THE PANAMA CANAL: HOW IMPORTANT TO U.S. GRAIN/OILSEED EXPORTS?

The Panama Canal will be transferred to the Republic of Panama on December 31, 1999. Some believe the Panamanians will not follow the break-even management philosophy of the U.S. and will attempt to maximize toll revenues. Other critics hold that Canal management and maintenance will suffer from corruption and nepotism. They believe that political patronage and inflated payrolls will drain resources from the Canal, and this will lead to inadequate maintenance which eventually will make the Canal virtually inoperable. Spatial models of the international corn and soybean sectors are used to evaluate the strategic role played by the Panama Canal for U.S. corn and soybean exports. Grain and oilseeds are the leading commodities transiting the Canal: about 44 percent of U.S. corn and soybeans more via this transport artery. Two scenarios are examined. The first scenario determines the effects of increasing Canal tolls while the second examines the effect of Canal closure. Increasing tolls reduce exports via U.S. Gulf ports, increase exports via U.S; Pacific northwest ports, reduce quantities transiting the Canal and increase flows to east Asia via Africa's Cape of Good Hope. In addition, the U.S.'s role in Asia's corn and soybean markets declines while Europe and north Africa become increasingly important markets for U.S. producers. Total corn and soybean exports of the U.S. decline no more that 2 percent. Analysis suggests a revenue-maximizing Canal operator could substantially increase revenues by adjusting tolls upward by $2 per ton of cargo on corn-laden vessels and $1 per ton on soybean-laden ships. This would lower U.S. producer annual corn and soybean revenues about $160 million. Closing the Canal has a similar effect on flows and trading partners as higher tolls. If the Canal were closed, revenues of U.S. corn and soybean producers are projected to decline $303 million per year.

Language

  • English

Media Info

  • Features: References; Tables;
  • Pagination: p. 337-362

Subject/Index Terms

Filing Info

  • Accession Number: 00804758
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Jan 8 2001 12:00AM