When the United States gave Panama control over its canal, many international observers predicted the waterway would be plagued by problems at best and chaos at worst. But the tiny country...

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PANAMA CITY — When the United States gave Panama control over its canal, many international observers predicted the waterway would be plagued by problems at best and chaos at worst.

But the tiny country bucked popular opinion. Today, five years to the day after Panama took control of the canal, the canal has doubled its income and lowered its accident rate, and the country is considering its most ambitious expansion plan ever.

“At the end of 1999, there was a lot of worry at the local and international level about whether Panamanians could operate the canal or not,” canal administrator Alberto Aleman Zubieta said.

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But, he said, none of the doomsday predictions came true. Panama is running the government-owned canal much like a private business that is operating at maximum capacity.

In fact, the country is planning to hold a referendum on whether it should invest an estimated $5 billion to add new, state-of-the-art locks that would allow larger ships to cross the canal. No date has been set for the vote.

Ten percent of the world’s ships are unable to pass through the narrow waterway, and administrators say the expansion would help the canal remain one of the fastest and easiest shipping routes between the Pacific and Atlantic oceans.

But many worry that the project will mean too much debt for the small country.

“If the United States was still the canal’s owner, it wouldn’t have the headache of coming up with the money,” said Fernando Manfredo, a former assistant administrator. “But Panama is a small, vulnerable country, and this would put us at a great risk.”

During the last fiscal year, which ended Sept. 30, the canal brought in $1 billion, compared with $500 million in 1999, and had a record surplus of $183 million.

The waterway registered 10 accidents last fiscal year among the 14,035 ships that passed through it. That was the lowest accident rate since 1923, when only 3,967 ships passed through.

The increase in income and decrease in accidents are attributed, in part, to a $300 million project that widened an eight-mile stretch called the Culebra Cut, boosting the canal’s traffic potential by 20 percent.

In 2002, the canal also eliminated a 1912 pricing system that charged all ships a flat per-ton rate and it began setting rates based on the type of ship and cargo.

“The United States managed the canal according to its interests,” said analyst Marco Gandasegui. “Now the canal is in Panamanian hands, and technically, it is running better than when it was under the United States’ control. Shipping companies are very happy.”

The United States opened the canal on Aug. 14, 1914. But under treaties signed in 1977 by President Carter and Panamanian leader Gen. Omar Torrijos, the United States handed over control of the canal on Dec. 31, 1999.

The treaties gave Panama 360,240 acres of real estate that made up the Canal Zone, a fenced-in U.S. civilian and military enclave.

Some initially complained about the loss of the estimated $300 million the Americans spent in Panama each year. But most think an increase in tourism, due in large part to the development of former U.S. lands, has created jobs.