Muskrat Falls and the Panama Canal scandal

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Last night, as I thought about the Muskrat Falls project, I began to recall bits of my high school history teacher’s account of another disastrous project — France’s failed attempt (1876-1888) at building the Panama Canal. The more I thought about the two projects, the more I was intrigued by the parallels I saw between them.

In both cases we see a weak government, in collusion with big business, using secrecy to keep the public ignorant of the details of the project.  We see consulting firms with a history of bribery, a plethora of incompetent bureaucrats, and government officials who are happy to do whatever they are told.

We see bureaucrats with no knowledge of engineering who are willing to listen to consultants who stand to benefit financially no matter how badly the project is going.

We see overconfident and inflated projections by people who should know better, with the usual potential for massive cost overruns and failure to meet construction deadlines.

In 1876 the Geographical Society of Paris formed a committee (actually a limited company) headed by Ferdinand de Lesseps, the engineer credited with building the Suez Canal. (In reality de Lesseps was not an engineer — he was a diplomat with no scientific or engineering expertise whatever — but he was a smooth talker and a great fundraiser.)  

The “committee” was given the task of finding a suitable route for a canal that would cross the isthmus between North and South America, thereby greatly facilitating shipping between the Atlantic and Pacific oceans.  And so French Navy Lieutenant Lucien Wyse was sent off to explore the region.

At the time of Wyse’s arrival in 1878, Panama was a province of Colombia, a country with a weak, disorganized government, fragmented by internal dissent. Wyse was able to negotiate a treaty, the Wyse Concession, giving his company the exclusive right to build a canal across Panama (Nalcor monopoly, anyone?).

In 1879 a congress was planned in Paris, supposedly to discuss possible plans and a suitable route for the canal, even though the details had already been secretly laid down by de Lesseps. The congress was in reality a publicity stunt, with much fanfare and hoopla, somewhat reminiscent of Premier Dunderdale’s Muskrat Falls sanctioning ceremony.

The route that Wyse had settled on was very close to that of the present day canal, except that instead of having the modern day system of water-filled locks to lift ships over the hills, de Lesseps insisted that the entire canal be cut through the isthmus at sea-level — a gargantuan and quite unrealistic undertaking.

De Lesseps had an unwarranted amount of faith in the technical capabilities of the engineers of his day.  When he envisioned a project, he never listened to advice: he saw no reason why it could not be done his way — he left the boring details to the engineers.

A technical commission was formed to map out the canal route and divide it into sections, each of which was put under the supervision of a team of engineers. The commission was also given the task of convincing potential investors that the company knew what it was doing, and how much the project would cost. Needless to say, these estimates turned out to be wildly inaccurate.

Preparations for canal construction included a 40-metre-high dam to hold back the Chagres River — a huge undertaking in itself (North Spur, anyone?) and another dam across the Rio Grande. And then there were the landslides of rocks and clay to contend with. The steep angle of the cut, together with heavy rainfall and inadequate knowledge of the local geology, would later result at times in more material falling into the canal than had recently been dug out.

Once the project began (1879), all manner of technical problems occurred, from inadequate equipment to lack of an efficient railway to transport machinery and carry away the excavated soil. Then there were court battles with the Colombian government over the awarding of contracts, and there were problems recruiting local labour. There were fights between foreign workers and locals.

The project, increasingly bogged down by technical problems, was further slowed down by death and disease, especially from malaria and yellow fever, the causes of which were unknown at the time.  

When, in 1881, the mosquito was found to be the carrier of yellow fever, the experts were ignored, to the point that the local hospital grounds were adorned with ponds, and the legs of hospital beds were immersed in pails of water (to keep the ants off the beds), thereby providing ideal breeding conditions for the mosquitoes. Ultimately 22,000 lives were lost over the 10-year period of canal construction.

In the first year of construction, only 660,000 cubic metres of earth were removed — a far cry from de Lesseps’ prediction of five million cubic metres. From there on, things only got worse: by 1885, only eight million cubic metres out of the required 120 million had been excavated. By now it was abundantly clear to everyone except de Lesseps that a sea-level excavation was not going to happen. One of his engineering colleagues suggested as much to the French government, and also recommended establishing a government lottery to attract private investment to keep the project going.

Finally, out of frustration, de Lesseps agreed to a system of locks, but only as a temporary measure until a sea-level canal could be built. He commissioned Gustav Eiffel (of Tower fame) to supervise this part of the project. If de Lesseps had gone with the recommended design in the first place, it is very likely that the project would have succeeded.

Then de Lesseps went on a nine-month fundraising campaign, borrowing money and selling lottery tickets. Meanwhile, government officials took bribes in return for keeping quiet about the company’s financial troubles.

Despite all of his manoeuvrings, de Lesseps’ company went bankrupt in 1888, bringing down the government and ruining the finances of 800,000 private investors. De Lesseps and numerous officials were charged with fraud and were given varying prison sentences.

