Panama seceded from Colombia with U.S. help and declared independence in 1903. Since then, the U.S.-built Panama Canal has been a significant part of its brief history as a country. Ownership of the Canal Zone devolved to Panama at the end of 1999.

Today, the country is ruled by "a few elite families of European descent" who share very little of their ill-gotten wealth with the poor. Corruption is institutionalized and rampant.

The 2005 World Development Indicator by the World Bank shows that the richest 20 percent earns or spends most of the country's wealth (60.3 percent), while the poorest 20 percent gets only 2.4 percent of the pie. Between 40 and 50 percent of Panamanians live in poverty or extreme poverty.

In such a dismal economic climate, ordinary citizens may care very little about the benefits of expanding the Canal. In fact, resistance to the expansion has cropped up in Panama. And there are signs that the government has not only clamped down on the opposition but also bought votes.

Foreign Interests

For those outside Panama, the Canal holds a great potential for investment and trade. Singaporean Foreign Minister George Yeo just returned from Panama. Japanese senators and government officials were in the capital last month for a briefing. Yesterday Canada announced a deal to finance expansion-related projects through its export credit agency. And Taiwan has made no secret of its desire for a share of the pie.

China's Influence in Panama

China, Taiwan's arch-foe and rival, holds significant economic influence and possible political sway in Panama. The sheer volume of China's export alone poses a threat to Panama's bottom line.

In 2005, China, including Hong Kong S.A.R., was the largest shipper in Atlantic-bound canal traffic with 17,769,372 long tons (18,054,515 metric tons) of goods reaching the East Coast of the Americas, according to the Panama Canal Authority. Nearly 87 percent of the Atlantic-bound cargo from China were for the United States.

The ports at the ends of the Canal are operated by Panama Ports Company, which is owned by Hutchison Port Holdings Limited. That firm is owned by Hutchison Whampoa Limited, which is owned by the Hong Kong-based Cheung Kong (Holdings) Limited.

Li Ka-Shing, the 78-year-old owner and founder of Cheung Kong, is Asia's richest and the world's 10th richest man, according to Forbes. And he has been the subject of U.S. military intelligence reports.

"Li is directly connected to Beijing and is willing to use his business influence to further the aims of the Chinese government," says an April 1998 report titled "China Awaits U.S. Departure [From Panama]."

The same report, which had been classified "NOFORN" (No Foreigners), adds, "Li's interest in the canal is not only strategic, but also a means for outside financial opportunities for the Chinese Government."

In a heavily redacted October 1999 Intelligence Assessment, the U.S. Southern Command notes that neither the company nor Beijing has any direct political or military incentives to seize control or shut down the Canal.

But Hutchison Whampoa could threaten to move its business from Panama to the Bahamas for leverage over the Panamanian government, the report concluded. Plus, the company could become a conduit for illegal shipments between China and the West.

Both these reports were initially obtained by Judicial Watch through FOIA when Hutchison Whampoa, which also plays with the communications industry, thought about Global Crossing and its store of fiber-optic networks.

The "Master Plan"

The Panama Canal Authority [ACP] cites two sets of reasons for the need to expand and deepen the waterway: 1) Existing locks are too small for post-Panamax ships; 2) The Canal faces stiff competition from the U.S. intermodal system that transports cargo over land and from the Suez Canal.

A growing number of container ships already wait at both ends of the Canal due to congestion. If the Canal does not expand to meet the demand for the route between East Asia and the U.S. East Coast, its market share would fall from 38 percent now to 23 percent in 2025, the proposal says.

M/S Emma Maersk, the world's largest container ship, cannot fit through the Panama Canal. (Photo: Courtesy Maersk)

She Is Too Big

M/S Emma Mærsk highlights the need for deeper, wider and more efficient lock systems at the Panama Canal. Built for the famed Danish shipping giant, she is the world's largest container ship.

She can fit an estimated 15,000 20-foot containers, or Twenty-Foot Equivalent Units [TEUs], whereas most vessels today carry somewhere between half and two-thirds of that number of containers. Mærsk, which uses a combination of volume and weight for capacity, estimates that she can hold 11,000 TEUs that weigh 14 metric tons each.

At 398 meters (1,305 feet), the Emma Mærsk is longer than the Eiffel Tower (324 meters) or the 102nd floor of the Empire State Building (373 meters). Her beam (width of the hull) is 56 meters wide, or longer than an Olympic-sized swimming pool.

This mammoth is fully computerized and can be run with a crew of 13 people.

With her enormous capacity, businesses could save in shipping cost. But like the Panama Canal, not many ports and docks around the world are deep and wide enough to handle her.

