panama canal project case study

Project in-depth: The Panama Canal Expansion, Panama

The Panama Canal is bestowed the honour of being one of the Seven Wonders of the Modern World by the American Society of Civil Engineers. The canal contributes to 6% of global trade and plays a critical role in transporting primarily petroleum products, motor vehicles, grains, coal, and coke between the East and West coasts. Since the expansion in 2016, the Panama Canal has carried an average of 14,000 ships every year.

The canal has a speculating and dramatic history that dates back to the 1880s.

French Roots of the Panama Canal

Initially, the maritime trade between the East and West coasts took place by the ships carrying a journey around the Southern tip of South America , Cape Horn. The trip was roughly 8,000 nautical miles. Ferdinand de Lesseps, a French diplomat who was at the forefront of the construction and success of the Suez Canal, saw potential in the Panama isthmus; he was the father of the idea of constructing this humongous, earth-moving engineering project which could change the economics of the then existing and future shipping business. In contrast to the geographical features surrounding the Suez Canal, the Panama Canal site was nestled in mountains covered with rainforests and wetlands, home to thousands of wildlife species. The French started the construction in 1881 with the concept of designing a sea-level canal. The construction began, and more than 22,000 workers died on-site due to the ruthless spread of malaria and yellow fever. The funding for this project stopped in 1888, and the French finally gave up after seven years of trying.

The American Takeover

After the French surrendered the canal construction, considering the deteriorating health of the laborers and the alarming deaths, the United States purchased the French assets in the work-in-progress canal zone for $40 million in 1902. US President Theodore Roosevelt took swift action, recognized The Republic of Panama, and signed the treaty of Hay-Bunau-Varilla granting America exclusive and permanent possession of the Panama Canal Zone in 1903. Panama, in exchange, received $10 million and an annuity of $250,000 beginning nine years later. Under the supervision of chief sanitary officer Dr. William Gorgas, immediate stringent measures were taken to elevate the working conditions on the construction site. Quinine was administered to the workers, recognizing the grassroots culprit of the fatal diseases. Swamplands were drained, and grasslands near the workers were grazed to eliminate mosquito breeding grounds. The medical success laid the foundation for the engineering marvel. 

The Panama Canal Design 

The construction revived by the US government started in 1904; approximately 300 million yards of dirt and rock were excavated, handling the massive never-ending landslides on the textured land. The sea-level canal design was scrapped, and a new invention with lock systems was designed and executed. The ships were carried between the Atlantic and Pacific oceans through Gatun Lake, the reservoir constructed over the Chagres River, to ensure a constant water supply for the functioning of the gigantic locks. The canal stretched for 51 miles; the locks measured 110 feet in width, 1000 feet in length, and 41.2 feet deep in draft. The term ‘draft’ indicates the vertical distance from the water surface to the bottom of the ship’s hull. The vessels designed to pass through the Panama bottleneck were labeled ‘ Panamax ships .’ The required measurements of Panamax ships were limited to 106 feet in width and 965 feet in length, along with a draft of 39.4 feet. The vessels moving through the passage between the locks were held in place with mild setbacks by the four locomotives riding along, two on each side.

Expansion of the Panama Canal

Studying the increasing load on the canal, which concentrated on the United States maritime industry, the Panama Canal Expansion was proposed in 2006. The ‘Third Set of Locks’ project was finalized in no time, and its construction commenced in 2007. The lock systems in the expansion project varied from the old design; instead of feeding them through the natural flow of water to keep vessels afloat, an introduction of water reservation basins was done on both the Atlantic and Pacific mouths, with the intention of a sustainable approach to bring in reusability, in turn lessening the pressure on the adjoining rivers. The Panama Canal now sustains successfully, hinged on the Gatun and Agua Clara locks on the Atlantic side and Pedro Miguel, Miraflores, and Cocoli locks on the Pacific Ocean side. 

The locks on the Atlantic and Pacific sides are 70 feet wider and 18 feet deeper than the old waterways. The measurement of the locks in this new second lane is 1,400 feet in length and 180.5 feet in width with a 60 feet draft. The larger ‘ New Panamax’ or ‘ Neo Panamax’ ships are fabricated to travel across this wider lane with the requirements to be no more than 1,200 feet in length, 160.7 feet in width, and with a draft of 49.9 feet. These vessels use four tugboats to guide themselves through the canal. The basic principle of gravity and buoyancy remains constant in the expanded canal design and old design.

Future of Panama Canal through the Sustainability Lens

The construction of this iconic Canal welcomed uninvited invasive species from different coasts, which were harmful to the native ecosystems of Panama from the initial days of its work till date. The use of the canal significantly reduced the carbon footprint of the shipping industry on a global level, but due to traffic congestion in regions of the canal’s vicinity, a deterioration in the surrounding ecosystems is observed. Due to climate change and the recent El Nino event, the place has seen its driest monsoon in the year 2023, leading to the evaporation of Gatun Lake and the water reservoir basins at the locks, unwinding a heavy toll on the maritime business with the disruption in the working of the canal. With the exponentially increasing burden on the existing canal, it is expected that a new canal might be considered to be built for a smooth shipping experience, leaving the Panama Canal, distinguishably one of the busiest waterways, with some slack!

