Sunday, August 16, 2009

Panama canal

Miraflores locks. Photo source here.

The U.S. operated the canal and the surrounding canal zone as its own fiefdom until 1977, when it agreed to return the area to Panamanian sovereignty. On New Year's Day 2000, Panama finally assumed responsibility for operating the canal, amid widespread doubts about the abilities of local officials.

Almost a decade later, canal officials say they have transformed what had been essentially a transport utility into a customer-oriented institution. Over the past decade and a half, the amount of cargo shipped annually through the canal has soared to 4.6 million containers from about 200,000 in 1995.

American managers adopted a one-size-fits-all approach to canal traffic, seeking only to cover the costs of operating the trade route. The Panamanian overseers, however, embraced innovations such as charging different tolls based on the type of vessel. They also established a reservation system designed to minimize costly idling by the canal's entrance, and they began two years ago to auction off one transit each day, so that ships in a hurry could pay extra for the right to jump the queue. In April 2008, an especially impatient tanker paid a record $397,300.
You can bet the tanker paid that fee because its cargo was so urgently needed at its destination. By jumping the line ahead of ships with less valuable goods it helped gets its product to market quicker, thus helping maintain supply levels and preventing prices from going even higher. In the pursuit of profits the new management has also made the canal smarter and more efficient.

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