Panamanians on Sunday overwhelmingly passed the multibillion-dollar canal expansion referendum.

BY MICHELE LABRUT AND STEVEN DUDLEY

PANAMA CITY, PANAMA - Panamanians endorsed a multi-billion dollar expansion of the Panama Canal on Sunday, the country's prime economic asset that has been at the heart of Panama's history and development for over a century.

With 94 percent of the votes counted in the simple YES-NO referendum, pro-expansion forces had 78 percent approval. Abstention was hovering close to 56 percent.

The approval opens the way for the government to develop a new system of locks and waterways to help unclog the canal and create more space for bigger ships coming online throughout the world. It also is a ringing endorsement of the Panama Canal Authority (PCA), the independent body that took over administration of the canal from the United States on December 31, 1999.

Showing clear signs of fatigue and having lost his voice, the Panama Canal Authority administrator Alberto Alemán Zubieta told local media that the ''Panamanian people had made the right decision and the decision was by a landslide.'' Now, the authority ``has a commitment to make (the project) work.''

''It's an historic moment,'' Panamanian President Martín Torrijos, who was accompanied by his wife and three children, told the press after voting. ``Today brings us the opportunity to open a new era for our country.''

With economic growth reaching 7 percent, Panama's economy has been soaring. But traffic along the canal has also clogged the waterway, and ships have been forced to seek alternative routes, especially to oblige increasing trade between the Far East and the eastern seaboard of the United States and South American nations such as Brazil and Venezuela.

Another problem is that the canal only fits so-called Panamax ships, which are 106-feet wide. Newer Post-panamax ships which are 150-feet wide are coming online and threaten to make the canal obsolete.

With that in mind, 'Yes' voters swarmed the polls on Sunday, many wearing green T-shirts that read 'SI.' The 'Yes' campaign also included round-the-clock workshops by the PCA leading up to Sunday's referendum.

''I voted yes for the future of my kids,'' said Cristian Howell, a 32 year-old Internet technology manager as he exited the polls with his wife.

''Personally, I'm not expecting that the expansion will help me much,'' he added. ``Obviously it will generate more wealth in Panama, but I hope that my children will work at the Panama Canal or related companies in the next decades.''

The canal has played a central role in this country's history and still has tremendous weight on the Panamanian psyche. The country separated from Colombia a century ago in order to build it with the United States. Thousands died in the process, but the United States maintained control over it.

Over the next 63 years, many Panamanians fought and died to take control of the waterway. Sunday's referendum took place 29 years after Panamanians approved the Panama Canal Treaty, an agreement between Panamanian President and the father of the current president, the late General Omar Torrijos, and U.S. President Jimmy Carter that transferred the waterway to Panama on December 31, 1999.

The 1977 plebiscite was approved by 66 percent.

The new project will take as long as a decade to finish and cost at least $5 billion. But analysts say the 'Yes' vote on Sunday sends the right message to investors and traders across the globe.

''This shows a firm commitment so that they can start building more Post-Panamax ships,'' said Ebrahim Asvat, columnist and former presidential advisor.

At one port in Panama, the approval of the canal expansion was seen as a blessing and a necessity.

''Last year, we received the first Post-Panamax vessel, a Maersk vessel, and we are waiting for the next ones to arrive during the construction of the third set of larger locks,'' said Manzanillo International Terminal General Manager Carlos Urriola, referring to the expansion project.

The critical period will be when the waterway comes to full capacity, which is expected to happen in about three years. Canal officials will have to improve efficiency and increase capacity to remain competitive, while augmenting the transit of Panamax vessels. The country will also need to develop more infrastructure.

Questions also remain over costs and how increased revenue will be used. Estimates of the costs vary between $5 billion and $10 billion, and citizens of this country of 3 million worry that corruption could hinder the project, limiting its long-term social benefits.

''The big challenge as a nation is to achieve economic benefit for the majority of the people,'' said Aníbal Galindo, the head of the Patriotic Union, an alliance of two political parties here.

Galindo's party supported the referendum, but said it would also push for a special Panama Canal fund that would channel revenue into social projects.