Eventually the U.S. government bought out the remaining assets of the company, resumed the canal project in 1906 and completed it in 1914.

In comparing the two projects, there are obvious differences: the Panama Canal had enormous potential economic value. Muskrat Falls makes no sense at all.

If completed, it will produce a pitifully small amount of power in proportion to its enormous cost, and there will be no one to come and complete the project if it goes disastrously wrong.

Then there is the economic impact on ratepayers: the only difference between us and the Canal investors is that although they, too, were deceived by their government, they were voluntary contributors, while we, on the other hand, are funding Muskrat Falls whether we like it or not.

And finally, the French government at least had the good grace to resign and the perpetrators were punished, whereas our government, shameless as it is, would never have the decency to resign, and the authors of the Muskrat fiasco will be richly rewarded no matter how disastrous the outcome.

Tony Rockel

St. John’s

Organizations: Geographical Society of Paris, Rio Grande

Geographic location: Panama Canal, France, Suez Canal Colombia Chagres River U.S.

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Recent comments

  • H Man
    July 27, 2013 - 01:45

    When this project comes online (and it will). When it provides a stream of revenue for the elderly and young (and it will). What will you say then naysayer?

  • Maurice E. Adams
    July 21, 2013 - 11:10

    How can the project be on budget, when an engineering design fix (if one is technically and financially possible/feasible for the North Spur quick clay, pug liquifaction/landslide problem) won't be completed until sometime in 2013 and a contract will not be awarded (by Nalcor's own words) until 2014? A link to Nalcor's minutes stating the foregoing can be found at .

  • John Smith
    July 19, 2013 - 18:48

    Congratulations to Nalcor and all involved in this project. The project is on time, and on budget, and is something we all should be very, very proud of.

    • Tony Rockel
      July 20, 2013 - 16:29

      How predictable! The usual pathetic response from John Smith who hasn't the guts to use his real name. Is it Kathy or Ed, or some lower ranking brown-noser from Nalcor or the PC party?

    • concerned
      July 21, 2013 - 06:41

      john smith. nalcor estimate is 37% higher than where it was at dg2. they are also in 2017 which used to be 2016 for first electricity. As worrying as that may be, it must be remembered that it has only been 6 months since sanction. You are very premature.

    • Tony Rockel
      July 22, 2013 - 09:14

      "John" You are clearly a PC Nalcor toady, and not a very bright one at that. What an absurd claim to make-- or did you borrow Jerome Kennedy's "crystal ball"?

  • hmmm
    July 19, 2013 - 08:36

    It's not exactly a fair comparison. The main reason the French failed to build the canal was because of the high rates of sickness and loss of life from malaria and yellow fever. The Panama canal was finally built, not for economic reasons but for military reasons. The world economy is now benefiting from the canal. I don't know if the same will be said about Muskrat Falls. Another tidbit, when the Americans took over, the cost to build the canal came in under budget. I'm pretty sure no one expects Muskrat to do the same.

  • Just Sayin
    July 19, 2013 - 08:26

    Muskrat Falls rationale was for more winter time heating needs for the island. They forecast a load growth that appears not to materialize, due to more efficient house construction as well as efficient heating. Manitoba Hydro stated that the forecasting doesn't meet best practises. Up to now I have faulted Nalcor for this poorly reasoned forecast. But consider this: some 93 percent of island energy sales is by Nfld Power. Nfld Power is the one that came up with this residential forecast. They are the middlemen who distribute and make a profit on sales, and higher cost MF power doesn't hurt their profit. And their conservation and efficiency plan is worthless, with other jurisdictions in North America doing 10 times more to help customers save significant energy, and lower their power bills. Nfld Power is owned by Fortis, a Nfld based national company. Compare what Fortis offers customers in B.C. for efficiency improvements with the Nfld Plan and it is clear we are getting shafted here. But while Nfld Power has no liability for Muskrat Falls, it is their winter heat forecast that is the rationale for MF. And with no real beneficial efficiency program here, the power forecast can look credible to those who don't take a critical assessment. Nfld Power and Fortis is getting a free pass from any criticism for the rationale for MF but the power demand forecast is effectively owned by them.

  • Eli
    July 19, 2013 - 07:23

    Here, here!

  • JM
    July 19, 2013 - 06:21

    This was an excellent article. It should be noted that Teddy Rosevelt was the first US president to make a foreign visit during his term in office. He visited the Panama Canal. A great engineering wonder, which would not have happened if it was not for the Americans. A truly great engineering project. But will Newfoundland and Labrador be like France when it comes to the Muskrat Falls project. All eyes on Nalcor to see if their delivery matches their rhetoric.

    • Jackson II
      July 19, 2013 - 10:38

      What does Nalcor care? They'll bleed Newfound to death and Martin & Company will go on their merry ways with their bank accounts and pockets overflowing with dollars.