• Online sources

Port Economics, Management and Policy. (2019). Comparative Characteristics of the Panama Canal Expansion | Port Economics, Management and Policy . [online] Available at: https://porteconomicsmanagement.org/pemp/contents/part1/interoceanic-passages/characteristics-panama-canal-expansion/ [Accessed 2 Sep. 2023].

Donovan, J. (1970). How the Panama Canal Makes Water Flow Uphill . [online] HowStuffWorks. Available at: https://science.howstuffworks.com/engineering/structural/panama-canal.htm?srch_tag=z7qdjblyw2taxsp6woo7heqojz4rbaha [Accessed 28 Aug. 2023].

Kingsland, P. (2018). Panama: the environmental legacy of the world’s key canal . [online] Ship Technology. Available at: https://www.ship-technology.com/features/panama-environmental-legacy-worlds-key-canal/?cf-view [Accessed 29 Aug. 2023].

Appleton, A. (2015). Panama Canal: Superhighway for Invasive Species? [online] History. Available at: https://www.nationalgeographic.com/history/article/150223-panama-canal-expansion-invasive-species-environment.

Livingstone, G. (2022). Climate change is impacting the Panama Canal — and the trade that moves through it . [online] Marketplace. Available at: https://www.marketplace.org/2022/09/05/climate-change-is-impacting-the-panama-canal-and-the-trade-that-moves-through-it/ [Accessed 29 Aug. 2023].

Baertlein, L., Parraga, M., Baertlein, L. and Parraga, M. (2023). Focus: Historic drought, hot seas slow Panama Canal shipping. Reuters . [online] 21 Aug. Available at: https://www.reuters.com/business/environment/historic-drought-hot-seas-slow-panama-canal-shipping-2023-08-21/ [Accessed 1 Sep. 2023].

Moreno, E., Parraga, M. and Parraga, M. (2023). Panama Canal’s bottleneck eases, some vessels detour . Reuters . [online] 22 Aug. Available at: https://www.reuters.com/world/americas/panama-canals-bottleneck-eases-some-vessels-detour-2023-08-22/ [Accessed 30 Aug. 2023].

GoComet (2023). The Panama Canal Drought Of 2023: A Comprehensive Analysis . [online] GoComet. Available at: https://www.gocomet.com/blog/panama-canal-drought/#:~:text=Future%20of%20Panama%20Canal%20Unclear [Accessed 1 Sep. 2023].

Budner, A. (2023). Climate crisis impacting global trade through Panama Canal . [online] Marketplace. Available at: https://www.marketplace.org/2023/07/31/panama-canal-climate-change-drought/ [Accessed 1 Sep. 2023].

Daniel, R. (2016). Panama Canal opens its gates to more and larger vessels . [online] pp.2–16. Available at: https://www.researchgate.net/publication/310707907_Panama_Canal_opens_its_gates_to_more_and_larger_vessels_in_English_Inzynieria_Morska_i_Geotechnika_Maritime_Engineering_Soil_Technology_No_42016_Gdansk_JulyAug_2016 [Accessed 30 Aug. 2023].

History.com Editors (2018). Panama Canal . [online] HISTORY. Available at: https://www.history.com/topics/landmarks/panama-canal [Accessed 1 Sep. 2023].

Pratesi, G. (2019). What Are Panamax and Post-Panamax Cruise Ships? [online] www.cruisecritic.com.au. Available at: https://www.cruisecritic.com.au/articles/what-are-panamax-and-post-panamax-cruise-ships?stay=1&posfrom=1 [Accessed 30 Aug. 2023].

• Images/visual mediums

Citations for YouTube videos:

TomoNews US (2014). Panama canal expansion: how it works . YouTube. Available at: https://www.youtube.com/watch?v=cB3tfM7ISgY [Accessed 2 Sep. 2023].

Top Luxury (2020). Panama Canal: The Biggest Megaproject in History . YouTube. Available at: https://www.youtube.com/watch?v=K_XIX8d_om8 [Accessed 2 Sep. 2023].

Harris, J. (2021). Control The Choke Point: How The US Stole The Panama Canal . YouTube. Available at: https://www.youtube.com/watch?v=D_PtYPnKBJs [Accessed 1 Sep. 2023].

Hilario, V. (2018). Megastructures Panama Canal – Extreme Engineering (2018 Documentary) . YouTube. Available at: https://www.youtube.com/watch?v=Dp8hlIn7eFQ [Accessed 31 Aug. 2023].

The B1M (2016). Expanding Panama Canal with BIM | The B1M . [online] www.youtube.com. Available at: https://www.youtube.com/watch?v=B48CkD8b1QA [Accessed 30 Aug. 2023].

marineinsight (2022). Why Panama Canal is Important? YouTube. Available at: https://www.youtube.com/watch?v=ao5jNSd1CwU [Accessed 28 Aug. 2023].

The Panama Canal (2014). Difference Between Panama Canal New Locks Project Proposals . [online] www.youtube.com. Available at: https://www.youtube.com/watch?v=L2x3WTb5Jn8 [Accessed 1 Sep. 2023].

Citations for images/photographs – Print or Online:

thepanamacanal (2016). https://twitter.com/thepanamacanal/status/733407219081863169/photo/1 . [online] X (formerly Twitter). Available at: https://twitter.com/thepanamacanal/status/733407219081863169/photo/1 [Accessed 3 Sep. 2023].