The Fight

As the October 22 referendum on the expansion nears, the battle line between the "yes" and "no" campaigns is shifting more frequently. The fight involves concerns about corruption, cost, employment and actual benefit to ordinary Panamanians.

As The New York Times noted, even the former chief engineer for the Authority is saying the project will cost a lot more than the US$5.25 billion estimate, which is just less than Panama's annual budget of US$6.5 billion.

The cost estimate for the A.C.P. was done by Parsons Brinckerhoff, the same firm that calculated and built Boston's Big Dig. That project ran over budget by about 50 percent, and a tunnel in its network collapsed.

(Eric Jackson of Panama News has more details on PB's involvement in the Big Dig and its cost estimate of the expansion.)

But, of course, only time will tell if and by how much the direct and indirect cost of the Canal expansion will rise.

A brief analysis by the Council on Hemispheric Affairs [COHA] shows that the cost is likely to rise perhaps as high as five times the official estimate when all is said and done.

The A.C.P. has touted how much employment the expansion could generate, but the figures are being disputed by opponents. The Authority claims in the Master Plan that during the peak of construction, which will start in 2007 and end in 2014, as many as 7,000 directly-related and 40,000 indirectly-related jobs will be created. And by 2025, as many as 250,000 jobs will have been created.

Panama's current labor force is about 1.4 million, out of a population of about 3.2 million. Assuming that the unemployment rate, currently at 8.9 percent, will stay the same or fall slightly, Panama would need a large foreign labor force to fill all the jobs created by the Canal expansion.

The "yes" campaign has been touting the quarter-million job figure as an absolute certainty without delving into the types of jobs that might be created. Panama is in desperate need of skilled labor, which the expansion alone cannot not supply.

Dr. Keith Holder, in a column in La Prensa, points out two key assumptions in the Master Plan: 1) The Canal usage will always increase without fluctuations despite historical data to the contrary; 2) An increasing number of post-Panamax ships will use the Canal.

Dr. Holder concludes that the expansion is unnecessary and far less urgent than the government claims. He urges the government instead to invest the funds safely in education, hospitals and public works.

In agreement with Dr. Holder, a former legislator, is Fernando Manfredo, the deputy canal administrator at the Panama Canal Commission, as the A.C.P. was previously known, through the 1990s.

In an interview with Panama America, Mr. Manfredo says a debate about an expansion of the Canal is possible when the A.C.P. and the government release all relevant information, including possible pitfalls, delays and other risks for Panamanians to understand the full scope of the project.

In the Master Plan, the Authority makes the following blanket statement:

It has been found that all possible adverse environmental impacts can be mitigated through existing procedures and technology and no immitigable or permanent adverse impacts on the population or the environment are anticipated.

The Panama Canal Authority has used questionable tactics in presenting the environmental impact of the expansion on areas surrounding the shipping lane. Mr. Jackson, of The Panama News, describes in painstaking detail how the Authority allegedly whitewashed and simply ignored concerns about the salinity of the area's fresh water.

While democracy is far from the minds of Panamanian leaders, one key demand of the opposition has been transparency. A transparent debate with the A.C.P. and the government on the one hand and the public on the other would have produced a more stable environment for the October 22 vote.

President Martín Erasto Torrijos Espino, is the son of Colonel Omar Efraín Torrijos Herrera, military dictator of Panama from 1968 to 1981. The revolving door of politics has been good to the younger Torrijos, who served in the administration of Ernesto Pérez Balladares (1994-1999). Col. Torrijos had handpicked Mr. Balladares to serve as finance minister during the dictatorship.

Both Mr. Jackson, of The Panama News, and the Noriegaville News (now defunct, sadly), have reported on vote-buying -- apparently $35 for each person. The source of the fund is unclear although Mr. Jackson believes the money used by First Lady Silvia to buy votes comes partly from an international fund.

When it comes to corruption, Panama ranks fairly low on the scale of integrity or transparency. Recent Panamanian presidents had a discretionary fund of US$25 million, which would as documented be for personal use, according to Transparency International. That fund has been cut to US$5 million under Mr. Torrijos.

Mr. Torrijos has taken some steps against corruption on paper, but their impact has been invisible. The Berlin-based anti-corruption group has documented, in Global Corruption Report 2006, that Panama remains a country where nepotism, influence-peddling and a judiciary unwilling to tackle corruption fail to inspire much confidence in the government.

In a scathing commentary, the Council on Hemispheric Affairs reported last year about how Mr. Torrijos has refused to launch a full investigation into the distribution of thousands of fraudulent University of Panama diplomas. Regent of UP, Gustavo García de Paredes is a close associate of the president.