Panama

The severe drought which has forced the Panama Canal, one of the world's busiest trade passages, to limit daily crossings could impact global supply chains during a period of high demand, S&P Global said on Wednesday, Reuters reported. The canal has imposed several restrictions since 2023, though last month the Panama Canal Authority bumped up daily crossings to 27, from 24, as water levels rose at the man-made Gatun Lake which feeds into the canal.

Fitch Ratings stripped Panama of its investment-grade credit rating as the closure of a key copper mine last year added to the country’s fiscal worries and risks undermining growth prospects, Bloomberg News reported. The Central American nation’s credit score was cut to BB+ from BBB- on Thursday, with a stable outlook. That’s in line with Vietnam, Colombia and Serbia. A downgrade by Moody’s Ratings is expected for the second half of the year, according to Morgan Stanley strategist Emma Cerda.

Panama's economy is expected to see growth slow in 2024 to 2.5%, from 7.5% in the previous year, as a result of the closure of First Quantum Minerals' lucrative copper mine in the country, the International Monetary Fund (IMF) said on Monday, Reuters reported. Gross domestic product (GDP) is expected to gradually improve over the medium term, but the mine's closure does entail the permanent loss of about 0.6% of GDP in fiscal revenues and 7.5% of exports of goods and services, the IMF said. Read more.

Panama's economic growth next year is now estimated at about 2.5%, down "in light of new scenarios," Economy and Finance Minister Hector Alexander said on Tuesday, Reuters reported. Speaking at a 2024 draft budget presentation, Alexander said the reduced figure did not include inflation. Alexander did not give further detail on the reasoning behind the cut, but a ministry official told Reuters earlier this month that the country could slash its 2024 GDP forecast after the closure of a lucrative copper mine.

Bulk grain shippers hauling crops from the U.S. Gulf Coast export hub to Asia are sailing longer routes and paying higher freight costs to avoid vessel congestion and record-high transit fees in the drought-hit Panama Canal, traders and analysts said, Reuters reported. The shipping snarl through one of the world's main maritime trade routes comes at the peak season for U.S. crop exports, and the higher costs are threatening to dent demand for U.S. corn and soy suppliers that have already ceded market share to Brazil in recent years.

The Panama Canal, the century-old engineering marvel that revolutionized global trade, is being squeezed shut by drought and forcing shippers worldwide to face a painful choice, Bloomberg News reported. They can wait in line for days or weeks, as low water levels limit the number of ships passing through the 50-mile waterway, carrying cars, consumer goods, fruit and fuel. They can pay millions of dollars to jump ahead in the queue, if a ship with a booked reservation drops out.

The cost of shipping fuels such as diesel across the Atlantic has soared to an almost 16-month high amid ongoing disruption at the Panama Canal, Bloomberg News reported. Shipping through the vital waterway — a shortcut between the Atlantic and Pacific oceans — has suffered as an El Nino-fueled drought reduced water levels to an unprecedented low. That’s prompting shipping companies to pay large sums to jump ahead in queues or sail thousands of extra miles around South America.

For over a century, the Panama Canal has provided a convenient way for ships to move between the Pacific and Atlantic Oceans, helping to speed up international trade. But a drought has left the canal without enough water, which is used to raise and lower ships, forcing officials to slash the number of vessels they allow through. That has created expensive headaches for shipping companies and raised difficult questions about water use in Panama, the New York Times reported. The passage of one ship is estimated to consume as much water as half a million Panamanians use in one day.

The operator of the Panama Canal said there’s no immediate prospect of relief from the drought that’s reduced water levels and snarled shipping and global supply chains, Bloomberg News reported. Panama Canal Administrator Ricaurte Vásquez Morales said Tuesday that abnormally high ocean temperatures, an unpredictable rainy season and the persistence of the El Niño weather phenomenon mean officials will have to continue restricting vessel traffic into 2024.

The Panama Canal is, in many ways, the Panama economy. It hands over about $1 out of every $4 the government takes in, generating a constant stream of cash that flows through all corners of the small country. So when dozens of container ships began backing up outside the canal recently, the result of a drought so fierce that water levels have plunged to dangerously low levels, it got the attention of traders on Wall Street, Bloomberg News reported. For days, they’ve sold Panamanian government bonds, making them one of the worst performers in Latin America.