How does the Panama Canal affect the economy of Latin America?


Quick Answer

The Panama Canal affects the economy of Latin America in a positive way through enhanced ties with North America, greater and more efficient trade and job creation. These implications result in a boost of regional economic activity and an overall increase in the standard of living.

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Full Answer

The Panama Canal first opened for commercial operations in 1914 under the authority of the United States Government. Between 1914 and 1977, Latin America reaped only the indirect benefits of the canal's operations stemming from overall trade to the region. In 1977 a series of treaties were signed to give the Panamanian government some ownership of the canal, which catalyzed job growth and foreign investment through profit sharing and a transfer of assets. These benefits spread throughout Latin America as it became a major trading region.

Despite the overall benefits that the Panama Canal has brought to Latin America, some concerns remain as to its future role in generating economic growth. As early as the 1980s, skeptics feared that a convergence of prolonged regional recession, a series of debt crises and the inability to adapt to bulk cargo carriers would make the canal less relevant to world trade. Nevertheless, the Panama Canal continues to be a source of Latin America's economic development in the expanding global economy.

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