New Path to Progress

The past and future of the Panama Canal weigh heavily on Martín Torrijos, like a freighter inching through a lock. It was Torrijos' father, the late Panamanian strongman Brigadier General Omar Torrijos, who persuaded the U.S. to sign a 1977 treaty handing over the canal to Panama, which it did six years ago. Now Torrijos, 43, who was democratically elected President of Panama in 2004, is stumping to persuade his countrymen to undertake a more than $5 billion expansion of the 50-mile-long waterway that bisects the isthmus.

The project--which voters look set to approve in an Oct. 22 referendum--may not compare with the big dig that created the canal a century ago, but Torrijos insists it is no less urgent, both for international shipping and Panama's development. "My dad solved the struggle for ownership," Torrijos told TIME. "My generation's challenge is to make better economic and social use of this geographical position history put us in."

The plan calls for adding a third set of locks, wide enough to serve the supersize, post-Panamax vessels--those carrying more than 5,000 20-ft.-long containers--that many consider the future of commercial-cargo shipping. The canal's Old World competitor, Egypt's Suez Canal, can already accommodate the bigger vessels. A resized Panama Canal could be a boon to U.S. ports on the Gulf and East coasts, which currently handle post-Panamax cargo directly to and from Asia only via the lengthier Suez route. Says Gary LaGrange, CEO of the Port of New Orleans: "This will be monumental for maritime trade on the Gulf Coast."

The expansion, set to be completed in the canal's centennial year, 2014, could also mark the nation's coming of age. It's a chance, say officials, to shed once and for all Panama's 20th century image as a U.S. lapdog and bolster its bid to become the hemisphere's Hong Kong--a world-class maritime, financial and commercial center for everything from foreign-exchange banking to aviation services.

It's also a chance, the officials agree, for Panama's ruling class to shed its notorious reputation for brazen malfeasance by managing the new canal wealth responsibly and finally doing right by the 40% of Panamanians living in poverty. The country's GDP per capita is $4,318, which still makes it No. 2 in Central America. Serious doubts about income redistribution are a big reason that only 22% of respondents to a recent poll said they thought the expansion would bring real economic benefits to Panama and its population of 3.2 million. Some 64% of Panamanians said they support the project. "The past," Torrijos admits, "is haunting our future. It's a weight on this referendum."

The canal is Panama's oil, its critical resource. But under the Americans it was run like a military installation. Since the canal's handover on Dec. 31, 1999, the Panama Canal Authority (ACP) has run it like a business--more efficiently, more safely and more profitably--doubling toll income to an estimated $1.4 billion this year. (The Suez Canal earns $3.5 billion.) That's nearly 10% of GDP. "Before, the canal was just about moving ships," says ACP administrator Alberto Alemán. "Today it's about moving cargo."