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January 15, 2014

Uncertain Future for the New Ditch

From the visitor’s center at the Miraflores Locks, tourists observe the painfully slow process of ships transitting the original Panama Canal.

© Latitude 38 Media, LLC

Considering the legendary difficulties that both the French and Americans endured while building the original Panama Canal a century ago, it’s not surprising that construction of a new set of locks — originally slated to open this summer — has fallen substantially behind schedule. But recent news reports indicate that the colossal construction project has much bigger problems that meeting a theoretical timetable.

The whole issue is intensely complicated, but in a nutshell the multinational contracting group GUPC (United for the Panama Canal Group) has run out of funds to continue the multi-phase project, and is demanding — but so far has not received — an over-run payment of $1.6 billion in order to continue, which is more than a third of its original $3.2 billion bid. It’s been reported that a complete work stoppage could come as early as next week.

When proposed in 2006, the project received overwhelming support from both the Panamanian government and its citizenry, 76% of whom showed their approval in a national referendum. When — or if — completed, the new locks will accommodate ‘New Panamax’ class vessels which are up to 1,400 feet long and 180 feet wide, as compared to the current maximums of 950 feet x 106 feet.

The root of the problem today, however, seems to be that the project was massively underbid, which many now claim was obvious at the outset. Allegations of corruption are rampant. According to the online Panama News, "The U.S. Embassy and every credible independent business observer identified the winning bid as a grossly unrealistic low ball offer at the time that the contract was awarded to GUPC, with the Americans suspecting that there was a hidden subsidy from the Spanish government at the time." The key players in that government are now out of office, however, and Spain has enormous financial problems of its own.

Although sailboats may never be allowed to travel through them, the new locks are longer, wider, deeper and more eco-friendly, as water is recycled via the three holding basins shown. In the original system millions of gallons of fresh water from Lake Gatun were flushed out to sea every day.

©2014 Latitude 38 Media, LLC

The further you dig into the controversy the more tangled this web appears to be. But construction is so far along already — and so critically important to Panama’s future — that we have to believe it will be completed one way or another. Indeed, The Panama Canal Authority (ACP) is considering a plan to finish the work with its own resources, while (again, according to The Panama News) "the U.S.-based Bechtel corporation [is] waiting in the wings."

Meanwhile, 500 miles to the north, it was recently announced that Nicaragua will break ground this year on its own Pacific-to-Caribbean waterway. The project, expected to take five years to complete, will traverse 170 miles across Central America, and is largely being funded by Chinese telecom billionaire Wang Jing. 

What will the bottom line impact be on sailors? That’s anybody’s guess. When and if Panama’s new lane opens it could make small boat transits easier. But that’s not a sure bet. And while Panama has a mandate to allow (annoyingly) small vessels through, it remains to be seen if Nicaragua will follow suit or simply shoo them away in deference to massive cargo traffic.


New SF Boat Show Next Week

The first annual Progressive San Francisco Boat Show, brought to you by the National Marine Manufacturers Association, takes place January 23-26 at Pier 48 and AT&T Park’s McCovey Cove.

Sailing on San Francisco Bay on a summer’s day.

© Latitude 38 Media, LLC

Be sure to stop by to visit the numerous exhibitors and get on board the newest sailboats and powerboats on the West Coast. It’s sure to be a fun event that all the family will enjoy.

For those of you interested in learning more about cruising, Latitude 38’s own Andy Turpin hosts two seminars on January 23: an introduction to the annual Baja Ha-Ha cruiser’s rally, as well as an overview of the Tahitian Islands and the annual cruiser migration from the West Coast called the Pacific Puddle Jump. On Sunday, January 26, Latitude’s John Arndt shares his in-depth knowledge of sailing on San Francisco Bay and explains how accessible sailing is to everyone. Here’s a complete list of scheduled seminars.

Mark the dates and head on down to the boat show, see what’s hot, and stick around to learn something new about racing, navigation, cruising, rigging and more. 

Angel Island Ferry Service

The California Department of Parks and Recreation will be holding a public meeting tomorrow (January 16) to discuss the best options for providing ferry service to and from Angel Island State Park — a cherished San Francisco Bay landmark.

