The Panama Canal keeps receiving bad news
“a historic drought at one of the world's largest trading routes.”
“The wait time to get through?
Now, up to three weeks.”
It is undersized, too expensive,
and wait times are getting frankly ridiculous.
“And we see ship after ship just waiting.”
Last year, Mexico finished construction
of an inter-oceanic railway
that's marketed as a faster and cheaper alternative.
Plans for building similar railways
through Honduras and Colombia
are now gaining momentum,
and there have even been talks of a rival canal through Nicaragua.
The United States is by far the canal's biggest user,
and they count on this waterway
to connect to their Pacific fleet,
making it even more worrisome
that China is establishing a strategic presence.
They already own two out of the five main ports,
and they are working on a third.
Near all these alternative routes
they're buying port facilities
and supporting industries,
and in some cases, they're even building the railroads themselves.
Can these routes actually rival the Panama Canal?
How is China establishing a presence here?
And what does this mean for U.S. dominance in the Western Hemisphere?
This is how China is buying the rivals of the Panama Canal....
with Hindsight.
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And now back to the video.
The Panama Canal has played a vital role
in global trade ever since its opening in 1914
as one of the world's shipping chokepoints.
And when such a chokepoint gets disrupted,
it has far reaching consequences.
Like in 2021,
when he grounded container ship blocked the Suez Canal
and about $9.6 billion of trade was held up each day.
The Panama Canal is extremely vulnerable to droughts
and during periods of little rainfall, the number of ships
that's allowed to transit is lowered.
During some months of last year.
The number of ships that was allowed to transit
was more than 50% lower.
Shipping companies
will pay on average about $100,000 to transit to canal,
were faced with a dilemma:
Either risk waiting for days or weeks,
or take a longer route and pay
$20,000-30,000 per day on fuel.
The United States,
with over 200 million long tons of cargo per year,
is by far the biggest user of the canal.
China, with 64 million, comes in second.
China wants to protect its strategic and economic interests,
and in 1999 they made their opening move.
They signed a long term contract to manage port facilities
at both ends of the canal.
Two out of the five main ports were now controlled by China.
On the Pacific side,
This board serves as a hub to transfer cargo
from large ships onto smaller vessels,
and their port on the Atlantic side
is much smaller and has facilities for cruise ships.
But 90% of the port services
here are provided by the two other ports.
But this was just the start.
In 2016,
China based Landbridge Group
acquired control of Margaritha Island
for $1 billion,
starting construction on a new deepwater port for megaships
Then Panama made a surprise turnaround.
Panama cut ties with Taiwan in favor of China,
and they became the first country in Latin America
to join China's Belt and Road Initiative.
Construction on the port started just a week later
and Panama announced
that a consortium of Chinese state owned companies
was going to build the fourth bridge over the Panama Canal.
Today, nearly 40 Chinese multinationals
from different sectors
have set their headquarters in Panama.
It took them only about two decades to achieve all of this.
The Panama Canal is owned and operated by the Panamanian government.
All countries are guaranteed
to have fair access,
and only Panama may maintain military installations.
But the United States has the right to use military force
in defense of the canal's neutrality.
But then China's winning streak was cut short.
There is a growing pushback from the United States
and from the Panamanian people,
which ultimately led to the government's decision
to scale back and cancel some of China's plans.
But China is playing the long game
more than any other country in the world.
They're searching for alternative commercial routes.
They have led official expeditions
through all Arctic shipping passages,
something that no other country has done.
And in Central America,
they are the main foreign investor in routes
that could rival the Panama Canal.
So the first rival of the Panama Canal
that we're going to discuss is a canal for Mexico.
And I want to show you guys something.
So last week,
as I was rewriting this story, in the evening,
I went shopping and I found this map.
So what you're looking at here is
this is a map of the Isthmus of Tehuantepec.
So we have the Atlantic Ocean here,
and we have the Pacific Ocean over here.
So this is an original map from 1829,
and it was commissioned by the French.
And what they wanted to find out
is if it was possible to build a canal
through the Isthmus of Tehuantepec.
So here, in Veracruz,
you can see a lot of rivers
And here, once you reach Oaxaca, there's almost none.
