of paying it back.

This is why no real time was spent studying the many alternatives for expanding the Panama Canal and why the powerful worldwide let that slide right through, unquestioned. It is also why strong arguments to expand the canal in stages were summarily dismissed.

Gaining time for a more thorough evaluation of lock options – such as to first add very much needed lighting along its channels plus to straighten and widen those channels to maximize the present-day canal's transit capacity, both improvements applicable to and needed for future expansion – would have been much more cost-effective.

When the Panama Canal Expansion was announced, the project's key element – its new locks – had already been defined. This is not appropriate when there are several viable options. For a public works project of world importance, having skipped the most important step is particularly inappropriate.

Many people knew that the planned design was not the panacea it was promoted to be, but the crucial detail that remained unknown was that loan applications for building it were already in the mill.

It has become perfectly clear that project promoters were not about to permit anything to delay the process of accessing those loans as soon as possible, no matter how risky, damaging, or illogical the plan. Obtaining value from spending that money was not relevant to the game.

The new locks of the expanded canal are, essentially, an “augmented” version of the US's design from the 1930's. The changes made to that system – deemed to be deficient long ago – do not constitute an improvement.

The lane of locks the US began building decades ago was to have three steps at each end of the canal, like today’s two-lane canal has, but with longer and wider chambers. Before the US suspended their third lane project with the onset of WWII, excavations into rock for the three contiguous lock steps at the canal's Caribbean entrance were nearly completed.

Similarly, the two contiguous steps at the Pacific entrance – parallel to today's two-step Miraflores Locks – were nearly completed. However, excavations for the uppermost one-step lock – parallel to the present day single-step Pedro Miguel Locks – never got started.

As a result of the war, perspectives regarding future canal transit needs changed. New concerns, such as how major projects like this one impact the environment and neighboring activities, caused the project to be put on ice for rethinking.

At issue were: 1) how many lanes should ultimately be targeted, 2) what maximum size ship should the addition handle, 3) how much operating water could ultimately be made available to the canal, and 4) what environmental or ecological issues would need to be overcome. The cost of attending each of these was, obviously, itself an issue requiring calculation and contemplation.

In addition to the Panama Canal Company's routine salinity measurement program, those new concerns gave rise to more detailed environmental studies, such as some of the ones the Smithsonian Institute established.

Also for many years, the US Army Corp of Engineers studied options for, and issues with, digging a Sea Level Canal somewhere across the Isthmus. Participating in those studies were engineers and geologists – including this author’s father. Ultimately – during the years the canal was operated jointly by the US and Panama – a multinational group of experts was brought together and tasked with evaluating system needs and concerns, and recommending the best course for a future canal or upgrade.

With the present Canal Expansion Plan it would appear that its promoters have convinced Panama to opt for ignoring this body of work – concerns and recommendations alike – and proceed as directly as possible to building the third lane much as it was envisioned in the 1930's.

Today’s expansion plan uses much of what the US dug in the 1930's, but with a dangerous deviation – a high-risk shortcut seemingly taken to complete the job more quickly.

Rather than excavate the uppermost Pacific end lock step next to today's Pedro Miguel Locks, as was originally planned, the third step is now added to the lower two steps parallel to Miraflores Locks. That top step is to be connected to Gatun Lake by a raised waterway that parallels the west bank of Miraflores Lake.

That raised waterway is to be kept separate from lower-elevation Miraflores Lake by a dike built across numerous active faults, which were originally rendered harmless by the introduction of that small lake. This dike puts the entire canal in jeopardy!

Closure of the Panama Canal due to an earthquake rupturing the dike would not only catastrophically empty Gatun Lake and severely affect world commerce, it would bankrupt Panama.

It is interesting to note that none of the above was part of the public “debate”. Neither were better ways to expand the Panama Canal. Interesting as well is that the Master Plan – presented to the nation prior to its required approval vote – does not disclose the engineering data needed to develop any system, including the one selected. That explains its embarrassing alternatives to the selected “design”. It is undeniable that serious options were not actually developed, much less compared, since those presented could be, and were, dismissed by a cursory inspection.

Plan promoters are intent on inaugurating this expansion on the Canal's 100-year anniversary in 2014, turning its on-time completion into a matter of national pride. Besides being a highly manipulative tactic, it diverts attention from the issues and is an absurd reason for promoting and advancing a very wasteful, very damaging, and potentially dangerous system without ever having performed comparative assessments of other lock layouts.

Much more effective layouts operated similarly and made using the same parts found in many canals, including today's Panama Canal, exist. Water use could be reduced to half of this expansion's design, which would allow for even more future transits.

