Panama Canal's Aleman Passes the Torch
It can be said of few people that they have changed the shape of global commerce and shipping. Without doubt, it can be said of Malcom McLean, who invented the container and the container revolution. The list certainly includes Maersk Mc-Kinney Moller, who built the world’s largest container line and one of the largest terminal operators.
Now, as he ends one phase of his long career running the Panama Canal, we can confidently add the name of Alberto Aleman Zubieta, who will have changed the way the world’s shipping lines ply their global routes when his canal expansion project opens in 2015.
Sept. 3 marks Aleman’s last day in office. He is retiring after more than 16 years at the helm of the canal, including the last 14 years as administrator of the Panama Canal Authority after the canal was transferred to Panamanian control in 1999, and three years before that as administrator of the U.S. Panama Canal Commission. His successor, Jorge Quijano, is the engineer who has been in charge of the canal authority’s massive $5.25 billion expansion project.
Aleman’s accomplishments will have an enormous impact on the U.S. maritime trades and on the economy of Panama, Central America and the Caribbean. But as he packed up the memorabilia that adorned his office in the Panama Canal headquarters last month, he said one of the most significant accomplishments was proving that Panama could run the canal when it was transferred to Panamanian control.
“The first task that we had was to manage the transfer in a very business-like way,” he told The Journal of Commerce. “We moved into a different mindset in the canal, one that was more geared toward understanding that we needed to compete, to attend to the needs of our clients and understand the business in a different manner.”
When this correspondent wrote a series of articles during the Carter administration about the boisterous, 1977 Senate debate over the proposed treaty transferring the Canal Zone to Panamanian jurisdiction, opponents said Panama would never be able to run it. Aleman proved them wrong.
“Under the leadership of Alberto Aleman Zubieta, the Panama Canal has been run just as efficiently and as effectively as when the United States was responsible for the canal,” said Robert McMillan, former chairman of the U.S. Panama Canal Commission from 1993 until the canal’s transfer to Panama in 1999. “In fact, Panama, beyond the enlargement of the canal, has taken steps, at a cost of some $1.5 billion, to add new mechanisms for the locks and purchase new locomotives and tugboats — all which add to an even more efficient operation for ships transiting the canal.”
The U.S. had run the canal along military lines since President Theodore Roosevelt named Col. George Goethals of the U.S. Army Corps of Engineers to take over construction of the original canal in 1907. That discipline helped builders cut the canal through the Central American rainforest in the last century, but a larger canal would have to be built in a different world.
“It had been a very military organization, just like the U.S. Army,” Aleman said. “It worked very efficiently under the old system, but we had a lot of young people who wanted to change things, and we needed to change from managing a budget to managing change.”
Aleman brought in consultants such as accounting firm Deloitte, Touche and borrowed management techniques learned in the U.S., where he earned his degree in civil and industrial engineering at Texas A&M University. He built the canal authority into a business enterprise that employs 10,000 workers and generates $2 billion in annual revenue.
The change in the efficiency of canal projects during the last 14 years has been so dramatic that the canal authority can best the U.S. Army.
Jim Newsome, president of the South Carolina Ports Authority, remembers it well. “The thing that I will always remember about him the most was him standing here last year at our South Carolina International Trade Conference and looking directly at our Army Corps of Engineers delegates and saying, ‘I’m going to complete this $5 billion project, probably the most complicated civil work in the history of the world, in a shorter period of time than you can deepen a harbor,’ ” Newsome said.
The management changes Aleman brought to the canal authority enabled him to lay the groundwork for the master plan for expanding the canal, his next big accomplishment. But before he could start the project, he first had to shepherd the project through a referendum by the Panamanian electorate, which required the skills of a consummate politician.
“The license we received from the country enabled us to go ahead with the expansion program, which required us to put together the financing and the engineering plan,” Aleman said.
The project to build a new set of locks that can accommodate post-Panamax ships with capacities that can carry almost three times as many containers as the existing infrastructure has not proceeded without a hitch. GUPC, the contractor building the new locks, could not produce the kind of concrete for the new locks required in its contracts, delaying the project.
