The idea of linking the Atlantic and Pacific is as old as The Panama Canal. A simple waterway through a 90 km sliver of land separating two oceans with Europe and Asia on either side. But the last five years have seen several new projects announced. The most startling of all, a freight railway linking the coast of Brazil on the Atlantic to a port in Northern Peru on the Pacific.
One impulse for the project is to streamline the transportation of soy products from Brazil to China. A rail route followed by shipping from Peru could be 30% less costly than the Panama Canal. Crossing the continent of South America at its widest point does not seem the simplest solution to the bottleneck of traffic at the Panama Canal.
Trade between China and Brazil soared to $83.3 billion last year from $3.2 billion in 2002, with iron ore, soy and oil making up the bulk of Brazilian exports. China buys 30 million tonnes of soy from the USA at harvest time in the Northern hemisphere, September through November, and a similar quantity from Brazil in February to May. All the Brazilian soy travels through the Panama canal.
The bulk of soy is grown in the state of Mato Grosso in the West of Brazil. Mato Grosso is as close to the Pacific coastal ports of Peru as it is to the Atlantic, but the beans are transported by road back East – adding up to 10% to the gross cost of soy to China.
The solution – a rail link from Brazil through Peru to Pacific ports – was first conceived in meetings between the Chinese, Peruvian and Brazilian governments in 2014.
The project is moving fast. In July 2014 the three governments agreed to conduct basic studies, and in November a working group was established. In May 2015 they met again and committed to produce a final report by March 2016. The railway will take at least six years to complete.
The only existing railway line from the coast to the top of the Andes was started in 1870 and crested the range in 1893. Climbing steeply through 60 tunnels and over as many bridges it tops 4700 metres at the highest pass. Half the workforce was Chinese – indentured labourers working in conditions close to slavery.
For over a hundred years it was the highest railway line in the world, until the Llasa railway in China opened in 2006. If China could complete a second railway over the Andes it would be a historic achievement.
The train will be a third axis of integration between Brazil and Peru. Road links on the Eastern side of the Andes have historically been poor – slow, vertiginous and winding roads, often damaged by floods and landslides. But in the past decade, two major highways have also been constructed to link the Western Amazon to Pacific coastal ports.
These road projects will open up areas of the Amazon previously isolated to trade, including export of products through Peruvian ports towards Asia, as well as trade from Peru across South America to Brazil, the regional powerhouse.
In central America, several more projects are under discussion, at the planning stage, seeking funding or even under construction. While Panama is widening its canal to take bigger ships, four other countries have plans to improve links between the oceans, by road or rail.
A scheme to build a canal through Nicaragua from the Atlantic to the Pacific was approved by a Nicaragua government committee of experts in July 2014. The canal would be more than three times as long as the Panama Canal at around 270 km. The project is conceived and is being funded by a Hong Kong Nicaragua Canal Development Investment Company Ltd (HKND Group) which is headed up by Beijing-born businessman Wang Ying, who also heads Xinwei Telecom Enterprise Group.
The $5.2 billion expansion of the Panama Canal to take larger vessels started in September 2007, and was said to be 93% complete at August 2015. HKND contends that this is already out of date, and that 17% of the container fleet will soon be too large to pass through the expanded Panama Canal.
In Guatemala, a scheme to link the two oceans for freight has been under discussion for 15 years (http://corredorinteroceanico.com). The proposed International Corridor will be 372 km long and 140 m wide, to include a four-lane highway, a two-way freight rail line, and four oil and gas pipelines.
Two deep water ports will be constructed on the Atlantic and Pacific coasts of Guatemala, each with the capacity to accommodate up to six ships at one time, carrying 22,000 containers each. These are the mega-ships that will not pass through the Panama Canal, even after expansion.
In Honduras, a transoceanic railway was first initiated in the nineteenth century. More recently a feasibility study in 2011 was followed by an announcement by the Honduras government in June 2013 that it was about to sign an agreement with a Chinese company on construction of an interoceanic railway to link the Pacific coast island of Amapala with the Atlantic coast port Castilla. The distance from Castilla to the Pacific is about 375 km.
The US$20bn project also envisages the construction of two ports, a refinery and an oil pipeline.
The Under the new government elected in 2013, the project has morphed from a railway to a road. The construction of a four lane highway linking the coasts is “the most important project in the country” according to President Juan Orlando Hernández. “This will be the great artery that will cross the country, and the first step towards making Honduras a major Logistics Center for the Americas.” The road is due to be completed by April 2017.
Plans to enlist Chinese engineering companies to help Colombia construct a train line connecting the Atlantic and Pacific coasts were announced by President Juan Manuel Santos in 2011. The proposed 220 km rail route would by-pass the Panama Canal but would pass through environmentally sensitive territory and lacks existing ports.
According to Colombia national daily El Pais, the project would be part of a larger proposal to build a 791km railway network linking the interior of the country to an expanded port of Buenaventura, on the Pacific coast. It would allow up to 40 million tonnes of coal a year to be carried to Colombian ports for export to China.
There could be half a dozen more trade and cargo routes from the Atlantic to the Pacific within ten years if all these projects are completed. One hundred years after the opening of the Panama Canal, world trade will be looking at a competitive market in bi-oceanic transport. That is sure to mean lower costs and shorter transit times for cargo – though there will be winners and losers in the race to market. Meanwhile, importers and exporters, shippers and traders, are in for an interesting few years.