The chosen arrangement – which combines circa 1870 water-saving tanks with “known-to-be-too-small” 1930’s lock chambers and adds great danger by changing the top lock location – aggravates matters.

The selected layout uses tanks in arguably the most ineffective and expensive way possible.

Also, quite opposite the claims of the plan's promoters, the way the tanks are being incorporated will greatly increase ecological damage relative to the 1930's design. Anyone with a modicum of technical prowess can independently confirm that many times more concentrated saltwater will intrude into freshwater lakes than would have through the 1930's locks.

The warnings of the suppressed Smithsonian's damage-to-sea-life studies will, undoubtedly, be validated should the new lane be built as designed and be allowed to begin operating.

This could all be avoided by using any of the many lock layouts that are more modern by either one or two generations, while greatly increasing the project's return-on-investment.

From its inception, the Panama Canal Expansion Project has followed a technically and financially illogical path with respect to long-term canal growth and profitability. After being approved by the referendum, the project has proceeded essentially as launched, ignoring all concerns and calls for review.

Interestingly, due to public objections – which threatened to kill the project – a single and very major “change” was made to it prior to the vote. Practically overnight the third water-saving tank was added to each lock step and the range of Gatun Lake's seasonal level fluctuations was increased, which “eliminated” the need to expand the existing watershed.

Project outsiders have always been suspicious of that revision. Not only do the additional tanks slow new lock transits a lot, the cargo capacity of ships using today's locks will be reduced when the lake seasonally drops below today's lowest level.

This change amounts to transit water being borrowed from the older locks to sustain new lock operations, which is like robbing Peter to pay Paul.

Furthermore, costs for executing the innumerable system adjustments this “flimflam” requires were never publicly disclosed, and it is doubtful they were ever estimated since the project's cost never reflected them.

Reports of preparations already afoot to expand the watershed – despite a law against such a move passed shortly before the referendum – appear to confirm that this “change” to the project was simply a trick used to win the approval vote.

It is unclear whether this “plan amendment” was ever brought to the attention of banks extending loans to the project, despite that being a requirement for most such loans. What is clear is that the cost of expanding the watershed is not included in the present plan, even though it is essential for comparing to plans not needing more watershed.

Clearer still is that there are significant short-term financial benefits – for someone other than the Republic of Panama and the canal's users – pushing forward this damaging plan, padded with superfluous work.

It is increasingly obvious that what is in the best interest of the public anywhere, or best for the environment, has never been of real concern. One only needs to look at the way the project's most lucrative contracts were “won” – and take note of who “won” them – to understand what this “expansion” is really all about.

The Republic of Panama will not see profit for a very long time from what is being added, nor will it see any from the presently operated locks. That income will be tied up for generations to pay for this fiasco. Plus, the canal's clients will end up paying too much for too little when using it.

Once the currently planned expansion is completed, there will be no choice but to forever live with the consequences. It will severely and permanently cut short the canal's growth potential. And, the ecology within and surrounding the canal, particularly along both coasts, will become irreparably damaged.

Clearly controls to prevent the misuse of funds from Development Banks do not work. Privy to loopholes in the loan application process and in collusion with corruptible officials, the “planners” of projects in Panama (including the canal expansion) have apparently been milking the Development Bank system for quite some time.

Beyond Panama, the questionable activities of government officials disclosed by way of the “Wiki leaks” suggest that leaders of a lot of nations are aware of many inappropriate activities, such as development funds being misused, but are not really doing much about it.

The Panama Canal Expansion is nowhere near one that could, in all fairness, be considered sustainable. Neither are most of the other projects across Panama. Negative impacts to water resources that the hydroelectric and mining ventures are creating – added to those of the canal – will virtually eliminate the livelihoods of those near them and terminate all river and coastal fishing as a means of subsistence. Damage to agricultural capacity is already being felt and local fishing is likewise on the decline, most directly affecting indigenous and rural residents.

Panama is safeguarding nothing for its future generations. This does not support Panama's selling of itself as a nice place to visit or in which to retire. It does not make Panama a good home for Panamanians, either. And, taxpayers around the world are the unwitting accomplices to that massive environmental devastation by funding it!

None of this has been preordained, however. It could be changed with good leadership, but taxpayers of developed countries will need to demand that.

As it stands, taxpayers are most definitely not going to receive value for their money in terms of better canal services. When the job is done, they will end up paying too much for goods they buy that are transported through the canal after having paid for its inefficient and endangering expansion.

Having been fooled into believing that Panama – with the world's “best-run project” – is the place to invest in or retire, those taxpayers will continue to fund the deceptive propaganda that incessantly promotes Panama to attract more gullible “investors” with pockets to be picked.

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