So they commissioned this study, and they discovered
that it was not that possible to build a canal here.
And a few decades later,
they commenced working on the Panama Canal.
A canal for Mexico was never built,
but a railway through the Isthmus of Tehuantepec
has existed since the days of Porfirio Diaz
prior to the Panama Canal.
This railway was used to transport
hundreds of thousands of tons of sugar
from Hawaii to the United States West Coast.
And this led to an economic boom for Mexico,
but the railway lost business
when the Panama Canal opened a few years later.
And over the years it was very poorly maintained.
Mexico's president Lopez Obrador in 2020 started rebuilding
the line, and in late 2023 it was reopened for operations.
The railway runs from the port city of Salina Cruz
on the Pacific side,
the Coatzacoalcos and the Caribbean side,
and has the capacity to transport 1.4 million containers each year.
This turned the region into a strategic asset for global trade,
and both the U.S. and China
began investing in supporting infrastructure.
The Chinese helped modernize the Salina Cruz port
and built new railroads in the region.
But in Honduras, they took it even further.
They invested billions in the acquisition of two ports.
Puerto Cortes, on the Caribbean side,,
is already the busiest port in Central America by volume,
and there are now high level talks
between the governments of China and Honduras
to build a connecting railroad.
The construction would be completed in 10 to 15 years
and would have the capacity to transport
3.6 million containers each year.
In Colombia,
China proposed building another railroad
from the deep waters near Cupica
through the dense jungle
up to Urabá on the Caribbean coast.
These railroad would primarily serve to transport coal,
but it would be capable of moving 300,000 containers
per year between oceans.
China is eagerly investing in all these projects,
either directly in its construction
or in supporting infrastructure
and industries that service these lines.
But even if you add up Mexico's 1.4 million
Honduras's 3.6 million
and Colombia's 300,000,
these rivals would not even come close
to the capacity of the Panama Canal,
which last year
was used to transport well over 8 million containers.
And that's even before mentioning
the existing transport infrastructure
that already exists in Panama.
But these routes should be seen as complementary
rather than competitive
and for some ships that are waiting for days or weeks
to transit the Panama Canal,
these might just be other routes that we can take into consideration.
The only plan that could actually outcompete Panama
would be a canal through Nicaragua.
The idea is to build two locks,
each with three consecutive chambers
on each side of the country.
These would be used to raise the ship
to the country's large freshwater lake.
These plans have existed for decades, but in 2014,
the Government of Nicaragua announced
that they had found an investor.
President Ortega signed an agreement with a company from Hong Kong
to finance and build the canal.
The face of this project was Wang Jing,
a mysterious Chinese businessman
who was considered to be one of China's richest people.
But much is unknown about how he amassed this fortune.
The proposed size of the canal
is about three times larger and much wider
than the Panama Canal,
and it would require excavating
hundreds of millions of cubic meters of dirt
and placing hundreds of cubic centimeters of concrete.
Meanwhile, Ortega was cozying up to Iran,
Venezuela
and Russia,
and he openly promoted the canal as an option against U.S.
dominance over global trade.
But after months of official acts and ceremonies,
deals and meetings,
the Chinese billionaire Wang Jing
suddenly lost nearly his entire fortune
and disappeared.
And as quickly as it started,
the hopes of building this canal faded away.
China has well-documented intentions
to secure its grip on global trade,
and the chokepoints that connect the Pacific
and the Atlantic oceans are of strategic importance
to have dominance in the Western Hemisphere.
The Panama Canal will likely continue
to suffer periodic droughts,
and its transit capacity will occasionally lower.
This heightens interest in alternative routes,
which are unlikely to outcompete Panama,
but they can take on some of the traffic.
Meanwhile, China is creeping into strategic position,
but they're also facing the harsh realities of Latin America,
which go beyond the hardship of building through rainforest.
Amongst them are corruption, political instability,
the presence of armed gangs,
opposition from environmental groups
and a general wariness of Chinese influence.
But they have time and they are making progress.
If you like our content and want to learn more about geopolitics,
consider watching one of these two videos. Next.