Lindahall.org. (2023a). Building the Panama Canal- French Attempt . [online] Available at: https://panama.lindahall.org/wp-content/uploads/sites/2/2014/08/panex2712e-cropped.jpg [Accessed 31 Aug. 2023].

Wayne , B., Burton, G., Padelford, N., Worthington, W. and Aileen , C. (2023). Panama Canal . [online] (Last updated 31 Aug 2023) Britannica.com. Available at: https://cdn.britannica.com/82/71082-050-AF372A0C/Men-locks-Panama-Canal.jpg [Accessed 3 Sep. 2023].

Daniel, R. (2016). Panama Canal opens its gates to more and larger vessels. [Online report] ResearchGate. Available at: https://www.researchgate.net/figure/Map-of-the-Panama-Canal-Expansion-Project_fig1_310707907 [Accessed 29 Aug. 2023].

U.S. Army Corps of Engineers, I. for W.R. (2012). U.S. Port and Island Waterways Modernization: Preparing for Post-Panamax Vessels. [Online Document] Institute for Water Resources . Available at: https://www.iwr.usace.army.mil/portals/70/docs/portswaterways/rpt/june_20_report_summary_u.s._port_and_inland_waterways_modernization.pdf [Accessed 8 Sep. 2023].

Rutuja is an inquisitive architect and a sustainability enthusiast; she loves to decipher the languages of built spaces and takes an interest in storytelling through photographs and poetries.

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A business journal from the Wharton School of the University of Pennsylvania

The Panama Canal Expansion: Changes Beyond the Waterway

June 3, 2016 • 12 min read.

Panama is on an economic winning streak, but it is aiming even higher with a $5.25 billion expansion of the Panama Canal.

• Finance & Accounting

With the opening of the long-awaited Panama Canal expansion project this June, all eyes are on the impact the $5.25 billion engineering marvel will have on maritime traffic across the vital international lanes that link the Pacific, the Atlantic and the Gulf of Mexico. However, the transformation it will bring to Panama’s domestic economy and society have been largely overshadowed by the historic expansion.

The expansion has already bolstered Panama’s efforts to become the Singapore – or perhaps Dubai – of Central America. It also promises to help to transform the role that Panama is playing for many U.S. and other foreign firms that are doing business in Central and South America.

There are several factors that make Panama’s prospects promising for many multinationals. Blessed with a unique geographical position, Panama is one of the fastest-growing economies worldwide. According to the World Bank, between 2001 and 2013, its average annual growth rate was 7.2%, more than double the average in Central and South America. In 2014, growth slowed to 6.2%. It was 5.8% in 2015, a year in which virtually all the region’s economies either slowed down or contracted.

The growth rates in Brazil, Chile, Argentina, Venezuela and elsewhere were hit by commodity price declines . Among all the economies of Latin America, Panama has been least sensitive to commodity prices. It helps that “Panama made a very intelligent choice shortly after becoming independent from Colombia in 1903 to adopt the U.S. dollar as its legal tender,” says C.E. Maurice Belanger, executive director of the American Chamber of Commerce & Industry of Panama. Although Panama’s official currency is the balboa, it does not print any paper money and only has a small amount of Panamanian coins the same size and denomination as U.S. coins. Belanger explains that “this provides a very convenient base for international trade and tourism.”

“When there is a $25 million investment in New York, Buenos Aires or Mexico City, nobody sees it. In Panama, an investment of this amount, the restaurants, the stores and even the taxi drivers [feel] the impact.” –C.E. Maurice Belanger

Furthermore, the banking system has at times been compared to the Swiss banking system, and widely lauded by many for being very “conservative.” “Even during the last world financial crisis in 2009, Panama still had a positive GDP of 3.2%,” recalls Belanger. Panama managed to reduce its poverty rate from 39.9% to 26.2% between 2007 and 2012, despite the global financial crisis, notes the World Bank, while reducing extreme poverty from 15.6% to 11.3%.

Attractive for FDI

In the 2015-2016 Global Competitiveness Report published by the World Economic Forum , Panama scored 4.4 points out of seven, slightly below South Africa but just above Turkey and Costa Rica, India and Mexico. In other key indicators, Panama’s unemployment rate is projected to drop from 2.88% in the first quarter of 2016 to 2.06% by 2020, according to government economists. Inflows of foreign direct investment (FDI) have also risen dramatically from an average of $1.258 billion between 1990 and 2012, to a total of $4.653 billion in 2013, according to the national census bureau. Reports the World Bank : “Panama continues to be an attractive country for FDI. The prospects of sustained high growth are also supported by emerging opportunities in transport and logistics, mining, financial services, and tourism.” Panama is a dollar-based economy, with no central bank of its own. Inventories in its warehouses are denominated in dollars, further simplifying the customs compliance process for companies when they export or re-export from Panama.

“Being a small country of just under four million inhabitants and about the size of the state of South Carolina contributes to our statistics,” says Belanger. “When there is a $25 million investment in New York, Buenos Aires or Mexico City, nobody sees it. In Panama, an investment of this amount, the restaurants, the stores, and even the taxi drivers [feel] the impact.”

