Valuetainment - September 18, 2023


Panama Canal Crisis - How it Impacts the World Economy


Episode Stats

Length

13 minutes

Words per Minute

221.03586

Word Count

2,912

Sentence Count

215


Summary


Transcript

00:00:00.000 So I don't know if you're following the story on what's going on in Panama Canal, but it's very problematic.
00:00:03.580 Forty percent of the stuff that you and I buy comes through the Panama Canal.
00:00:07.460 And due to the drought that they're having over there, ships are.
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00:00:34.100 Waiting.
00:00:34.660 Just in July was taking five and a half days to six and a half days for ships to transit through, whether it's the northbound or the southbound transit.
00:00:41.960 That five and a half to six and a half days is now 18 to 21 days.
00:00:46.340 And you and I are buying this stuff.
00:00:47.960 So a lot of ships have to go all the way around.
00:00:50.060 Big problem.
00:00:51.160 A couple years ago, if you remember what happened to Suez Canal, that's a great case study to see how bad it's going to be here.
00:00:56.100 We're going to take a deep dive on what's going on with the Panama Canal and how it can affect you.
00:01:00.340 Okay, so if you get value out of this video, give it a thumbs up and subscribe to the channel.
00:01:03.520 Let's get right into it.
00:01:04.320 Let me give you some facts here on what we're looking at.
00:01:05.920 Number one, I told you, 40% of containers that come to U.S. travel through the Panama Canal.
00:01:11.320 6% of all global trade goes through the canal.
00:01:14.380 And Panama Canal is the busiest canal in the world, handling over 14,000 ships per year.
00:01:19.740 By the way, if you've never been there, I've been there before.
00:01:21.380 It's an incredible experience seeing how ships are elevated.
00:01:25.200 Water is used to elevate ships or lower ships.
00:01:28.980 That's the whole concept of the canal.
00:01:30.640 It's unbelievable what it does and how important it is to U.S., specifically you and I, when we're buying stuff.
00:01:35.460 The canal is expected to reach capacity by 2030.
00:01:38.700 And the expansion of the canal, which they're talking about, is expected to cost $5.25 billion and take five years to complete.
00:01:46.520 The Panama Canal is the busiest canal in the world, handling over 14,000 ships here, which is roughly 40 ships a day.
00:01:52.520 And this past July, the number of ships allowed to pass per day was lowered from 40 a day, give or take, to 28 to 32 a day.
00:01:59.940 So now, what does this mean?
00:02:01.240 If you look at this map here, you'll notice there's two ways for ships to come through from New York to California.
00:02:06.900 So if you look at it, the short way is New York, ship comes down, goes through the Panama Canal, and goes straight to L.A.
00:02:13.160 If the canal is problematic, these ships have to go all the way south, all the way south, and then come up to L.A., California.
00:02:23.260 And let's look at what that really costs, how long it takes, what's the problem with that.
00:02:27.000 Here's what it looks like.
00:02:28.120 With the Panama Canal, it's only 4,970 nautical miles.
00:02:32.540 Without it, it's 12,350.
00:02:35.800 With the canal, it's only 10 to 14 days to go from New York to California.
00:02:39.940 Without it, it's 30 to 35 days.
00:02:42.000 With it, it's only $262,000, roughly, fuel cost.
00:02:46.120 Without it, it's $705,000.
00:02:48.920 With it, it's calm conditions.
00:02:51.660 Without it, it gets violent at the bottom when they're going through.
00:02:55.440 So obviously, when you look at that number, it's kind of like, imagine you're trying to go home, and the main freeway's closed.
00:02:59.660 Okay, where typically you're going home, it takes you 20 minutes to go, then it'll let you say 5 miles, and it costs you 10 bucks for gas prices.
00:03:05.760 Now, if the freeway's closed, you have to go all the way this way, go all the way around.
00:03:10.100 How many more miles is it?
00:03:11.240 How much more time is it?
00:03:12.340 How much more gas are you going to spend?
00:03:13.720 That's exactly what's going on here.
00:03:15.520 But here, they're bringing goods through canal.
00:03:17.740 Now, watch what happens if they're going from China, Shanghai, to New York.
00:03:21.440 Here's what it looks like with the canal as well as without the canal.
00:03:24.000 With it, it's roughly 12,000 miles.
00:03:26.920 Without it, it's roughly 19,000 miles.
00:03:29.280 With it, it takes 22 to 25 days without it.
00:03:32.200 It takes 35 to 40 days.
00:03:34.360 With it, it's only $600,000 of fuel cost.
