Do you dig the Canal, yet? (A reprint of Vol. XIV, Art. 17, from Feb.8th, 2008)

“US ports must enlarge because of Panama Canal expansion, says researcher.” That was the headline in the Dallas Morning News. And the “researcher”? None other than the Panama Canal Authority vice president of Research and Market Analysis, Rodolfo Sabonge. (No doubt a Spanish translation for the word, “sponge”.)

Mr. Sabonge foresees that the new lane of traffic to be built on the Panama Canal will greatly influence world trade and US ports in particular.

“These ports should be ready for larger and bigger ships that will go through the expanded Canal – anticipating infrastructure needs in the near future is key to their growth,” he said.

The prediction was made during an expansion workshop held in Tampa, Florida, and co-sponsored by the American Association of Port Authorities, the US Maritime Administration, and the workshop’s host, the Tampa Port Authority.

Also in attendance was the civilian head of the Army Corps of Engineers who “promised to spend his final year in office” in an attempt to speed up those approaches that delay dredging projects.

The Dallas Morning News issued a lengthy report on that workshop. “Port directors say the United States is not ready for the shake-up in trade patterns across the Western Hemisphere that is likely to follow the expansion of the Panama Canal, which is now underway,” was the opening comment.

Note the use of the word “likely” … and then watch the demands port authorities make upon U.S. taxpayers to fork over billions, because “anticipating infrastructure needs in the future is key to their growth”. But whose growth? Ours? … the taxpaying sheep? Or the growth of unidentified non-taxpayers? Take one guess.

One of the port directors at the workshop stated that many U.S. ports need deeper channels to accommodate a giant new class of container ships that will use the expanded Panama Canal. Coincidentally, the demand for overseas goods at this director’s port decreased by approximately 11% last year. Logically, then, smaller ships, not giant ships, will be servicing his port.

But like all unaccountable port directors, he’s not looking at things logically. He’s talking about dredging for larger vessels, acquiring additional sites for expansion, and hiring a “consultant” in order to examine how best to modernize for future business. It’s a good thing that there are no stockholder-watchdogs looking over his shoulder.

Another of the U.S. port directors in attendance who, incidentally, used to work with the Panama Canal Authority, complained that “we’re all sitting around not knowing what to do.” He urged that the U.S. Army Corps of Engineers, which handles waterway projects for the federal government, should come up with a new approval process for channel dredging and take it to Congress.

He inferred that inaction would lead to unnecessarily high prices for U.S. consumers. “The cargo will move,” (through the Canal), he said. “But you’re not going to get the economies of scale, so you’re going to be paying more than you should.”

[Anytime someone mentions “economies of scale”, hold on to your wallet.]

As all baseball fans know, a curve ball is what you get when you least expect it. So here comes another one. It’s the Panama Canal again. That’s right … again.

In the late 1970’s we were conned into turning our Panama Canal Zone over to Panama. Our chief executive at that time orchestrated the transfer with some clever double-talk. When asked why we should give away something that Americans had bought and paid for, the answer he gave was not exactly the truth. He said:

“We do not own the Panama Canal Zone. We have never had sovereignty over it. We have had only the right to use it. From the beginning, we have made annual payment to Panama to use their land. You do not pay rent on your own land.”

The truth of the matter is that there was no mention of renting or leasing in our 1903 treaty with Panama. The purpose of our annual payment to Panama, in the years since the treaty, was to compensate that nation for the loss of revenues from a pre-existing agreement regarding a railroad across the Isthmus which Americans, by the way, had built for them back in 1863.

The French took over the railroad, and the payments, when they began their Canal project in 1878. After spending $ 180 million and seeing 40,000 of their laborers fall to yellow fever, dysentery, malaria, and a few other tropical diseases, the French terminated their efforts. When we subsequently bought out the French and again assumed control of the railroad, the sole purpose of those aforementioned annual payments was to compensate Panama for that loss of revenue resulting from the departure of the French.

By the time we completed the Canal, those loss of revenue payments came to $ 50,000 annually. This was later increased to $ 430,000 when the U.S. abandoned the gold standard, and it was gradually increased to $ 2.3 million annually. Why that gradual increase? Our “chief executives” never told us.

Back in the ’70s, it was being alleged by irresponsible politicians, and their supportive media, that we acquired the Canal Zone by “gunboat diplomacy”. It was one of the smokescreens being issued so that opposition by concerned U.S. citizens could be subdued.

We “swindled” the poor Panamanians, was another bit of nonsense tossed at those who challenged this sneaky transaction. The sovereignty of this proud little nation in Central America was being trampled upon by a big, bad “colonial power”, Americans were being told. The truth is that in exchange for the 500-square-mile Canal Zone, U.S. taxpayers have provided 28,000 pestilence-free square miles of habitable living area to Panama and to all of that nation’s inhabitants.

