CANAL TRANSFER SETS OFF UNCERTAINTY : ASIAN POWERS SEE OPPORTUNITY TO BUILD OWN TRADE ROUTES.

Byline: Larry Rohter The New York Times

From the moment it opened in 1914, the Panama Canal has been the envy of nearby countries. For centuries, their governments dreamed of a waterway of their own across the Central American isthmus and of the prosperity and power that so busy and vital a trade route would surely bestow on them.

Now, a century after the intrigue among great powers that enabled the United States to elbow out France and Britain as the builder of the magnificent ``path between the seas'' - which generated $486 million in tolls in the last year - Panama's neighbors think they have a second chance.

Seizing on political and technical uncertainties about the canal's future once the United States transfers it to Panamanian control three years from now, they are once again dreaming.

But this time, because of cost concerns and environmental restraints, they imagine not a gigantic waterway but a series of ``dry canals,'' or light rail lines for container traffic, that would be cheaper and easier to build.

And though foreign powers are once more actively involved in the maneuvering behind the scenes, this time the principal players are China, Taiwan, Japan and South Korea, not the United States or Europe.

Just as in the 19th century, Nicaragua has quickly emerged as Panama's main rival.

In August, the government there signed an agreement with an international consortium, backed by East Asian and Nicaraguan interests that argue that shippers are hungry for cheaper, quicker and more secure alternatives to the Panama Canal. The plan envisions a privately built $1.6 billion ``dry canal'' across southern Nicaragua.

``You cannot look at this project isolated from its geopolitical context,'' said Juan Carlos Rivas, general manager of the Consortium for the Inter-Oceanic Canal of Nicaragua, S.A., in an interview in Managua.

``The world's great powers are looking to Central America as one of their bases to compete in the 21st century, so this is not just an economic issue. There are large political and strategic interests here too.''

For the immediate future, the Panama Canal, which handled 198 million tons of cargo and more than 13,500 ship transits in the last year, will clearly remain the main trade route in the region.

But with commerce and container shipments booming, especially between East Asia and North and Latin America, the search for choices other than the canal and container shipments by rail across the United States is already under way.

``It's all going to depend on the economics, but we feel there have to be more and better options to move global trade from Asia and Europe to both coasts of the United States,'' said J.T. Keegan Jr., vice president and director of Latin American operations for Sea-Land Service Inc., the giant American ocean freight company that pioneered the use of containers. ``There's been tremendous growth in trade in the region, so yes, we are looking for alternatives.''

Pointing to toll increases and what he called ``recent instances of delays in the canal'' because of congestion, Keegan said his main consideration was being able to ``transit between the Atlantic and the Pacific as efficiently and reliably as possible.'' He also mentioned the Panama Canal's ``engineering limitations and maintenance problems'' as factors to be weighed.

Those problems include the supply of water, sedimentation and the need to build a new set of locks early in the 21st century, an estimated $7 billion investment compared with the original $380 million cost of the canal's construction.

Then, too, there is the issue of the new generation of cargo vessels that are simply too wide to fit through the Panama Canal but might find a Central American port and light rail project attractive.

``Obviously, the ships we are building today cannot transit the canal,'' said John Urban, vice president for Latin American services at American Pacific Lines, a large shipper based in Oakland. ``They're too large, and the operators who are commissioning these ships are planning around that, assuming that they will serve trade routes that don't require transit of the Panama Canal.''

Alberto Aleman Zubieta, a Panamanian engineer who became the administrator of the Panama Canal in August, said he was very much aware of those concerns among shippers. For that reason, he added, the canal commission has begun an $895 million improvement and modernization program intended to increase the canal's capacity by 20 percent and allow it to remain competitive with any potential rivals.

``We understand that we do not have a monopoly in this business,'' said Aleman, who studied industrial and civil engineering at Texas A&M University before returning here to head a leading construction firm. ``We understand all too well that the Panama Canal needs to remain efficient, safe and reliable for shippers, and that we need to give high-quality service to our customers.''

But for the East Asian countries that are increasingly large users of the canal as their trade with Latin America and the United States expands at a double-digit annual pace, the issue is more than just one of dollars and cents. Eager to gain a foothold in the region, China in particular has strategic and political interests at stake.

Its archrival, Taiwan, has diplomatic relations with all of the Central American countries and has forged a particularly close relationship with Panama.

Taiwanese companies, for instance, have signed agreements to build an industrial park outside Colon, near the former U.S. submarine base that Taiwan's flourishing Evergreen Shipping Group is converting into a container terminal.

CAPTION(S):

Photo, Map/Box

Photo: A cargo ship passes through the Panama Canal, but could bypass the ``path between the seas'' someday in favor of a light-rail system.

New York Times

Map/Box: A CLOSER LOOK

Competition for The Canal

New York Times