00:03:37.300 Without it, it's roughly 900,000.
00:03:39.420 Again, conditions calm with it, violent without it.
00:03:43.140 So obviously, it doesn't take a mad genius to say, I would much rather go through Panama Canal because it's going to be the most effective way.
00:03:48.540 Now, to understand the importance of Panama Canal, how political of a project this was, how many people's lives and businesses' lives had changed, we have to go back and study the history of the Panama Canal.
00:03:59.140 Here's what we learned.
00:03:59.920 The idea of a canal across the Isthmus of Panama was proposed in the early 16th century.
00:04:04.120 However, it wasn't until 1880 that a French company began construction on a canal and the project was abandoned due to engineering challenge and financial problems.
00:04:12.500 In 1904, the U.S. took over the project and completed it in 10 years in 1914.
00:04:17.060 The canal was a major engineering feat and it revolutionized global trade.
00:04:22.060 The canal was also a major strategic asset for the United States during World War II.
00:04:26.260 It allowed the U.S. to rapidly deploy ships and troops between the Atlantic and the Pacific Oceans.
00:04:31.460 In 1977, the U.S. and Panama signed the Torrios-Carter Treaties, which transferred control of the canal to Panama in 1999.
00:04:39.580 Now, you and I, we're just watching this video or living our lives.
00:04:42.320 We don't know what it took to build a canal.
00:04:44.140 We just kind of sit there and say, what's the big deal?
00:04:45.620 It's just a canal. It's not like it's that complicated of a project.
00:04:48.300 Do you know how many people died building a canal?
00:04:50.220 22,000 people died during the French construction efforts.
00:04:54.660 And an additional 5,609 people died during the American construction for a total of 27,609 people died building the Panama Canal.
00:05:05.740 So you may ask, what did they die from?
00:05:07.720 One, the explosive for the way you have to do to build a canal.
00:05:10.960 It's not the easiest thing to do.
00:05:12.000 They died from mosquitoes.
00:05:13.260 They died from malaria.
00:05:14.360 They died from black vomit, internal bleeding, back pain, extreme thirst, a lot of different things.
00:05:18.800 This was not the safest conditions for these guys to build what they build.
00:05:23.560 We benefit from it on the backs of 27,000 people that died building the Panama Canal.
00:05:28.760 In other words, they did the impossible.
00:05:30.740 We're the beneficiaries of their efforts.
00:05:33.320 Pretty wild when you think about it.
00:05:34.600 But how does the Panama Canal work?
00:05:36.020 So the Panama Canal allows ships to transit between Atlantic and Pacific Ocean without having to navigate the violent waters around the southern tip of South America.
00:05:43.680 So one of the coolest things is while you're there, they have a nice hotel, the Hard Rock Cafe.
00:05:47.360 They have a Hard Rock Hotel there right next to Roberto Duran's restaurant.
00:05:51.040 And they'll say, hey, it's the only place in the world where you can go have breakfast at the Atlantic and have lunch at the Pacific.
00:05:56.360 That's kind of what you get to do.
00:05:57.640 And it's what a lot of people do when they go there for vacation.
00:05:59.660 So now the lock system, the canal uses a system of locks, large chambers that can be filled or emptied of water.
00:06:06.300 When a ship enters a lock, water is either pumped in to raise the ship or let out to lower the ship,
00:06:11.760 enabling it to transit from sea level up to the level of Gatton Lake, an artificial lake created for the canal,
00:06:16.780 and then back down to sea level on the other side.
00:06:19.160 So each vessel that passes through uses roughly 51 million gallons of water from the lake.
00:06:25.400 So if you look at this chart here to the left, you'll see the Atlantic Ocean.
00:06:28.160 To the right, you'll see the Pacific Ocean.
00:06:29.840 Then you have the Miraflores Lake.
00:06:31.460 It's elevating the ship to Gatton Lake and then decreasing, lowering the ship to go to the Atlantic Ocean.
00:06:37.360 The entire transit through the canal takes roughly eight to 10 hours, depending on various factors.
00:06:42.560 Again, pretty intense for what these guys have built.
00:06:44.740 Absolutely insane for engineers to have built something like this.
00:06:47.720 Number two, time and money saved impact on global trade if the canal were inaccessible.
00:06:53.220 So obviously the first one would be the diversion of routes.
00:06:55.240 The second one would be increased costs.
00:06:56.720 Then it would be supply chain disruptions.