That doesn’t mean that Panama has been completely immune to the ill effects of global financial contagion and the steep drop in global commodity prices over the past year. Henry Kardonski, managing director of London & Regional Panama, project leader of the huge Panama Pacifico development project, says that Panama has “not been directly affected” by the current global slowdown, but “the downturn in commodities affects the currencies of these countries” and changes in the value of currencies — such as the decline of the Colombian peso versus the U.S. dollar — “affect those countries’ ability to import and do other things.” However, the current crisis began last year, and “my clients have adapted to it. They’ve done their adjustments but it affects them because they are doing business regionally.”

The expansion of the Canal will enable longer, wider and heavier ships to transit; it is expected to open for commercial traffic on June 26. Although that’s far behind the original target date of August 2014, the delay has given U.S. East Coast ports and businesses more time to get ready. The expansion includes two larger sets of locks on both the Atlantic and Pacific sides, new access channels, dredging and improved water supply along the length of the 50-mile waterway.

Natural Advantages

Observes Philip Nichols , professor of legal studies and business ethics at Wharton: “You can’t help but notice that the roads [in much of Panama] are very modern, and it’s a substantially different experience from driving around Honduras or Nicaragua. There is clearly something going on all over Panama, not just at the two cities at the terminus [of the Panama Canal].” More than ever, Panama is determined to exploit its natural advantage — the Canal. “The Canal is the advantage that Panama has over everyone — and it always will [have],” notes Nichols. “They know that they have an income, no matter what. It’s like having a good, solid lead tenant when you’re building a development.”

It’s not just the predictable flow of income from the Canal, says Nichols, a frequent visitor to Panama. “It’s the security that Panama is always a good bet” and that the Canal is “a resource that a lot of people with a lot of money are interested in. During World War II, the U.S. devoted considerable resources to protecting the Canal. It’s like oil, but it’s even better than oil.”

To be sure, there are competitors to the Canal — such as large container ships that operate on multi-modal supply chains. These ships dock in California, and then use rail to carry their goods across the U.S. Later, those vessels are picked up again in New Jersey or Florida or Georgia and then taken to Europe. There are also new competitors, adds Nichols: The trans-Arctic routes that are going to open up to traffic in response to global warming. “There are technologies that can compete with the Panama Canal but the Canal will always be important as long as we are moving things physically.

“The Canal is the advantage that Panama has over everyone…. It’s like oil, but it’s even better than oil.” –Philip Nichols

“Oil often has an adverse effect on governance,” adds Nichols. “There is an incentive for bad governance because, if a government can get a monopoly over oil, it pays off big. With the Canal, it’s kind of had the opposite effect in two ways: First, because the Canal is so important, the world has taken a stronger role in administering it. So, no matter what else was going in Panama, there was accountability and responsible administration of the Canal; there was a model for governance. People could just look over to the Canal Zone and say ‘our government should be working the way that’s working.’”

Ties with Outsiders

The Canal has long provided huge opportunities for Panamanians to establish personal ties with outsiders that are rare in most of the region’s small, natural-resource poor nations. Says Nichols: “There were tons of relationships created. If an American had to choose between investing in Nicaragua and Panama, most people in the U.S. would think of things like the Sandinista-Contra civil war [in Nicaragua], and would think negative. Whereas with Panama, they might think, ‘My uncle lived there for 10 years while he worked in the Canal Zone.’” Indeed, U.S. Sen. John McCain was born into a U.S. military family at the Coco Solo Naval Air Station in the Panama Canal Zone, which was U.S. territory between 1903 and 1979. “You can’t underestimate the importance of those kinds of relationships,” Nichols says. “Economists are now looking at behavioral economics — and Panama had those relationships in abundance, unlike other countries in the region. Those relationships affect economic decisions just as much as numbers do.”

In part because of strong linkages between the U.S. and Panamanian private and public sectors, “innovation and entrepreneurship are currently playing a very important role in Panama,” says Nicolaj Siggelkow , management professor at Wharton. “The current government, through liberalization of immigration laws and low taxes, has created an environment very conducive to innovation and entrepreneurship.”

Siggelkow points out that one way to gain permanent residency in Panama is to start a new enterprise. “In addition, since the Canal became Panamanian property in 1999, the government has spent considerable resources in upgrading infrastructure. Given its central location, it has developed into a key mode of transport and logistics of goods and services.” This makes it easier for entrepreneurial startups to source and distribute their components and the products that they ship from Panama.

Looking Inward for Further Growth

Given the Canal’s historic role as a critical pathway between the Pacific and the Caribbean, Panama has traditionally been a country that “looks from the coast outward,” says Kardonski, project leader of Panama Pacifico since it was conceived in 2005. Panama Pacifico exemplifies a growing awareness of Panama’s potential to change its mindset and “look inward,” Kardonski notes. Gradually expanding, Panama Pacifico’s 3,450 acres of land assets are home to the International Business Park and the PanAmerica Corporate Center, where 140 companies have a presence, including 3M, Caterpillar, Dell, Grainger, Cable & Wireless, Avon and BASF. There, and elsewhere in Panama, a total of 117 multinationals have established their regional headquarters for Central and South America.

