ACP is a financially autonomous public-sector entity established under the Constitution of Panama. It has exclusive responsibility for the administration, operation, conservation, maintenance and modernization of the Canal and related services.

The total project cost is estimated at $5.25 billion. To help finance the project, IFC is considering an A Loan to ACP of up to $500 million.

300.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	300.0
Equity

* These investment figures are indicative

The project will be implemented within the existing administrative boundaries of the Panama Canal Zone, an area under the operational control of ACP.

The project is expected to boost Panamanian GDP and fiscal revenue, to lower international trade costs, and to reduce the environmental impact of increased shipping volumes.

In 2005, Canal operations generated, either directly or through multiplier effects, some 18.6% of Panamanian GDP, 41.2% of its export volume, and 28% of fiscal revenue. Preliminary estimates suggest a permanent 0.6 to 0.8 percent boost to real GDP growth after expansion. Canal-derived fiscal revenue would increase providing the government with substantial additional resources to implement its development program.

The project would have a strong positive global impact on shipping and trade. Canal expansion would:

- allow the Canal to accommodate larger and more efficient container ships;
- increase Canal capacity, and
- decrease queuing time.

These improvements would stimulate international trade and reduce global transportation costs.

A positive environmental impact will derive from the shorter routes newly available to the post-Panamax ships unable to fit through the current locks. Such ships, representing fully half of all new container vessels under construction, use substantially less fuel per container/mile, but are forced to use much longer routes for Asia to the Americas east coast traffic.

The Bank Group’s engagement in the project is expected to play a strong positive role due to the Group’s

- global experience in financing major infrastructure projects;
- affirmation of both investment viability and E&S standards that would be important for many banks considering financing the project;
- ability to offer longer tenors and flexible terms, and
- ability to work effectively with other multilaterals.

This is a category A project because of the potential significant negative impacts that such a large construction project might have on the environment and surrounding communities. Of particular concern are the potential diverse risks and impacts associated with:

- loss of secondary forests due to construction and earth movement activities;
- affects on the properties of private landowners due to the increase in operational water level of Lake Gatun;
- localized soil erosion and land instability issues in excavated areas;
- impacts to water quality, air and noise in areas adjacent to construction sites;
- possible alteration of sediments with contaminants due to deepening and widening of navigation channels;
- temporary increase in water turbidity along Corte Culebra and Lake Gatun due to new dredging activities;
- potential long-term impacts on water quality due to the operation of the new Gatun locks;
- increase in pressures on public transport infrastructure (roads and maritime transport) during the construction phase, and
- construction worker safety and health.

Because the area directly affected by the expansion project is located within existing ACP operational and administrative boundaries, it will not compromise primary forests, national parks or forest reserves, relevant cultural or archeological sites, or agricultural areas. And most importantly, the expanded Canal will operate without the need for new dams or reservoirs while, at the same time, preserving the freshwater resources for drinking water for the population at large.

The ACP has developed and will implement a comprehensive set of mitigation measures and related programs, many of which are currently in place and practiced, to ensure no permanent adverse impacts to the environment and natural resources of the Canal watershed or to the surrounding population. Sufficient resources are being made available for reforestation of disturbed areas, reclamation of construction sites and work areas, and social and environmental monitoring and follow-up. Key among the most relevant prevention and mitigation measures during construction are: dredge spoil management; erosion and runoff control; wildlife and archeological findings rescue and relocation; and replacement of infrastructure and other property that might be disturbed or damaged. Upon implementation of these, ACP has demonstrated that the expansion project will comply with the IFC Performance Standards on Social and Environmental Sustainability.