When our chief executive was asked why we were agreeing to pay Panama approximately $ 50 million annually until the year 2000, he answered, inaccurately: “Are we paying Panama to take the Canal? We are not. Under the new treaty, any payments to Panama will come from tolls paid by ships which use the Canal.”

Baloney is still baloney, no matter how you slice it. Where would those tolls go if they didn’t go to Panama? Obviously they’d go to the nation that bought the territory (the U.S.), paid millions for the construction of the Canal (the U.S.), saw thousands of its citizen laborers die during this construction (the U.S.), and paid billions to operate the canal once it was completed (the U.S.). So regardless of which pocket we are taking it out of, we are paying Panama, or someone, to rip us off.

Panama, you may recall, didn’t contribute financially or technologically, nor did she even provide manpower for the project. The building of the canal was entirely an American effort, but it is Panama that has heaped the lion’s share of benefits from our incredible engineering achievement.
And our contributions to the Panamanians didn’t end there. We installed and maintained sewage and sanitation systems in their cities, paved their roads, built breakwaters at their harbors on both coasts, and directly and indirectly generated a substantial portion of Panama’s everyday economy.

Didn’t we just refer to “the nation that bought the territory”? Yes, and we paid through the nose – with dollars that shouldn’t be judged in terms of today’s inflated currency.

– Initially, we paid $ 40 million to the French company which owned the “right of way” and which had made an enormous investment in a failed attempt to build a canal across the Isthmus.

– We paid $ 10 million to the new nation of Panama.

– We paid handsome prices for all privately owned lands within the Canal Zone, as well as for land illegally occupied by “squatters”.

– And in order to settle a serious territorial dispute we also paid neighboring Colombia $ 25 million to recognize Panama as a sovereign nation.

Our record with respect to the Panama Canal has been one of continual investment and improvement, for the benefit of Panama as well as for our Canal operations. We just didn’t sit back and harvest the tolls as so many U.S. citizens have been led to believe.

We built a huge dam across the Chagres River in Panama back in 1936, which not only helps to stabilize the flow of water in the Canal system but also provides light, power and water to Panama.
And to assure uninterrupted use of the Canal in the event of damage, a duplicate set of locks was added in the 1940s at a cost of almost $ 200 million, a sum that also shouldn’t be judged in terms of today’s inflated currency.

In addition to the obvious value of the Canal itself, our Canal Zone encompassed billions of dollars worth of huge cranes, warehouses, machine shops, highways, docking facilities, hospitals, airports and their support activities, housing, recreational areas and all manner of assets bought and paid for by American taxpayers. Unfortunately, these assets were directed into the hands of greedy politicians and not into the hands of needy Panamanian citizens. Surprise! Surprise!

Something was amiss back in the ’70s. The Canal Zone pitch came up like a sneaky curve ball. Almost everyone following Senate proceedings on this matter concluded that, since we had nothing to gain and everything to lose, the vote would be 100 to 0 against ratification. The fact that this treaty, a plain case of piracy, even reached the Senate for so-called “debate” was a national disgrace. Shenanigans and political pressures won the day. The American taxpayer lost. Big time.

We had to “return” the Canal Zone back to Panama because we – more or less – “swindled” it from them in the first place. What we paid to the Panamanians, we were told, was a measly $ 500 per acre. If we “swindled” it, we stole it. Right? And stolen property must be returned. Right?

Well, let’s look at some of our other purchases.

– The Louisiana Purchase from France in 1803 cost us $ 15 million.

– Then we bought Florida from Spain in 1819 for $ 5 million.

– And then we bought Alaska from Russia in 1863 for $ 7.2 million.

In terms of cost-per-acre, it turns out that we paid 13 cents per acre for Florida, 3 cents per acre for the Louisiana Purchase, and 2 cents an acre for Alaska. Using the same logic imposed on us gullible citizens back in the ’70s – that $ 500 per acre is a “swindle” – shouldn’t we return what we “swindled” from France, Spain and Russia to their rightful owners? Fuggeddaboudit.

So now the Panama Canal rears its ugly head again. The greedy – the shipowners, the dredging companies and the port authorities – will walk away with all the marbles, and the needy – the U.S. taxpayer – will pay through the nose. Again.

Back in the late ’70s, when they were debating the new treaties in the Senate, Nevada’s Senator Paul Laxalt may have provided us with a clue about what really goes on in tiny Panama. In his opening day address to the Senate, he got our attention when he said – and we were careful to note – :

“It looks like big business is concerned enough about insuring its investments in Panama to back the treaty. It is no secret that the (ruling) regime is teetering close to the edge of financial collapse. What is less well known is that many U.S. companies have created offshore investment centers in Panama, taking advantage of Panama’s lax banking and tax laws, and pouring literally hundreds of millions of dollars there.”

Misrepresentation, double-talk, shenanigans, willful deceit, tax-evasion – it’ll be one curve ball after another. Watch.