California Department of Parks and Recreation is seeking public input on the future of the Angel Island Ferry.

© Latitude 38 Media, LLC

Community members interested in participating are welcome to attend. The meeting takes place at the Mill Valley Community Center on at 6:00 p.m. Other stakeholders invited include staff members of California Department of Recreation and operators of the Angel Island Tiburon Ferry. This ferry service is family owned and operated and is the last of its kind on the San Francisco Bay.

For any further information, contact Devon Ford at 916-541-5919 or send him an email

Hundreds of Foreign Boats Remain Impounded In Mexico

It’s going on six weeks now that over 300 foreign-owned boats remain impounded in Mexican marinas following a sub-agency of the Mexican IRS conducting audit/raids on at least eight marinas. Thanks to their dubious auditing techniques and lack of familiarity with Mexican and US law, the agency saw fit to impound 338 out of 1,600 boats. That’s 21% of all boats they inspected! Had they — or if they — hit all 30+ marinas in Mexico, it’s likely that over 1,000 foreign boats will be impounded.

Despite the public relations nightmare that has resulted for Mexico, the agency, AGACE, remains defiant, saying they have been working for the "safety" — what a joke! — of boat owners and to make sure that Mexico collects all the tax it is owed. AGACE suspects that many foreign-owned boats in Mexico have really been imported permanently and thus the owners are ‘tax cheats’. This is ridiculous, of course, as AGACE has been finding out. In one marina 52 of the 53 boats impounded were shown to have the required 10-Year Temporary Import Permits, and one had an outdated permit. At least as bad is the fact that AGACE insists that it has up to four months to assess each case. Can anybody say, "Ruined winter cruise?" And think about those boats that are, against their owners wishes, confined to expensive marinas. Who should pay for that?

Most of the boats that have been impounded were in compliance with all Mexican law, the only problem was the owners weren’t aboard to show the auditors the things they needed to see, but couldn’t see from the dock. In a land where you’re innocent until proven guilty, hundreds of the impounded boats never should have been impounded. It would have helped if AGACE hadn’t conducted sneak raids backed with marines armed with machine guns, but had simply made appointments with owners or owner’s reps to confirm compliance. It would also have helped if AGACE made contact with the owners of the boats, which they have yet to do, and which is why many boat owners don’t even know their boats have been impounded.

As of this morning 16 boats had been released from Opequimar Marina in Puerto Vallarta, an unspecified number in Acapulco, and some were reportedly being released yesterday in Cabo San Lucas. But that means around 300 boats are still impounded.

Even as some boats are being released, there is no assurance that defiant AGACE won’t hit the marinas that haven’t been hit yet — such as Marina Vallarta, Paradise Village Marina, the three big marinas in La Paz, and the three marinas in Mazatlan. People with boats in those marinas have a right to be concerned if not scared.

The worst case would be if your boat had been in a marina AGACE had already visited, and been cleared. But then you moved to another marina, AGACE agents showed up, and you weren’t aboard to show them what they needed to see. Your boat could end up impounded because AGACE doesn’t give out certificates saying your boat had been cleared. We’re not saying it’s going to happen, we’re just saying it could happen.

The fallout for marine tourism and Mexico has been terrible, and with each passing day it gets worse. Here are a couple samples of the kinds of letters we’ve been getting:

"As I recently wrote in a letter to Mexican officials, I recently purchased a Peterson 34, and was planning to sail her from my home waters of San Francisco Bay to Ensenada to have her refit. I planned on spending about $30,000 on the refit. I would then continue on to La Paz and the Mexican Riviera, where I wanted to spend the winter and spring before turning right for Polynesia in May. I figure I would have spent another $20,000 on a vacation with my wife in Mexico before continuing on to the South Pacific. Why did Mexico spend all these years encouraging visits by nautical tourists and then shoot itself in the foot like this? Unless this problem is resolved, I will spend my money elsewhere."
— Steve Bryant, Peterson 34.

