Unrest Expected to Hold Back Works on Panama Canal

A wave of strikes and opposition protests against the government´s social security reform is likely to delay an ambitious $4 billion plan to widen the Panama Canal in an effort to relieve congestion from growing traffic.

The social security changes, approved in May, are designed to head off bankruptcy of the government pensions system and to clean up public finances, a move that would clear the way for the Canal to seek financing for the expansion on favorable terms.

The reforms which include an increase in the retirement age and higher pension contributions represent an essential policy for Panamanian President Martin Torrijos. Panama´s fiscal deficit reached more than 5 percent of gross domestic product last year.

But last month Mr. Torrijos was forced to suspend social security reform for 90 days after a month of work stoppages by construction workers, doctors and teachers.

The suspension prolongs debate on the Canal a sensitive issue and means that a referendum on expansion will probably not take place until at least 2006, rather than in November as had been hoped. Delays could deprive Panama of shipping-toll revenues.

The proposed expansion, the most ambitious streamlining project in the Canal´s history, calls for a wider third waterway. Government and Canal authorities say the government will not give a sovereign guarantee in support of any funding raised in domestic or foreign markets.