Military commanders and troops from 18 countries including the United States mounted extensive naval exercises focused on defending the Panama Canal against terrorist activity that could threaten maritime traffic.

In what defense industry analysts saw as a potential major opportunity to showcase the latest innovations in maritime security, more than 2,000 civilian and military personnel pooled resources for the 12-day exercises that will explore how best to secure the Panama Canal. The waterway currently handles about 5 percent of global trade.

Defense industry manufacturers are pinning hopes on new contracts in Central and South America and Asia amid drastic cutbacks in spending in Europe. U.S. defense manufacturers, including those not already contracted to the U.S. military, are in the lead alongside European and Asian competitors looking for new business in the region.

Latin American maritime security in the Atlantic and Pacific oceans will also be the focus of an international conference of government leaders and military commanders scheduled for October.

Officials said the PANAMAX 2010 exercises will be a precursor to enhanced regional cooperation involving intelligence and ground, naval, air and special forces.

The units taking part will explore their ability to respond to a range of potential threats to the Panama Canal region, including terrorist action, a major humanitarian crisis or natural disaster.

PANAMAX 2010, in the waters off the coasts of Panama, will wind down Aug. 27.

Backed by the government of Panama and the U.S. Southern Command, the event is rated as one of the largest multinational maritime training exercises in the world. Participants aside from host Panama and the U.S. Southern Command include Argentina, Belize, Brazil, Canada, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru and Uruguay.

PANAMAX began in 2003 with the participation of Panama, Chile and the United States. Jesus Rodriguez, Panamanian coordinator of this year's exercises, said personnel will simulate a terrorist action but also focus on threats from drug cartels.

Panama earns about $800 million a year from the canal.

Central and South American countries face tough choices as drug trafficking, illegal immigration and the threat of attacks on newly found natural resources make new demands on maritime security needs.

Top maritime and naval commanders from the region will gather at the second Maritime Surveillance Latin America conference Oct. 18-20 in Miami. The conference is organized by the Institute for Defense and Government Advancement.

Security briefs on the forthcoming event cited water-borne improvised explosive devices among threats facing law enforcement authorities and security forces along Latin American coastlines.

In recent years, maritime interdiction and humanitarian assistance has become a top priority for the Latin American community, IDGA said. "The need for greater communication and cooperation is great," it said. Analysts said increased crime on the high seas and greater movement of people, as well as illegal human traffic, had led to concerns about tightening up security along the coastline.

The Maritime Surveillance conference will bring together a variety of international participants -- "stakeholders" -- to discuss what the organizers see as "overarching challenges," IDGA said.

These include situational awareness and intelligence, security integration and partnerships, latest capabilities and technologies, information sharing and international law enforcement.

The event will also address more specific concerns that continue to plague international ports, such as small vessel threats, waterborne IEDs, drug smuggling and illegal immigration, IDGA said.

In June the U.N. Office on Drugs and Crime launched a Center of Excellence on Maritime Security in Panama City and opened a Regional Program Office for Central America, Cuba and the Dominican Republic as part of an effort to prevent illicit and counterfeit goods from entering markets through the world's ports.

"Most of the world's trade is shipped by containers, which means that containers are also the main delivery system for illicit goods," said UNODC Deputy Executive Director Francis Maertens, adding that "better container security can raise the risks and lower the benefits to organized crime."

The UNODC-World Customs Organization Container Control Program helps countries identify suspicious cargo with the creation and use of intelligence and timely information-sharing.

Since it started in 2006 in eight countries -- Cape Verde, Costa Rica, Ecuador, Ghana, Pakistan, Panama, Senegal and Turkmenistan -- the program has led to the seizure of 38 tons of cocaine, 770 tons of precursor chemicals and 1,550 tons of illegally logged wood.

The Center of Excellence will help diagnose threats in maritime security and serve as a resource of expertise, training, data collection and analysis. It will provide strategic direction and training in search techniques, security, maritime interdiction, human trafficking and the handling of hazardous and toxic cargo.

As a new UNODC operational hub, the center will allow the organization to provide more effective advisory services to countries in the region.

Drugs flowing from the Andean countries to North America are a key concern, UNODC officials said. "Seventy percent of crimes in Central America are directly linked to drug trafficking," said Panama's Foreign Affairs Minister Juan Carlos Varela. "This reinforced focus on maritime security will help the governments in the region to tackle the common threat of organized crime."