"I am writing to you [a Mexican official] about the recent impound of more than 300 boats by a branch of the Mexican AGACE. I have sailed my own sailboat up and down the Mexican coast from Ensenada to Zihuatanejo for more than 10 years. At this time my boat is in the US, for which I am very thankful. My wife and I were planning to purchase a home in La Paz on our next visit to your beautiful country. I am sorry to say, we will not be returning to Mexico, at least not by boat. And after watching what has happened to the boat owners recently, I believe it would be a mistake to buy property in Mexico, when it can so easily be taken away for no reason. We have cancelled our intention to buy property in La Paz or anywhere else in Mexico. I love Mexico and have made many friends there. This incident is going to bring terrible hardship and undeserved consequences to the thousands of workers who derive their living from marinas and other tourism. What a sad, awful mistake you have made. I cannot imagine why, but it breaks my heart. It is shameful.
— Charles Lane, San Francisco.

"We’re in the process of buying a new boat. As it’s in Southern California, we were thinking of taking it to Mexico to get some work done on her. There is now ZERO chance of us doing that. There is a few thousand dollars that won’t be spent in a Mexican boat yard, along with hotel rooms, air fares, etc. This is idiotic, and I have yet to get a reason why these folks would be so stupid."  
— Beau Vrolyk of Santa Cruz.

In a side note to the last letter, one of the most expensive impounded boats had come to Mexico from San Diego for a few days of boat work. Despite AGACE agents assuring the captain and crew that everything was in order on their boat, when they tried to leave Mexico the port captain refused, saying the multi-million-dollar boat was impounded. That was in early December and she’s still impounded.

While many people in the Mexican government understand that it’s not a good idea to scare the hell out of guests, potential guests, and investors by recklessly impounding foreign-owned assets — without telling the owners of those assets — for months at a time, at least one branch of Mexican government apparently doesn’t care. We don’t know of any boat owners who have a problem with Mexico making sure boats aren’t stolen and making sure every boat is legally in the country and has all the proper documentation — especially since it can be so easy and inexpensive in Mexico. It’s just that AGACE couldn’t have done it in a less competent, slower or more frightening way. May it all end soon.

By the way, there has been a lot of misinformation on this whole matter. Consider, for example, the claims of the Elizabeth Shanahan, who owns a marine business is Nuevo Vallarta. Consider two of her ‘facts’:

"Fact: Per the requirement of a TIP, the sticker portion must affixed to the vessel."

What Shanahan fails to report — or maybe she simply doesn’t know — is that many TIPs never came with stickers. People need to realize what happens to them is not something they can carelessly project as happening to everybody else. What happens in Shanahan’s world, for instance, hasn’t necessarily been happening in the world of other boat owners  — as demonstrated by her next so-called ‘fact’:

"Fact, the vessels in Nuevo Vallarta and Opequimar shipyard have not been impounded, they are on a ‘precautionary embargo’ and are free to come and go from the dock. They just must provide copies of their paperwork that was missing or incorrect, and will be released to freely travel Mexico."

In addition to noting that Shanahan uses the future tense in saying boats "will be released" — when will that happen? — we also note that she specifies that boats will be able to "freely travel Mexico," but says nothing about them being able to leave the country. Errors of omission or intent? We’re not sure.

Despite what some people claim, Mexican maritime law is very complicated, which is why we asked Neil Shroyer of Marina de La Paz, who is as up on chapter and verse of Mexican maritime law as anyone we know, to weigh in on the concept of ‘precautionary embargoes’. Neil writes:

Depositario is a person [or business or agency] who the provisionally impounded goods are entrusted to while the legal process goes through its stages. He can do with the goods as he sees fit, as long as they are not sold, destroyed, modified, or made unavailable to the legal process. So, in answer to the question, it depends on the circumstances [as to whether an embargoed boat can leave the dock]. If the vessel was officially ‘deposited’ with the owner of said vessel alter the ’embargo precautorio’ (a possibility), then that owner can move around on the vessel as long as she / he can produce the vessel at any time that the AGACE authorities request it during the legal process. It’s kind of like being out on bail. If the Owner/Depositario does not produce the vessel when required by the AGACE, then he could face fines and jail.