00:06:58.860 Economic impact countries and ports that rely heavily on trade through the canal would suffer economically.
00:07:04.720 Potential price increases to you and I.
00:07:06.460 We would be paying more.
00:07:07.560 The increased cost of shipping goods could lead to higher prices for consumers around the world,
00:07:11.480 especially for products heavily reliant on these shipping routes.
00:07:14.980 So what are some of the products?
00:07:16.000 Let's take a look.
00:07:16.920 Top 10 U.S. imports.
00:07:18.080 Number one, printers.
00:07:19.040 $14 billion of printers.
00:07:20.860 Then it's TVs, then car parts and sweaters, furniture, video games, pills, computers, toys, shoes.
00:07:26.800 And if you look at the top 10 U.S. imports purely by weight, furniture, 4 million metric tons.
00:07:31.840 Then it's bananas, artwork, car parts, coal, beer, oil, tires, seats, tiles.
00:07:37.620 And by the way, how long can bananas sit there?
00:07:40.260 Think about it.
00:07:41.040 You think banana can sit there for three weeks?
00:07:42.780 You ever have banana at the kitchen?
00:07:43.880 You leave it there for three weeks?
00:07:44.880 What happens to it?
00:07:45.580 Imagine we're talking 2.8 metric tons of bananas sitting there for 21 days.
00:07:50.620 Now watch the exports, what this looks like.
00:07:52.540 We're shipping it out.
00:07:53.460 Top 10 exports by value.
00:07:54.820 Number one is cars, plastic, construction machinery, car parts, cotton, scrap metal, nuts, pork, wood pulp, lab equipment.
00:08:03.360 And if you look at it by weight, number one is scrap paper, scrap metal, wood pulp, plastic, hay, fresh paper, cotton, sugar, soybeans, chicken.
00:08:11.520 This is catastrophic if this goes from taking five and a half days to six and a half days to 18 to 21 days.
00:08:18.880 So by the way, you may be saying, Pat, I got 17 different problems I'm dealing with right now.
00:08:21.800 You want me to be thinking about the Panama Canal.
00:08:23.360 Why should this matter to me?
00:08:24.480 Why should I learn more about this?
00:08:25.760 Because do you remember what happened to the Suez Canal when that one ship was stuck?
00:08:29.940 And every minute of the day, we were watching the news showing us about this one ship in Suez Canal
00:08:35.080 and why you and I should be worried about it and how everybody was talking about it.
00:08:39.620 And that's why that case study is preparing us for that not to happen with Panama Canal.
00:08:44.520 On March 23rd, the ever given ship, a container ship ran aground in the Suez Canal blocking one of the world's busiest shipping lanes.
00:08:51.780 The ship was en route from China to Netherlands when it ran aground in a strong windstorm.
00:08:56.080 It took six days to free the ship during the time an estimated 400 ships were delayed.
00:09:00.720 The blockage caused an estimated $9.6 billion in losses to global trade.
00:09:06.780 To tell you crazier stats about this, how much do you think the blockage of the Suez Canal cost losses per hour?
00:09:13.640 $10 million an hour?
00:09:14.760 $100 million an hour?
00:09:16.000 How about $400 million an hour?
00:09:18.600 The blockage delayed the delivery of essential goods such as food, medicine, and fuel.
00:09:22.080 And it also caused a spike in the price of oil and other commodities.
00:09:24.900 It also highlighted the vulnerability of global economy to disruptions in shipping.
00:09:29.480 What this incident of ever given in Suez Canal taught the world a number of lessons about shipping and logistics,
00:09:34.960 including the global economy is highly dependent on shipping.
00:09:38.140 Shipping disruptions can have a significant impact on the global economy.
00:09:41.180 There's a need for increased investment in alternative shipping routes.
00:09:43.860 There's a need for better risk management and shipping.
00:09:45.900 There's a need for better communication and cooperation between shipping companies and governments.
00:09:50.060 And by the way, just like the Panama Canal was revolutionary, so was the Suez Canal.
00:09:53.720 Here's why.
00:09:54.260 The Suez Canal is a man-made sea-level waterway between the Mediterranean Sea and the Red Sea.
00:09:58.100 It connects the Indian Ocean with the Atlantic Ocean through the Red Sea and Mediterranean Sea, respectively,
00:10:02.620 and provides the shortest sea link between Europe and Asia.
00:10:05.260 If you look at this map, you'll notice you can either go from Mumbai to London all the way around south through Africa,
00:10:11.420 or you can go through the Suez Canal straight shot to London and save yourself 50% of the route.
