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Panama blasted away part of a hillside next to the canal on Monday, marking the start of the waterway's biggest expansion since it opened 93 years ago.
In the presence of former president Jimmy Carter, who signed the 1977 treaty that gave Panama control of the waterway, Panamanian President Martin Torrijos celebrated the start of construction on two wider sets of locks being added to both sides of the canal.
“We are witnesses to an exceptional and unique act,” Mr. Torrijos said moments after the explosion sent up a curtain of smoke and water.
The $5.25-billion (U.S.) expansion is expected to double the 80-kilometre canal's capacity and lower the price of consumer goods on the East Coast of the United States by allowing wider vessels to squeeze through with more cargo.
About two-thirds of the cargo that passed through the canal is headed to or from the United States. China is the Panama Canal's second-largest user. The waterway now moves 4 per cent of the world's cargo. The new locks, approved in a referendum nearly a year ago, are expected to be ready for use between 2014 and 2015.
The Panama Canal Authority, the autonomous government agency that runs the canal, is borrowing up to $2.3-billion between 2009 and 2011 to help finance the project. It expects to pay that back by increasing ship tolls an average of 3.5 per cent a year.
In addition to benefiting international trade, the new locks are expected to generate more revenue for the canal and Panama's government, which is struggling to pay back more than $10-billion in debt and battle poverty that affects some 40 per cent of the population.
“I'm proud of the grand plans for this expansion,” said Carter, who signed the 1977 treaty with Mr. Torrijos' father, strongman Omar Torrijos, that led to the U.S. handover of the canal to Panama on Dec. 31, 1999.
Under Panama's control, canal accidents and the time needed to transverse the canal are down, while revenues have increased.
Former U.S. president Theodore Roosevelt arranged for Panama's independence from Colombia in 1903 to build the canal. By some accounts, more than 25,000 people died during American and French efforts to build the engineering marvel, which opened on Aug. 15, 1914.