Panama Canal drought threatens $10 billion in Caribbean imports

Severe drought in the Panama Canal watershed is threatening between $8 billion and $10 billion in annual imports for the Caribbean Community (CARICOM). According to analysis by the Caribbean Private Sector Organization (CPSO), these restrictions impact approximately one-quarter to one-third of the region’s total non-fuel imports.

Between May and August 2026, rainfall in the canal's watershed was 34% below the historical average, resulting in a 44% decrease in water inflows. Consequently, the Panama Canal Authority has reduced daily vessel transits to 32 ships as of mid-September. The situation is expected to persist or worsen due to the El Niño phenomenon, which may further reduce water availability during the 2027 dry season.

The scarcity of transit slots has caused logistics costs to surge. A recent auction for a priority transit slot reached a record $5.3 million. Major shipping companies, including CMA CGM, MSC, and Hapag-Lloyd, have begun implementing additional surcharges per container, costs which the CPSO warns will ultimately be passed on to Caribbean consumers.