“They still have about a six-month delay,” Aleman said. “They are pouring about 150,000 cubic meters of concrete per month, or about 75,000 per site on average, but they still need to do better.”
Aleman had hoped to open the new locks in October 2014, on the 100th anniversary of the opening of the first set of locks, but the delay has pushed their opening to sometime in 2015. This has given East Coast ports more time to complete or develop the massive infrastructure needed to handle post-Panamax ships.
The Port Authority of New York and New Jersey, for example, says it will be able to raise the air draft of the too-low Bayonne Bridge in time for the opening of the new locks. In South Carolina, Newsome is racing to get approval for deepening Charleston’s harbor to 50 feet so it can handle the large post-Panamax ships that will tr
“We’ve seen a run of significant manufacturing investment around South Carolina, including BMW’s expansion, Michelin’s expansion and Bridgestone and Continental,” Newsome said. “These are all investments that are heavily geared toward exporting. Ships are getting larger for economic reasons, and the wider canal will allow them to come to the East Coast, load heavily and go back to world markets.”
Aleman’s accomplishments at the canal authority are transforming more than just global shipping patterns and North American ports. They have already turned Panama itself into a modern financial and business center. It is also turning the country into a logistics center and a shipping hub.
The prospect of the enlarged canal also is rippling through Central America, where new ports and manufacturing facilities are planned, and is fueling new port and logistics developments throughout the Caribbean and northern South America.
“The importance and the impact that the canal expansion has given to Panama cannot be overstated,” said John Martin, principal of port consultant Martin Associates, which is involved in several projects in the Caribbean as well as port developments on the U.S. East and Gulf coasts.
The canal expansion, he said, already is fueling the development of new logistics centers in Panama, where goods can be processed or assembled for export. “His vision for the enlargement of the canal in the context of where the industry is going is pretty impressive,” Martin said. “He was the key person. You never thought of the canal expansion without him.”
Martin thinks the canal expansion will have repercussions far beyond the Western Hemisphere as well. “It’s raised the awareness of shipping in general, but also the ability on the bulk side to move grain and ores out of the Gulf area westbound to Asia,” he said. “Previously, it’s all been containers. This is also significant. It can also play well in servicing the needs of West Africa by enabling larger ships to move products to China.”
Aleman thinks the expanded canal will result in new types of commodities moving through the canal. “We will see new cargo coming through the canal, like LNG, because LNG ships have not been able to transit the canal in the past,” he said.
Ships that transport liquefied natural gas were not considered candidates for using the canal when its expansion was planned, but as the U.S. becomes a big producer of natural gas from shale, LNG vessels carrying U.S. gas exports to Asia could become a growing segment. “We’ll also see coal from Colombia and the U.S., which can move on larger ships, and we’ll see more grain from the U.S. and ore from Brazil,” Aleman said.
The big question that will remain unanswered until after the new locks open is how much cargo volume will shift from the West Coast to East and Gulf Coast ports. “I think there will be more of a shift simply because lines would rather deploy their own assets, which are a sunk cost for them, than pay money out of pocket for long-haul rail,” Newsome said. “People say that it won’t shift because of the nature of high-value import cargo that lands on the West Coast, but there is a lot of cargo that isn’t high-value, such as home improvement cargo for Lowe’s and Home Depot.”
As he looks to the future, Aleman said he plans to set up his own office as a consultant on logistics, trade and project management for development of large infrastructure projects, such as the ones he thinks the enlarged canal will bring to Panama. “I think we can provide some assistance in that area,” he said.
He also plans to write about his experience in running the canal and will write case studies on his management of the canal for several business school professors who will work with him.
His experience should provide grist for many case studies. “I had a former boss at Hapag-Lloyd who said to me, ‘Jim, the victories go to the bold,’ ” said Newsome, who was president of Hapag-Lloyd (America) before he joined the SCPA. “Aleman has been very bold. He took decisive action to embark on this path, and he has realized it quickly and has been very professional. On a personal level, he’s a hell of a nice guy as well.”
