As crews work to expand the Panama Canal, analysts debate its future effect on global trade

The Panama Canal, constructed over a ten-year period at the beginning of the 20th century, serves as one of the most important shipping routes in the world. The waterway is undergoing a 21st century makeover, as its operators look to increase the number of ships that pass through each year.

According to a report from The New York Times, the Panama Canal connects the Pacific and Atlantic Oceans, and has, for nearly 100 years, helped shipping vessels circumvent the otherwise arduous trip around the coast of South America.

However, the canal was not designed to handle modernity's exceedingly large ships. In an effort to expand the waterway's capacity, the government is investing roughly $5.25 billion to add an additional route capable of handling ships significantly larger than the maximum-sized vessels that currently travel along the canal's two existing waterways.

The Panama Canal is comprised of two lanes of locks, each of which is able to accommodate ships up to 106 feet wide and 965 feet long, The Sydney Morning Herald reports. Ships of that size are dubbed "Panamax." The reduced capacity of the two existing routes, however, effectively limits the number of ships that pass through the vaunted waterway, with an average of 35 vessels crossing the canal per day.

Officials have long wanted to increase the canal's capacity. Experts assert many ships are often forced to wait a day - and sometimes longer - before they are allowed to cross the canal. The lost productivity results in slower delivery times, and often prevents companies from achieving business cost reductions in their strategic sourcing of goods.

The project to expand the Panama Canal has already broken ground, with crews working around the clock to construct a third lock. The new third set of locks will help to alleviate the ship backlog that plagues the canal, and they will be able to accommodate "New Panamax" ships, roughly 25 percent longer, 50 percent wider and equipped with a deeper draft, according to The Times.

The New Panamax vessels will have the capacity to carry roughly 300 percent more cargo than current Panamax ships, allowing for the speedier passage of more goods throughout the globe. While experts are split in their projections of how the canal's increased capacity will affect worldwide trade, analysts assert shipping times between the U.S. and Asian countries will fall precipitously.

Hofstra University global studies professor Jean Paul Rodrige affirms the new set of locks will certainly help companies dealing in international trade, but he acknowledged there is disagreement among analysts as to what kinds of effects it will have on the flow of goods.

"They know it's going to change things, but they’re not sure of the scale," he said in an interview.

Aside from expediting travel times, the increased capacity will also put pressure on ports in many U.S. cities - including those in New Orleans, Louisiana, and Savannah, Georgia - to deepen harbors and augment cargo-handling facilities, the Morning Herald reports.

Jorge Quijano, an executive vice president for the Panama Canal Authority, said that while the canal's ongoing expansion is not the world's biggest infrastructure project, it has the potential to change the manner in which global trade is conducted.

"This is the one that has the most foreign impact," Quijano affirmed.