Panama President Martin Torrijos. - Reuters

PANAMA CITY, Panama (Reuters):

President Martin Torrijos, son of a populist dictator who wrestled control of the Panama Canal from the United States (U.S.), is following in his father's footsteps at the helm of a huge expansion for the waterway.

Voters overwhelmingly backed a US$5.25 billion plan to build a new set of locks for the 92-year-old canal in a referendum on Sunday, a project spearheaded by Torrijos who hopes it will cut poverty in the Central American nation.

His father, the late General Omar Torrijos, is revered for negotiating treaties signed in 1977 with U.S. president Jimmy Carter who agreed to hand over control of the canal to Panama in 1999.

Although there are big differences between the style of the two Torrijos, the current president gave a hint of his father's populist touch in a televised address on Sunday night.

"The challenge we face implies using money from the canal to pay up social debts and improve the lives of many people," said Torrijos, a centrist educated in Texas.

He is betting on doubling the canal's capacity to boost Panama's economy, create thousands of jobs and bump up revenue for social spending.

The overhaul was approved with the overwhelming support of almost 80 per cent of voters after an intense government campaign for a 'yes' vote.

Due to begin in 2008 and end in 2014, the expansion will allow the short cut between the Pacific and Atlantic oceans to handle mammoth modern cargo ships.

While his father was a dictator, albeit a popular one, Torrijos is a skilled political operator who pushed a pension reform plan through Congress last year despite street protests.

"Times have changed and the son has to govern in accordance with interests that are often not the people's, like those of the unions and party politics," said a Panama City tradesman close to the Torrijos family.

NATIONAL HERO

Omar Torrijos died in 1981 in a mysterious plane crash. His deal with Carter was acclaimed in Panama as a national victory.

The risks for his son are higher because critics warn the canal expansion could bankrupt the small nation if costs spiral. Taxpayers could be forced to pick up the tab and investors could lose money.

Mario Santos, a 35-year-old engineer, said expanding the canal, an engineering wonder opened in 1914, was good for Panama's 3 million people. But she worried about cost.

"It is going to hand the country more debt, because it is a lie that it will cost US$5 billion," he said, forecasting a final bill at double that amount.

The Torrijos government says expansion spending will not run over budget and will not add to sovereign debt. It says the canal expansion will create 7,000 jobs and 40,000 indirect jobs, and help the poor.

The expansion, which will not interrupt existing traffic, will let ships with up to 12,000 containers pass through the canal, compared with around 4,000 at present.

The canal, which cost US$375 million and 25,000 lives to build, saves ships a long haul around South America's treacherous Cape Horn and carries around 4 per cent of world trade.