A man, a plan, a bigger canal

(Fortune Magazine) -- Miraflores Locks, Panama

When the Panama Canal opened in 1914, it was one of the engineering wonders of the modern world. But it clearly isn't adequate in the age of globalization. Supersized tankers and container ships can't pass through its locks. And those ships that can - about 14,000 a year, carrying more than 200 million tons of cargo, or about 5% of the world's trade - have to wait longer to make the ten-hour trip across the isthmus because of heavy traffic.

In October, Panamanians voted overwhelmingly to back a $5.25 billion expansion plan that will widen the canal from two lanes to three, double its capacity, and allow the largest ships to sail through. Panama President Martín Torrijos, who championed the plan, said it would bring jobs and increased revenue to the country, where 40% of the population lives in poverty and unemployment is nearly 10%. Opponents said the project would cost too much and harm the environment.

The canal, which was owned by the U.S. for most of the 20th century, was fully turned over to Panama in 1999 under a treaty negotiated in the 1970s by President Omar Torrijos, Martín's father.

The modernization, which is expected to be completed by 2015, will be financed by higher tolls for ships like these in the Miraflores Locks on the Pacific side of the canal. Current tolls for large container ships can run to more than $200,000, but even with increased charges, that may be a bargain. The trip shaves about 8,000 miles from the route around Cape Horn at the tip of South America.