26-02-2025
Panama Canal Board Approves Plans for New Reservoir to Combat Drought
The Panama Canal Authority (ACP) board of directors approved plans to build a new reservoir in the Indio River watershed in an effort to mitigate impacts from future drought conditions.
Construction on the project, which includes a dam, is slated to begin in 2027 and take four years to complete. The reservoir plan's estimated cost is $1.2 billion, with an additional $400 million tacked on as investments in neighboring communities.
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The new lake will be created to guarantee water supply for over 50 percent of the country's population, nearby communities and the canal operations.
When Panama experienced a drought throughout much of 2023 and early 2024, the authority was forced to restrict the number of vessels that could sail through the waterway. The ACP also implemented draft restrictions that required some ships to reduce capacity to travel the canal.
As a result, vessel backlogs occurred from the summer through the remainder of 2023. At one point in August that year, as many as 161 ships were queued up awaiting their turn.
The ACP put the restrictions in place as Lake Gatún, the artificial lake that feeds the canal's lock system and helps float the vessels, endured low water levels throughout the drought.
By building the new reservoir, the canal can supplement Gatún's main supply of water.
Ricaurte Vásquez Morales has previously said the reservoir would provide capacity for an additional 11 to 13 daily transits, which would better stabilize vessel movement in the event of another drought.
According to Vásquez, the project 'would provide a little more certainty to maintain 36 transits per day, a higher level of reliability for the route.'
Monthly transits through the Panama Canal in January 2024 bottomed out at 189 after the series of restrictions, plummeting from 283 a year prior, according to the authority. The ACP began easing its daily restrictions at the nadir of traffic, when projections for Lake Gatún's water levels began improving.
But even today, with the transit restrictions no longer in place, traffic hasn't yet bounced back to pre-drought levels. Between September 2024 and January 2025, ship capacity transiting through the Panama Canal was 10 percent lower than the 2019-22 average by deadweight tonnage, according to the Baltic and International Maritime Council (BIMCO).
Transit fees, trade pattern changes and 'the establishment of a new normal' are all potential factors preventing a full return, Filipe Gouveia, shipping analysis manager at BIMCO, said in a Thursday statement.
Building out the reservoir will still have some hurdles, namely since communities living in villages near the Indio River basin will have to leave the area.
According to preliminary data from the ACP, there are 538 households on the construction site, comprising 1,714 people: 53 percent are men and 47 percent are women. In total, 12,000 people are said to live near the river's banks.
Under the authority's Resettlement and Livelihood Restoration Plan, relocating families and property owners will receive compensation.
The canal operator began conducting a census of the impacted population in August 2024, which is set to be completed by April 30. The aim is to allow the Panama Canal to better identify resident families and develop compensation processes.
Following the ACP board's approval of the reservoir, the canal's teams have held a series of meetings with residents via house visits and community gatherings.
However, the residents aren't falling in line with the project's plans. On Tuesday, residents of Rio Indio, alongside the Coordinadora Campesina por la Vida (CCV) and other social organizations, held a rally to protest the construction effort.
CCV president Digna Benítez accuses the ACP of disseminating false information about the alleged acceptance of the project among the riverside population. She says that, by and large, residents reject the 'exploitation' of that reservoir, due to its serious socioeconomic, political, legal and environmental implications.
The Indio River reservoir isn't the only upcoming project in Panama designed to alleviate some of the concerns about the canal's efficiency amid other adverse climate conditions.
Late last year, the ACP unveiled it also has plans to develop a new land bridge that would substantially expand container movement for cargo carried on ultra-large ships too big to transit the trade artery. Instead, with a bridge in place, companies would have a new option to transport goods from one ocean to the other via rail or truck.
While the Panama Canal facilitates the transportation of 8.3 million containers per year, the ACP wants to make room to move at least 5 million more containers annually by 2045.
The authority expects that project to cost between $1.2 billion and $1.4 billion.
The Panama Canal has drawn plenty of attention after the U.S. presidential election, amid President Donald Trump's repeated threats to 'take back' the waterway over concerns of Chinese influence.
While Trump has lofted baseless claims that China operates the canal, his allies in Washington, including Secretary of State Marco Rubio, view two ports adjacent to the waterway as a national security issue.
The ports of Cristóbal and Balboa are both operated by a subsidiary of Hong Kong-owned CK Hutchison, which Rubio has stressed is a 'legitimate concern' due to potential Chinese government oversight of the gateways.