00:10:18.100 It was built over 10 years in the mid-19th century.
00:10:20.480 The canal officially opened up November 17 of 1869.
00:10:24.300 Originally constructed without locks, the canal was converted to a lock system.
00:10:27.820 In 1980, roughly 110 years later, the Suez Canal is one of the world's most strategically important waterways
00:10:33.340 and is vital to global trade.
00:10:34.920 The canal is also a major source of revenue for Egypt, which operates and maintains it.
00:10:38.820 So now, this is a lot of problems we're talking about.
00:10:40.940 Is there any solution?
00:10:41.960 Are they making any kind of progress?
00:10:43.380 What's going to be happening?
00:10:44.360 You don't want to be affected by this.
00:10:45.620 Here's the good news.
00:10:46.300 When you think about this, capitalism always works.
00:10:48.480 The Panama Canal makes Panama roughly $2 billion per year in profits.
00:10:52.980 If they do this expansion of the $5.25 billion, they're going to make another billion dollars.
00:10:57.420 Now, it's going to take five years for them to build this.
00:10:59.360 So Panama may say, well, we don't want to use the money right now to put $5.25 billion.
00:11:03.260 Another country may say, you don't want to do it?
00:11:05.180 No problem.
00:11:05.700 I'll give you the money, but we got to own a piece of it as well, moving forward with the profits.
00:11:09.400 Then Panama is going to say, no, no, no, no, no.
00:11:11.080 Then the world's going to say, well, then hurry up and do it because you kind of need us.
00:11:14.600 We're the customer.
00:11:15.640 Panama may say, well, then what are you going to do about it if I don't do it?
00:11:17.920 It's going to cost you more anyway.
00:11:19.200 So it's going to be a power play on companies can end up paying for it.
00:11:21.940 It's kind of like relationships when a vendor and a company, the product producer and the
00:11:25.760 marketer, they both need each other because the product's working very well.
00:11:28.680 They have to figure out a way to make it work.
00:11:30.260 But regardless, they got to move fast.
00:11:32.380 The good news is just like the Panama Canal Authority is undertaking a $5.25 billion project
00:11:36.340 to add a third set of locks to the canal.
00:11:38.740 Suez Canal Authority is also taking $8.5 billion development project to widen and deepen the canal.
00:11:43.700 This will also increase capacity and reduce shipping costs.
00:11:46.420 On top of that, both the Panama Canal and the Suez Canal Authority are investing in new
00:11:50.420 technologies to improve efficiency and safety.
00:11:52.680 For example, the Panama Canal Authority is implementing an automated lock system and the
00:11:56.660 Suez Canal Authority is installing new navigation aids.
00:11:59.600 Both canal authorities are also working to reduce the environmental impact of their operations.
00:12:03.880 For example, Panama Canal Authority is investing in water conservation and flood control measures
00:12:08.480 and the Suez Canal Authority is working to reduce pollution.
00:12:10.960 Now, the best part about this is if Panama Canal doesn't have another competition,
00:12:15.140 they can do whatever they want to do.
00:12:16.440 The best part when there's another competition, they have to really accelerate and get going.
00:12:20.400 And there's possibly another route through where?
00:12:23.700 Nicaragua.
00:12:24.200 The Nicaragua Canal is a proposed canal that would connect the Pacific Ocean to the Atlantic
00:12:28.540 through Nicaragua.
00:12:29.600 The canal is estimated to cost $50 billion to build and it would take 10 years to complete.
00:12:34.080 So a lot of these issues that's being dealt right now, they have to figure out a way to address it.
00:12:38.720 But if we got another option, it's going to make that better for you and I.
00:12:41.580 So next time you're in your car or you're using something that we talked about out of these
00:12:44.820 products, just make sure for a second, drop a prayer for the people in Panama who are doing
00:12:48.260 what they do for us to be able to have the goods that we have because it's not easy to do
00:12:52.460 what they're doing.
00:12:53.300 They're very important.
00:12:54.040 Anyways, if you got value out of this video, give it a thumbs up, subscribe to the channel.
00:12:57.620 And number two, if you didn't watch the video we did about hospitals and the healthcare
00:13:01.980 system, why it's so expensive, why they almost have a monopoly.
00:13:05.000 If you've not seen that yet, click here to watch it.
00:13:07.460 The numbers are staggering.
00:13:09.220 Take care, everybody.
00:13:10.020 Bye-bye, bye-bye.