The capacity of the canal, which was US territory until it was returned to Panama in 1999, will double under the plan, allowing it to transport twice as many ships between the Atlantic and Pacific oceans, boosting government revenue.

"History will record this as the day when Panamanians made the first major decision on the Panama Canal and their future by themselves," Ricaurte Vasquez, minister for canal affairs and a former finance minister, told Reuters.

Expansion of the canal, an engineering wonder first opened in 1914, will create a jobs bonanza for Panama's 3 million people and boost economic growth, supporters say.

Critics warn the plan could bankrupt the small nation, which is already burdened with huge debts and where most people live in poverty, if costs spiral. Taxpayers could be forced to pick up the tab and investors lose money.

Voters queued for hours in vicious heat to have their say.

In Paraiso (Paradise), a small, neat town of mainly English-speaking Afro-Caribbeans on the canal's bank, retired police officer Crispin Mayers, 79, said he supported the expansion because it would bring in more cash.

"My parents came from Jamaica to dig the big ditch. This is an important vote ... and I'd like to see it come out on top," he said outside a polling station at the Gen. Omar Torrijos School, with palm trees swaying nearby in the tropical breeze.

Torrijos was the populist military leader who helped clear the way in the 1970s for the canal's handover from the United States. His son Martin Torrijos is Panama's elected president.

Opened in 1914 at a cost of $375 million and 25,000 lives, the canal was dynamited and dug out by thousands of laborers who braved deadly malaria and yellow fever. It saves ships a long haul around South America's treacherous Cape Horn and carries around 4 percent of world maritime trade.

But its lock system is too small for many modern tankers and ships making the passage, mainly from the United States, Japan, China and Chile, also face longer waits to make the 50-mile (80-km) inter-oceanic trip as global shipping grows.

The expansion plan will build wider locks and deeper and bigger access channels, and let ships with 12,000 containers pass through, up from around 4,000 containers at present.

The Panama Canal Authority, which runs the waterway, warns the route will become log-jammed in seven years if nothing was done, meaning business will be lost to competitors like the U.S. intermodal system of ports and cross-country rail links.

The project, due to start in 2008 and finish in 2014, needs $2.3 billion in loans or bonds to be paid back with revenues from higher tolls from ships using the canal, whose upgrade will not interrupt traffic. Construction would create 7,000 direct jobs and up to 40,000 indirect jobs.

France's Ferdinand de Lesseps, builder of the Suez Canal, started the Panama Canal in 1880 but abandoned it nine years later when the project went bankrupt.

The US government bought the canal in 1904 and 10 years later opened the waterway. With an eye on naval supremacy and control of the Western Hemisphere, the United States ran the canal for most of the past century.

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