“[Because of strong linkages between the U.S. and Panama], innovation and entrepreneurship are playing important roles.” –Nicolaj Siggelkow

Beyond using Panama’s convenient location for managing regional distribution, an increasing volume of manufacturing takes place here. At Panama Pacifico, 3M produces lines for its automotive division, including paint guns and plastic bottles. Other firms make diapers, and operate high-tech printing technology to turn out such magazines as Esquire , notes Kardonski. Because Panama is well-equipped with infrastructure, such firms now “have the ability to reduce their presence in Peru, Colombia” and other Latin American locations that lack Panama’s transportation, distribution and just-in-time manufacturing capabilities. It helps that Copa Airlines, the country’s national flag carrier, has been pursuing an aggressive expansion path, already operating direct flights to over 50 of the biggest cities across Latin America and more than a dozen cities in the U.S. and Canada, including a new direct service between Panama City and New Orleans. In an effort to facilitate trade between Panama and the oil-rich nations of the Middle East, Dubai-based Emirates Airlines recently began nonstop services from Dubai to Panama City; billing the flight as the longest nonstop in the world. “We have combined first-world infrastructure, first-world buildings and first-world services” in one convenient location, says Kardonski.

Tourism is another sector growing at a rapid rate. According to Panama’s comptroller general directorate, income from tourism is now nearly double what the country earns from the iconic Panama Canal itself. Much like their counterparts in Dubai, Singapore and Hong Kong, Panama’s high-end malls draw large numbers of fashion-conscious travelers to the country.

In 2015, the number foreigners who visited Panama grew by 10.7%, reaching 2.5 million, according to the Tourism Authority of Panama. Nearly half — 46.1% — came from South America, led by Colombia (288,569), Venezuela (260,145), Brazil (88,348), Ecuador (74,043), and Peru (50,275). Collectively, the three nations of North America (the U.S., Mexico and Canada) accounted for only 24.1% of all incoming tourists, followed by Europe with 13.6%, Central America 10.3% and the Caribbean with 2.3%.

The wide range of new initiatives demonstrates that the Panamanians are aware that the best way to take advantage of the expanded Canal is “to build around it; to complement it,” says David Lewis, a Latin American investment consultant, and vice-president of Manchester Trade in Washington D.C. “Over and beyond just ships coming in and out, there is going to be [further] growth of ancillary services.” He adds: “Companies are realizing that Panama is a very attractive location to set up America hubs, because of Panama’s [multiple] free-trade agreements that get you everywhere. And with its dollarized economy, they don’t have to worry about foreign exchange risk.” While Panama’s population is small, “what really counts is the companies coming in to do their operations” in the country.

Lewis notes that at least 75% of the capital that has left troubled Venezuela recently seems to have gone to stable Panama. (Within the Latin American market, the rest has largely gone to the Dominican Republic). A lot of foreign companies that once had successful operations in Venezuela have moved them to Panama. In uncertain terrain, it’s a better bet.

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University of Notre Dame

College of Engineering

Doubling the Capacity of the Panama Canal: How this colossal global engineering project was achieved—and how it is changing the world

March 6, 2024 April 30, 2024

Please join us for this Edison Lecture featuring Raul Romero, ND ’75, ’77 (Civil Engineering).

April 18, 2024 at 4 p.m.

Jordan Auditorium, Mendoza College of Business University of Notre Dame

All are welcome.

Please join us to hear the fascinating story of the expansion of the Panama Canal, from the vantage point of one of the leaders of this enormous global project. The multi-year expansion, which culminated in 2016, added new sets of locks in the Pacific and Atlantic entrances, doubling the size and capacity of the canal to meet the growing demands of maritime trade.

Raul Romero , a native of Panama, graduated from Notre Dame in 1975 with a bachelor’s degree in civil engineering. He earned his master’s degree in civil engineering from Notre Dame in 1977. In 2020, Romero retired as Executive Chairman for North America of Sacyr Group, a multinational engineering and construction firm based in Madrid, Spain. At Sacyr he led, as Capture Manager, the successful pursuit of the expansion of the Panama Canal.

The Edison Lecture Series  was established in 1989 by the Charles Edison Fund to stimulate interest in and encourage participation in science and technology. Notre Dame Engineering’s Edison Lectures are designed to bring new ideas and innovative perspectives on engineering to our community and beyond.

Photos from the Edison Lecture with Raul Romero on April 18

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Project management lessons of the panama canal.

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The idea had been bandied about for decades, but in January 1880 a bold French team finally embarked on one of the most ambitious projects of all time: building a shipping canal through the Panamanian jungle to connect the Atlantic and Pacific oceans. But in less than a decade the French canal company had gone bankrupt after burning through $287 million and killing 22,000 men, mostly victims of yellow fever. The project’s leader, French diplomat Ferdinand de Lesseps, who had overseen construction of the Suez Canal, was convicted of misappropriation of funds and sentenced to five years in prison.

The upstart Americans thought they could succeed where the French had failed. In late 1903, as Panamanian rebels sought to separate from Colombia, the US seized its chance and used “gunboat diplomacy,” as it became known, to offer a security guarantee to newly independent Panama in return for the right to build and operate a canal. US work began in May 1904 under President Teddy Roosevelt-appointed engineer John Findley Wallace. But Wallace soon tired and resigned in June 1905. His successor John Frank Stevens made the crucial contributions of improving sanitation and worker housing and sharply cutting the rate of disease. But in early 1907, just as the focus shifted to construction, Stevens also resigned.

