After six years and billions of dollars, the Panama Canal expansion may grind to a halt

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Aaron Schachter: I'm Aaron Schachter in for Marco Werman and this is "The World", a co-production of the BBC World Service, PRI, and WGBH Boston. It's hard to imagine global commerce without the Panama Canal. It's a key international cargo route, especially for companies shipping between the eastern US and Asia. The Canal is being expanded now to allow more cargo to pass through. But the project hit a snag - a dispute, not surprisingly, over money. Joining me is Jason Margolis. And, Jason, you've been to the Panama Canal and reported a series of stories on the proposed expansion just a few years ago. First, just tell us what the dispute is about. Jason Margolis: Well, as you said, it's about money. An European consortium agreed to expand part of the canal for about 3.2 billion dollars and now they're saying the will need another 1.5 billion dollars to complete to project. They say the Panama Canal Authority provided poor geological studies and now it's costing them more to build than they originally anticipated. The Panama Canal Authority says, "No, we had a deal," and by the way it's worth noting that the European consortium's bid was the lowest at the time and is actually lower than what the Canal Authority said it would actually cost. So now they're just haggling over money, who's going to pay for the cost overrun. Schachter: Now, 1.5 billion dollars is not chump change, but what happens if they don't resolve the issue? That's it? The construction stops? Margolis: No, they can go to arbitration, but if they can't reach a compromise they'll put out the bid to another contractor, but nobody wants that because that would slow down the project significantly and time is money. Schachter: Now, Jason, you've been there. Paint a picture of the canal for us. Margolis: There you go. So a lot of people think it's a long canal. It's not. The passage is about fifty miles, but most of it is ships crossing over a man-made lake. It's really just an amazing engineering feat. So what the ships are doing is they're coming up these three locks, they're raising up eighty-five feet on the Pacific or the Atlantic and then they're cruising along this lake as well as some cut channels. And this is the major trade route from Asia to the east coast of the United States. Schachter: And why does it need to be expanded now? Margolis: Well, there's two reasons. First, the canal is just too crowded. It can accommodate forty-three ships in a day and there have been times when there are over a hundred and fifteens ships waiting to get through and the captains on the ships, they do a little analysis, they say, "OK. How long can I wait before this starts costing me money to get my goods to where they need to go?" And if the wait is longer than ten days, most will go around the cape of South America. Schachter: Is it really possible to wait ten days to get through the canal? Margolis: Yeah, if it's backed-up or if they're doing repairs or something's happening, the wait can be ten days or longer. Schachter: OK. So the canal might be too crowded. What's the other reason for widening it? Margolis: Size constraints. Right now the locks are one hundred and ten feet wide, and that's an important number because there's these ships called "Panamax ships" and that means maximum that can fit through the Panama Canal , and they can be a hundred and six feet wide. So it's just amazing when you go to the Canal, there's these little locomotives, four on each side, they call the mules, and they're pulling along these Panamax ships with cables tethered to the ships and they're passing with twenty-four inches of clearance on each side. It's really, really tight. And now the ships are even bigger. They have these ships called "Post-Panamax ships" so, as the name implies, bigger than the Panama Canal. So they new locks will be one hundred and eighty feet wide, so significantly wider and longer, allowing these bigger ships to pass. Schachter: Man. So what do the Post-Panamax ships do right now? Margolis: Again, the major trade route is from Asia to the east coast of the United States, and right now, say a ship comes from China. They'll go to Long Beach near Los Angeles. The ships unload the cargo. The cargo goes on trucks or rail and then they deliver it to Chicago or New York or where ever it's going and that costs a lot of time, a lot of fuel. It would be easier just to go right through the Panama Canal if those bigger ships could get there. Schachter: So these delays are costing everyone a lot of money I imagine. Any idea when the project might be completed? When was it supposed to be completed? Margolis: It was supposed to be completed at the fall of this year. They're already nine months behind schedule. The Panama Canal Authority says it will be done in June of 2015, but if the workers stop working it's anybody's guess. Schachter: The World's Jason Margolis. Thank you so much. Margolis: You're welcome.