(PANAMA CITY) — Global trade is facing more turmoil after a severe drought that began last year has forced authorities to slash ship transits by 36 percent in the Panama Canal, one of the world’s most important trade routes, the Daily Mail reported.
The new cuts announced on Wednesday by authorities in Panama are set to deal an even greater economic blow than previously expected, amid a crisis in the Red Sea that is already wreaking havoc on global trade between Asia and Europe.
Panama Canal administrators now estimate that dipping water levels could cost them between $500 million and $700 million in 2024, compared to previous estimates of $200 million.
The water shortage has caused a traffic jam of ships, casting doubts on the canal’s reliability for international shipping and raising concerns about its affect on global trade.
On Wednesday, Panama Canal administrator Ricaurte Vasquez said authorities would cut daily ship transits to 24, after already gradually slashing transits last year from 38 a day.
“It’s vital that the country sends a message that we’re going to take this on and find a solution to this water problem,” Vasquez said. He added that in the first quarter of the fiscal year, the canal handled 20 percent less cargo and 791 fewer ships than the same period the year before.
Vasquez said that more “efficient” water management and a jump in rainfall in November has at least enabled canal authorities to ensure that water levels are high enough for 24 ships to pass daily until the end of April, the start of the next rainy season.