As his replacement, Roosevelt chose Army Major George Washington Goethals, a West Point-trained civil engineer with experience in canals. Goethals took the simple yet brilliant step of breaking the massive project into smaller, more manageable chunks. For instance, he divided the engineering and excavation work into Atlantic, Pacific, and Central divisions. The first two had a variety of locks and breakwaters to deal with, while the third was all about making the Culebra Cut through the continental divide to connect Gatun Lake to the isthmus’ southern coast. The project finished two years ahead of schedule and the Army Corps of Engineers largely credited its success to Stevens’ thorough preparation, which laid a strong foundation, and Goethals’ method of breaking the work into bite-sized chunks, which they dubbed work breakdown structure , or WBS.

All of which helps underscore the great value of strong preparation for 21st-century businesses – especially when people are dialing in from all over the world. We call this “Planning to Plan”. Before embarking on a project, ask how much planning you need and how you will go about it before starting. Lesseps’ catastrophic failure was largely due to over-confidence and inadequate preparation. Project success often hinges on preparation, yet time and again today’s managers rush to launch. Whatever you’re working on, a solid foundation is essential to ensuring a full understanding of the context, scope, and complexity, and orienting everybody toward success.

Thus, the main objectives of any project should have clear metrics and provide a simple answer to the question “ What does success look like? ” It’s crucial that project agreements with all parties nail down expectations and that everyone, whether in an office or working remotely, is on the same page. Using web-based tools like Miro and department retrospectives to clarify and prioritize outcomes will ensure that everyone is onboard and invested.

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Once everyone signs off, move onto a WBS, or an Agile Story Map, which similarly breaks goals into smaller deliverables. There’s a good reason the US military institutionalized WBS as a planning tool : because it works. You might want to take an afternoon to visually map out the project to see how chunks might be separated from the whole. Once you have all the pieces of the project defined, work backward from your deadlines and fill in the steps needed to reach your destination. For instance, if a regional sales launch requires customized designs and you know the art will take three weeks to produce, make sure the copy is completed at least three weeks before the event.

A WBS is essential for estimating budget, timeline, required team members, and other project elements , but it also helps identify, right at the outset, all those involved and their roles. This includes government bodies, clients and third-party vendors, and identifying them early is crucial, as it ensures that all decision-makers, especially external figures, are accounted for and kept on schedule. In the unfortunate event that you end up like Lesseps, in charge of a Titanic-like project, an environment of connection and understanding should encourage the negotiation of an acceptable solution, rather than a full-steam ahead push into bankruptcy and prison.

Assuming you’re not building a canal, you might look to reduce project scope to mitigate risk. With most remote and Agile projects, it’s helpful to deliver something you can learn from as soon as possible. In some cases — and we’ve had this happen to us too many times to count — the early lesson could be that the project sponsor no longer has any interest in the project or its objectives. But the likelier scenario is a bit of cost-cutting. For most projects, the primary cost is employee hours, yet they’re often overlooked. If you expect your project to be an uphill slog, doing a rough estimate of the total hours, and adding in any additional costs, such as printed reports, can sometimes sway the sponsor to reduce scope, alleviating the burden on you and the team — and moving you closer to success before you even begin.

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The Panama canal expansion mega project : a case study and stakeholder´s analysis

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As globalization increases integration, a new playing field is emerging which is driving the need for operational efficiencies and alignment of complementary capabilities among countries to build sustainable models and integrated offerings. As demands increase, companies are turning to effective project management as means to control operations and countries are increasing the amount of mega projects to boost their competitiveness and global footprint. Given the scale, complexity, political nature, multicultural makeup, and high level of visibility; mega projects rely on successful stakeholder management to effectively manage its operational, tactical, and strategic levels to execute their mission. This paper examines the success drivers of mega projects and presents an in depth stakeholder assessment of the Panama Canal Expansion mega project to identify the perceived value to its stakeholder community. The stakeholder categories include: the Panama Canal Authority, subcontractors executing the expansion project, customers of the canal in Panama and U.S., as well as the communities surrounding the Panama Canal and ports in the U.S. East Coast. The conclusion of this paper captures the relationship between the effective stakeholder engagement from the Panama Canal Authority, the perceived value of the Panamanian stakeholders, and compares it to U.S. based mega projects being executed simultaneously to allow the U.S. East Coast ports to accommodate increased cargo volumes.

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Case Study: Panama Canal Expansion in Central America

AuCom soft starters support excavation of 6.1 km extension to the Panama Canal.

Running through the Central American nation of Panama, the Panama Canal has been an important conduit for international trade between the Atlantic and the Pacific Oceans for over 100 years. In 2016 the largest expansion of the trade route since its original construction was completed.

This feat of engineering has an overall program cost of $US 5.25 billion, and has involved shifting more than 50 million cubic metres of material (an Olympic-sized swimming pool has a 2500 cubic metres capacity).

Part of the expansion was the Pacific Access Channel, known as PAC4, which involved the excavation of some of that 50 million cubic metres in the form of a 6.1km long access channel for a set of new Pacific locks. AuCom distributer in the region, El Salvador-based Industrial Systems , has played a role in making the huge project happen.

