When a historic waterway runs low on water, a continent of private‑sector visionaries begins sketching a rail‑and‑road empire across the jungle. The race to build a “dry canal” – a trans‑isthmian logistics corridor that could shunt cargo around the Panama Canal – has taken a decisive turn in the past two years, driven by drought, geopolitics and a chorus of investors who say the old route is too fragile.
In early 2012, Guatemala Dry Canal Consortium secured a $400 million land‑purchase package and received the green light from the Guatemalan government to start construction. By April 2013, the pro‑business administration was hosting an investors’ forum that drew potential financiers from North America, Europe and Asia. At the same time, Honduras announced an $18 billion plan – a network of highways, rail lines and central logistics hubs – that could eclipse any single‑track solution.
Historical Context: Why a Dry Canal Now?
The Panama Canal, a marvel of early‑20th‑century engineering, has long been the backbone of global trade, moving roughly 14,000 vessels and 8 million TEUs each year. Yet climate change has turned its water‑level management into a high‑stakes gamble. In October 2023, the Woodwell Climate Research Center recorded rainfall 43% below average, making it the driest October since the 1950s. By November, the canal had slashed daily transits from the normal 38 to just 24, a restriction that was projected to last until at least April 2024. The shortfall could keep up to 4,000 ships – carrying everything from children’s toys to life‑saving insulin – out of the waterway each year.
That vulnerability sparked a resurgence of a notion first floated in the 1970s: a land‑based corridor that could ferry containers across the isthmus in a few days, bypassing the canal’s water‑level constraints altogether. The idea resurfaced with new urgency as El Niño intensified droughts and as former President Donald Trump publicly promised to “take the Panama Canal back under US control,” stoking political uncertainty (see Donald Trump on Channel 4 News, 21 Jan 2025).
Project Details Across the Region
Guatemala – The consortium’s path would cut from the Caribbean port of Puerto Barrios to the Pacific hub of La Union in El Salvador, skirting the highlands where land is already owned. The $400 million outlay covered roughly 150 km of right‑of‑way, and the government’s 2012 authorization allowed for an initial 30‑km test segment to be built within two years.
El Salvador‑Honduras Joint Venture – Dubbed the “Dry Corridor,” this plan links La Union, Henecan (Honduras) and Corinto (Nicaragua) on the Pacific side to Puerto Cortés (Honduras) and Puerto Barrios (Guatemala) on the Atlantic. The proposal includes a high‑capacity rail link capable of moving 150,000 TEUs per year, plus parallel highway upgrades.
Honduras – The $18 billion blueprint, reported by AS.com on 21 Jan 2025, envisions a dual‑track system: a 200‑km railway paired with a 250‑km highway, punctuated by three logistics hubs that could each process 75,000 containers annually. The plan also earmarks $3 billion for port upgrades at Puerto Cortés and Puerto Barrios.
Costa Rica – Mid‑2012 saw the government seal a mega‑investment partnership with China International Water & Energy Corp.. While the partnership focuses on renewable energy, analysts note that the same financing could be redirected to a dry‑canal spur that would shorten the route from San José to the Pacific port of Quepos.
Mexico – The CIIT (Corredor Interoceánico Integral del Trópico) project is a 188‑mile railway stretching from Salina Cruz on the Pacific to Coatzacoalcos on the Gulf. Pawan Joshi, executive vice president of products and strategy at e2open, warned that “the Panama Canal is about 50 miles long, and the railroad to get from the Pacific to the Gulf is around 200 miles, so it’s a much longer track.” He added that container‑handling capacity at the ports themselves could become the bottleneck.
Stakeholder Responses
Regional governments have largely welcomed the proposals as a way to diversify their economies. Guatemala’s President Alejandro Giammattei, speaking at the 2013 investors forum, called the dry canal “the next‑generation trade artery for Central America.” Honduras’ Minister of Infrastructure, María Elena Rivas, emphasized that the $18 billion plan would generate an estimated 120,000 jobs during construction.
Private‑sector voices are more cautious. Joshi of e2open said, “Another challenge — how many containers can [the railroad] move? It’s also about the ports on either end, whether they’re able to unload those containers; do they have the appropriate infrastructure?” Nevertheless, he conceded that “at the least it provides an alternative and I think a lot of companies are looking to that.”