"If the vessel was ‘deposited’ with the marina representative/manager/owner after the ’embargo precautorio’, it would be entirely up to that person to allow the owner to move about. But if the owner took off with the vessel, the person that was named ‘Depositario‘ would be responsible for the vessel not showing up or being available for trial, and could even face jail time. If no ‘Depositario’ is named by the AGACE, it means that the vessel is technically in AGACE´s possession and they are the ‘Depositarios’. That is why AGACE is or was pressing the marinas [and later port captains — ed.] to accept the ‘deposito‘, because if something happens to the vessel they would be responsible.

"Half the marinas accepted the deposito of the vessels impounded, the other half did not. Some vessels that were in marinas that did not accept the deposito have left the country, and I do not know what AGACE can or would do about that. The law permits the return of the vessel (merchandise), so maybe if the owner proves it has left the country then possibly, in a positive scenario, they would pay the fine and that would be that. Worst case, maybe they would be charged with wrongful disposal or theft of impounded goods." So wrote Neil Shroyer.

It’s our understanding that Opequimar agreed to be a depositario for the embargoed boats in their marina only because AGACE threatened to shut them down the next day if they didn’t. The marina our boat is in refused to be a depositario, so the situation in Shanahan’s marina is entirely different from that in our marina — and many other marinas in Mexico. As AGACE has not named us personally as the depositario for our boat, Profligate, AGACE is Profligate‘s depositario by default. Since they have not only not given us permission to leave the slip — they haven’t even contacted us, but they have put us on the ‘no go’ list with the Port Captain — we’re not going anywhere. After all, we don’t think it’s worth risking an asset worth hundreds of thousands of dollars to go for a daysail when it’s in the control of an agency that doesn’t seem to care how badly it damages Mexico’s marine tourism industry.

As we think everyone can see, the less you know about the complexities of Mexican maritime law, the less you’ll worry. And don’t even get us going about the questions of whether US zarpes and captains licenses are needed to legally bring a boat to Mexico, and whether a $100 sanitary certificate is necessary for a boat to leave Mexico. In the old days — before the third week of November of last year — things were friendly in Mexico, and all the inevitable paperwork hiccups and legal contradictions could be worked out in a few minutes with a smile. But with the cold, harsh actions of AGACE, where the agency insists it has up to 24 weeks to decide whether your boat should be released, fined or confiscated, Mexico suddenly became a much less friendly place to foreigners with any kind of significant assets.

We’re hoping and praying, for the sake of all cruisers in Mexico and potential cruisers to Mexico, as well as all the nautical tourism businesses — and the owners of impounded boats — that Mexico puts an end to this self-destructive insanity immediately. And furthermore, that they give assurances that similar episodes won’t happen again. Mexico has steadily been making life easier and more attractive for cruisers, so let’s hope this is an aberration, not the start of a really horrible phase.

By the way, as of January 1 Mexico instituted a new 16% IVA tax on all food and drink in Mexico, including that sold in grocery stores and restaurants, as well as on other things like pet food. Mexico has many millions of really poor — not US-style poor — people. Minimum wage is about $6/day. How the government expects them to suddenly cough up another 16% for the basics of survival is beyond us, especially when the property tax on a half million dollar condo on the water is a mere $150 a year. Why do staples for the poor have to be taxed? As for restaurants, some are collecting the new tax, others aren’t, the latter saying the new rule hasn’t been constitutionalized, it’s not legal, their accountant told them not to pay it, etc, etc. Inconsistency ought to be the motto of Mexico.

There are signs that the new Pena Nieto Administration is doing some good things, such as cleaning up the very corrupt teacher’s union, opening Pemex to much-needed foreign investment, and cracking down on the many major tax abuses in a land where the amount of tax paid compared to GDP is ridiculously low. Hopefully AGACE’s action is an anomalous brain fart on the way to a better Mexico, but we can only wait and see.

Obviously, this boat (or what’s left of it) has seen better days. We recently invited you, the faithful Lectronic Latitude readers, to help explain how the boat’s bow-end found its way onto the curbside of a street.
Here’s the situation: The lock used to keep your outboard from being stolen has corroded over the years, so when you try to turn the key, it breaks off inside the lock.
The bi-annual Pacific Cup race to Hawaii now has over 70 entries in various divisions including: cruising, doublehanded, fully crewed and multihull.