Industrial Systems worked with fellow-Panamanian company Electrisa to supply EMX3-360 and EMX3-255 soft starters to operate on the excavation sites, which were operating at high capacity in challenging climatic conditions.

AuCom soft-starters are also supplied by Industrial Systems for a number of other applications in Panama, including sugar refining, rice milling, meat processing, ammonia compressors for shrimp factories, and paper and plastic shredders.

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Anchored in History: The Panama Canal

Before the construction of the panama canal, vessels would circumnavigate south america: as a result, routes between europe and the far east via america were longer and more expensive.

by Mattia Micheli, SeaNewsEditor

The Panama Canal is an impressive feat of engineering: it links 1,920 ports thanks to 180 routes worldwide, facilitating a total of 14,080 transit in 2023. This enormous transit volume makes the Panama Canal fundamental to maintaining global commerce and the exchange between the two oceans.

That's why the 82-kilometer facility is one of the most important for global trade, and its construction boasts a fascinating history.  

A colossal undertaking fraught with failure

Colombian President Simon Bolivar was the first to propose building a canal across Panama. In 1829, he commissioned British engineer John Lloyd to verify the feasibility of the project.

After several attempts by South American nations and the United States during the 19th century (interrupted due to the Civil War), the French tried to build the channel twice.  

The first attempt, from 1876 to 1889, was led by the “Civil Society for Interoceanic Channel.” From 1880 to 1885, Ferdinand de Lesseps (the same engineer behind the Suez Canal) directed the excavations. After four years of work, the project's errors were corrected, and the excavations continued under new management.

In the second half of the 1880s, Gustave Eiffel, a civil engineer renowned for building the Eiffel Tower, directed the construction of the locks. Sadly, a combination of tropical diseases and challenging climatic conditions ended the ambitious project after 20,000 deaths.

Subsequently, the “New Society of Panama Canal” (also French) made another attempt from 1894 to 1899, which also failed.  

Just two years later, the United States initiated efforts to build the facility under the leadership of Theodore Roosevelt (who assumed office a few months after the assassination of his predecessor, William McKinley).

A preliminary agreement between the Secretary of State John Hay and the British Ambassador Sir Julian Pauncefote abrogated the 1850 “Clayton-Bowler Treaty” that established the neutral status of the Panama area. The new agreement allowed the US to build and manage its own canal in Panama, which was then part of Colombia. 

After a favourable vote of the US Senate, on 16 June 1902, Secretary of State John Hay signed a Treaty with its Colombian counterpart Tomas Herran for building the new facility. Unfortunately, it was rejected by the Colombian parliament. 

The negotiations, temporarily suspended, resumed in the following year after the Panama Declaration of Independence on 3 November 1903 and the nomination of French engineer Philippe Bunau-Vanilla as representative for negotiations.

After a few months, Panama and the United States signed a treaty for renting a 10-mile-wide stripe of land for the construction of the facility in exchange for a $10 million payment, a $250,000 annual annuity and the guarantee of Washington to Panama’s independence.

The Canal was finally built by military engineers under the direction of Colonel George Washington Ghoetals from 1907 to 1914. The United States maintained sovereignty over the Panama Canal until 2000 when it was returned to Panamanian control.

United State's historical interest in the Canal

The United States' main interest in controlling the Canal was evident in the relations between Washington and the Panama locals throughout the 20th Century. Washington sought to maintain a presence in the area to ensure the Canal’s neutrality. Panama maintained friendly relationships with the United States during this period, except for a brief period in 1964.

In 1977, a number of treaties called “Carter-Torrijos” occurred between Panama and the US, establishing the Canal's neutral status. Years later, in 1999, Panama's sovereign authority over the Canal should have been established.

However, with Manuel Noriega’s rise to power, and despite never actually serving as president but as a de facto ruler of Panama from 1983 to 1989, relations between Panama and the US deteriorated. Initially aligned with Washington’s positions, Noriega posed a threat to the neutrality of the Canal and, on 15 December 1989, declared war on the United States.

To safeguard their interest in the zone, 5 days later, the United States deployed the greatest number of troops since the end of the Vietnam War. The entirety of Panama was invaded and occupied in just 5 days in an operation called “Just Cause”.

This series of events serves as a clear example of the fact that, after 1914, the US didn’t extinguish its interest in the area; on the contrary, it maintained a presence to vigilante the neutral status of the Canal for nearly a century. 

The Panama Canal today

The Panama Canal is of immense economic importance. Its historical significance cannot be overstated.

For the entire 20th century, this small US enclave in Latin America served as a vital passageway connecting two oceans and countless countries, becoming a fundamental route for merchant ships worldwide.

Today, the canal faces a new challenge: the lack of water. A record dry season in 2023 restricted the number of daily transits to almost half, significantly impacting global trade.

As a solution, the Panama Canal Authority announced that it would build a new system of canals to draw water from the Gatun Lake, to increase the number of daily passages.

While the Panama Canal Authority is optimistic about the upcoming summer season, the locks are heavily dependent on good rainfall to keep trade moving.