Logistics operators in Asia and Europe have begun to factor “dry‑canal risk” into their supply‑chain models. A senior analyst at a German freight forwarder noted that the Panama drought “has forced us to re‑evaluate transit times and cost structures for shipments to the U.S. Gulf Coast.”
Impact Assessment and Expert Analysis
From a cost‑benefit perspective, the dry canal options present a mixed bag. The Honduras rail‑highway combo could move up to 300,000 TEUs per year once fully operational, but the per‑container cost is projected to be 15‑20% higher than the canal’s average toll of $150,000 per vessel. Meanwhile, the Guatemalan corridor, being shorter and partially built, might achieve parity within five years if port upgrades keep pace.
Environmental groups are watching closely. The Woodwell Climate Research Center warns that large‑scale land clearing for rail and highway corridors could offset any climate gains from reduced canal traffic, especially if deforestation rates rise in the Petén region of Guatemala.
Geopolitically, the United States appears to be hedging its bets. Canadian Pacific Kansas City Southern railroad has announced plans to invest “on the Panama side to build more infrastructure and provide an alternative,” suggesting that U.S. logistics firms are preparing for a multi‑modal future where the canal is just one of several routes.

Future Outlook: Who Will Win the Race?
Several variables will decide which corridor, if any, becomes the dominant alternative. First, the duration of Panama’s drought restrictions. If water levels rebound by mid‑2024, the incentive to divert cargo could evaporate. Second, financing: the Honduras $18 billion plan hinges on multilateral loans and private equity that have yet to be fully secured. Third, port readiness: both Puerto Cortés and Salina Cruz need deep‑water berths and automated cranes to handle the projected container volumes.
In the short term, we may see a hybrid model where shippers use the canal for high‑value, time‑sensitive cargo while diverting bulk goods to the most cost‑effective dry‑canal link available. Over the next decade, however, the consortium that can deliver a seamless door‑to‑door service – from a factory in Shanghai to a warehouse in Dallas – will likely capture the lion’s share of trans‑isthmian traffic.
Key Facts
- Panama Canal transits reduced from 38 to 24 daily in Nov 2023 due to drought.
- Guatemala Dry Canal Consortium invested $400 million in land and received construction authorization in 2012.
- Honduras’ $18 billion rail‑highway network aims to move up to 300,000 TEUs annually.
- Mexico’s CIIT railway spans 188 miles, linking Salina Cruz to Coatzacoalcos.
- e2open’s Pawan Joshi says alternatives provide “options, not replacements.”
Frequently Asked Questions
What is a “dry canal” and how does it differ from the Panama Canal?
A dry canal is a land‑based transport corridor – typically a combination of railways and highways – that moves containers across the Central American isthmus without using water. Unlike the Panama Canal, which is a 50‑mile waterway that physically lifts ships, a dry canal relies on trucks and trains to haul cargo, making it less vulnerable to water‑level changes but more dependent on road‑and‑rail infrastructure.
Which countries are actively pursuing dry‑canal projects?
Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and Mexico all have formal proposals or ongoing feasibility studies. Guatemala’s consortium already owns land and has government approval; Honduras announced an $18 billion rail‑highway plan; Mexico’s CIIT project is a 188‑mile railway linking the Pacific and Gulf coasts.
How does the Panama Canal drought affect global trade?
Reduced daily transits (from 38 to 24) mean fewer ships can pass through, pushing up shipping rates and causing delays for commodities ranging from electronics to pharmaceuticals. The World Bank estimates that each lost transit could add $1‑$2 billion in extra logistics costs worldwide.
What are the main challenges facing the dry‑canal proposals?
Financing large‑scale rail and highway projects, upgrading ports to handle high container volumes, and navigating environmental concerns such as deforestation are the key hurdles. Additionally, the longer distance compared to the canal (up to four times longer) raises cost and time considerations for shippers.
Will geopolitical tensions, like former President Trump’s statements, influence the development of alternatives?
Yes. Political uncertainty can accelerate private investment as companies seek to mitigate risk. Trump’s repeated calls to reclaim the canal have prompted U.S. logistics firms to explore land‑based options, while the U.S. government has signaled possible support for infrastructure that reduces reliance on a single choke point.