Long term solutions to resolve chronic water shortages on the Panama Canal could cost around US$2bn, Bloomberg quoted the Panama Canal Authority (ACP)’s water division manager as saying.

The canal was Panama’s biggest source of revenue, bringing in US$4.3bn in 2022, the 2 January report said.

The waterway handled US$270bn/year in global trade, with about 3% of global maritime trade volumes and 46% of containers moving from Northeast Asia to the US East Coast passing through under normal circumstances.

However, with water levels 1.89m feet below normal at the time of the report, the canal authority had capped the number of ships allowed to cross to 24 vessels/day.

Introduced late last year, the limits were the strictest since 1989, when the waterway was shut when the USA invaded Panama to extract its de facto ruler, Manuel Noriega, the report said.

Some shippers were paying millions of dollars to jump the growing queue, while others were taking longer, more expensive routes around Africa or South America.

The constraints had eased slightly due to more rainfall than expected in November, but the 24 vessels/day limit was still well below the pre-drought daily capacity of around 38 vessels/day.

As the dry season takes hold, the bottleneck is expected to worsen again, according to the Bloomberg report.

“As a canal, as a country, we need to take some measures … we need to calibrate the system again,” the ACP’s Erick Córdoba was quoted as saying.

The main solution to chronic water shortages would be to dam up the Indio River and then drill a tunnel through a mountain to pipe fresh water 8km into Lake Gatún, the canal’s main reservoir, the report said.

It would take at least six years to dam up and fill the site and, with additional conservation measures, the project would cost about US$2bn, Córdoba added.

At the time of the report, the US Army Corps of Engineers was conducting a feasibility study into the proposal.

The Indio River reservoir would increase vessel traffic by 11-15 vessels/day while also guaranteeing fresh water for Panama City, Bloomberg wrote.

However, the proposal would need congressional approval and the thousands of farmers and ranchers whose lands would be flooded for the reservoir were planning to oppose it, the report said.

In addition, the country would need to dam more rivers in the future to guarantee water reserves on waterway until the end of the century.

The ACP was also looking into solutions that included an artificial lake to pump water into the canal and cloud seeding to boost rainfall but, even if feasible, both options would take years to implement, Bloomberg wrote.