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Risk Planning and Management for the Panama Canal Expansion Program

In April 2006, the Panama Canal Authority formally proposed a major expansion of the canal to increase its capacity and make it more productive, safe, and efficient. This proposal included cost and schedule estimates for completing the expansion and was supported overwhelmingly by the citizens of Panama in an October 2006 public referendum. Given the conceptual level of design at the time of the proposal and the inherent uncertainty in a project of this magnitude at the early stages of engineering, a comprehensive risk analysis was performed to develop a contingency model for the total expansion program cost and schedule. This contingency model is based on a Monte Carlo simulation of the cost and schedule estimates, taking into account the most significant risks identified for the project. The resulting model provides contingency assessments for duration and total cost and sensitivity analysis of the risks; it also allows for multiple scenario planning and ultimately supports overall risk management. This paper presents a project case study that focuses on the contingency model development and the resulting risk management and contingency resolution processes.

• Record URL: https://doi.org/10.1061/(ASCE)CO.1943-7862.0000317
• Find a library where document is available. Order URL: http://worldcat.org/oclc/8675438
• Copyright © 2011 American Society of Civil Engineers
• Alarcon, Luis F
• Ashley, David B.
• de Hanily, Angelique Sucre
• Molenaar, Keith R
• Ungo, Ricardo
• Publication Date: 2011-10-1
• Media Type: Print
• Features: Figures; Photos; References; Tables;
• Pagination: pp 762-771
• Journal of Construction Engineering and Management
• Volume: 137
• Issue Number: 10
• Publisher: American Society of Civil Engineers
• ISSN: 0733-9364
• EISSN: 1943-7862
• Serial URL: http://ascelibrary.org/journal/jcemd4

Subject/Index Terms

• TRT Terms: Canals ; Contingency planning ; Costs ; Risk analysis ; Risk management ; Scheduling ; Uncertainty
• Identifier Terms: Panama Canal
• Uncontrolled Terms: Construction costs ; Expansion projects
• Subject Areas: Construction; Marine Transportation; Planning and Forecasting; I21: Planning of Transport Infrastructure; I50: Construction and Supervision of Construction;

Filing Info

• Accession Number: 01357474
• Record Type: Publication
• Files: TRIS, ASCE
• Created Date: Nov 29 2011 1:43PM

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Home » Case Studies » The Panama Canal Negotiations

The Panama Canal Negotiations

This case study reveals how different negotiation tactics can be employed to negotiate and conclude a better international agreement.

The successful construction of the Panama Canal was one of the world’s great engineering feats. The negotiations to complete and build this vital connector between two oceans spans decades. The cost in human lives, suffering, and capital staggers the imagination. It all began in 1847 when the United States entered in a treaty with New Granada (later to be know as Colombia), allowing the U.S. a transit passage over the Isthmus of Panama. The treaty guaranteed Panama’s neutrality and recognised that Colombia would have sovereignty over the region.

Nothing really occurred with this development and ultimately, a French company called the Compagnie Nouvelle du Canal de Panama acquired the contract to build the canal in 1881. By 1889, the Compagnie had gone bankrupt and had lost roughly around $287 million U.S. along with approximately 20,000 lives in the process. It is also in 1889 that the U.S. has become convinced that the canal passage was absolutely vital to their interests. They appointed Rear Admiral John Walker to head the Commission and to choose the most viable route.

Naturally, the U.S. was interested in the Panama route already started by the French. The French company which had been heading for bankruptcy, and seeing the writing on the wall before their bankruptcy in 1889, had entered into negotiations with the U.S. The French company was eager to extricate themselves from the project. At the time, their holdings were extensive and included land, the Panama Railroad, 2,000 buildings, and an extensive amount of equipment. They felt their total holdings should be valued around 109 million U.S., but Rear Admiral Walker estimated them to be not greater than about 40 million U.S., a significant difference.

As negotiations progressed, the Americans began to hint that they were also interested in the possibility of building an alternative canal in Nicaragua. The French countered with the ploy by claiming that both Great Britain and Russia were looking at picking up the financing to complete the canal’s construction. It was subsequently leaked to the U.S. press, much to the French company’s pique, that the Walker Commission concluded that the cost to buy out the French company was too excessive and recommended the Nicaraguan route.

A couple days later after this news, the president of Compagnie Nouvelle resigned. The resulting furore caused the stockholders to demand that the company be sold to the U.S. at any price they could get. The Americans became aware that they could now pick up all the French holdings for 40 million dollars. However, the Walker Commission had not just been a ploy by the Americans because the Nicaraguan route was actually a serious proposal that had a lot of backing in the U.S. Senate. President Roosevelt had to engage in some serious political manoeuvrings to get everybody on board of the Panama passage. The Walker Commission changed its recommendation to favor Panama as the canal route.

But the story doesn’t end there. Next, the U.S. signed a new treaty with Colombia’s charge d’affairs which gave the U.S. a six mile area across the Isthmus and agreed to financial remuneration that was to be paid to Colombia. The Colombian charge d’affairs had signed the treaty without communicating with his government. The treaty was rejected by Colombia. In the meantime, revolution against Colombian authority was afoot in Panama. Since they believed they had signed a legitimate treaty, Roosevelt sent warships to the area to pacify the Colombians, and thus secured U.S. interests. Roosevelt offered aid to the Panamanians in their quest to separate from Colombia. Panama succeeded in their revolt and became a republic. In 1914, the Panama Canal was opened.

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