by Lloyd's List

25 February 2025 (Lloyd's List) - THE Panama Canal’s board of directors has approved funding for the construction of a new lake that will guarantee water supply for large swathes of the country’s population.

The Rio Indio project has been called “one of the most important public investments of this decade” by the Panama Canal Authority (ACP), and will be completed in approximately six years.

Part of the canal’s Water Project Program, which aims to guarantee water supply for more than 50% of the country’s population, the new lake will serve as a safety measure against future droughts, the ACP said.

The canal was brought to its knees by a months-long drought in 2023-2024, with canal transits down 29% in the 2023/2024 fiscal year compared with the previous year. Monthly transits in January 2024 reached a nadir of 189, down from 283 in January 2023.

Canal administrator Ricaurte Vasquez said the ACP was expecting another drought within four years, before the new reservoir came online.

But this time shipping companies will already have the playbook on how to reroute and avoid the canal should transit slots be cut and drought restrictions enacted.

The new lake represents “a significant step towards canal sustainability, reliability and competitiveness for the benefit of all Panamanians and global trade”, the ACP said.

In order to flood the Rio Indio basin and create the man-made lake, many local residents will have to be relocated. The canal’s deputy administrator insisted that work to compensate those affected by the project will be “carried out in an orderly, fair and transparent manner”.

The resolution passed to greenlight the project also included a fund for compensation, resettlement and support for families and property owners, the ACP said. A census of the area affected is set to be completed in April 2025 and will be used as a baseline for the compensation process.

Work on the project is expected to begin in 2027 and will last at least four years, the ACP said.