A merchant ship sails along the Panama Canal, on March 23, 2015.Photograph by Rodrigo Arangua — AFP/Getty Images

The Panama Canal is getting a major overhaul, and despite an unresolved lawsuit that has delayed the project, it’s poised to transform global trade dramatically.

The original Panama canal remains of the most ambitious public works projects of all time. But it wasn’t quite ambitious enough: within a few years of its opening in 1914, it was too small for many military and cargo ships. The U.S. authorities then in control began excavation for larger locks in 1939—but that work came to a standstill as America entered World War II, and no effective progress was made on the project for the remainder of the 20th century.
That changed swiftly when the canal transitioned to full Panamanian control in 1999. By 2006, a detailed expansion plan had been drafted and approved by Panamanian voters in a 77% landslide. With a total budget of $5.2 billion, completion was initially projected for 2014. Last year, the canal netted $2.6 billion, roughly half of Panama’s national revenue. The Panama Canal Authority has projected that the expansion will increase that revenue eightfold by 2025.
There’s been a hitch in the expansion effort, however. A group of mostly European contractors known as the Grupo Unidos por el Canal has filed claims totaling more than a half billion dollars against the Panama Canal Authority, alleging that misinformation led to cost overruns.
But according to Dr. J. David Rogers, a professor of geological engineering at Missouri University of Science and Technology, who has worked closely with the Panamanians for more than a quarter-century, the real problem is that contractors knowingly underbid the job.
The canal expansion is about more than money to the Panamanians, according to Dr. Rogers. “It’s a national pride project for them. It’s their lifeblood,” he says of the Panamanians’ feelings about the canal. “It’s what makes them go.”
The same seriousness didn’t characterize Americans’ approach to canal expansion. Of a series of false starts and fizzled plans, the most amazing came as part of Operation Plowshare, the “Atoms for Peace” program of the U.S. Atomic Energy Agency (now the Department of Energy). Intended to highlight the peacetime usefulness of atomic warheads, Plowshare spent more than a decade exploring the possibility of widening the canal by detonating a string of nuclear warheads. Rising awareness of environmental risks in the 1960s scuttled the idea.
Under the current, nuke-free plan, new approach channels and locks are being excavated alongside the existing entrances, allowing operations to continue normally during construction. The new locks and channels will be about three times bigger, allowing the passage of more of today’s huge container ships. The maximum load will increase from about 5,000 containers to 12,000—though the very largest ships, which currently balloon up to 19,000 containers and primarily work routes between Europe and Asia through the Suez Canal, still won’t fit.
The expansion will provide cheaper shipping between Asia and the American Gulf Coast. Traffic that currently flows through West Coast ports such as Los Angeles and Long Beach—including huge amounts of Midwestern grain and coal—will soon move more directly through ports including Houston and Savannah. Ports along the U.S. Gulf and East coasts have been expanding to accommodate increased ship size and traffic.
The ongoing court battle means that even the Panama Canal Authority’s recently-updated 2016 target for completion may be missed. But a bigger canal is finally coming—and with it, a host of new possibilities.

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