With most votes counted from Sunday's referendum, more than 78 per cent of voters supported the $5.25 billion expansion aimed at enabling the canal to handle modern cargo ships, the Central American nation's electoral tribunal said.

Voter turnout was relatively low with more than 57 per cent of Panama's 2.1 million population failing to vote.

"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, said.

In Paraiso (Paradise), a small town on the canal's bank consisting of mainly English-speaking Afro-Caribbeans, voters faced long lines in stifling heat.

Crispin Mayers, a 79-year-old retired police officer, 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 Omar Torrijos School.

   

David Guardia, a fish vendor in the poor town of Caillimito, north of Panama City, was voting "no," saying it was too risky for a poor nation and the government was rushing into things.

   

"I believe in expansion but stage-by-stage, step-by-step," he said.

Mega-ships

The US is by far the biggest user of the waterway followed by China and Japan, according to the Panama Canal Authority.

Opinion polls had predicted a victory of up to 70 per cent in favour of the expansion.

Promoters of the project point out that modern shipping increasingly relies on mega-ships too large for the canal.

Currently such ships - too wide and too long for the Panama Canal - must go around Cape Horn at the southern tip of South America to reach ports on the east and west coasts of the Americas.

Panamanian authorities say the project will directly generate 7,000 jobs.

Work would begin late next year and is sheduled for completion in 2014.

Built by the US between 1904 and 1914 after an initial failed attempt by the French, the canal is the driving force of  Panama's economy.

About 80 per cent of Panama's gross domestic product, $16 billion in 2005, is linked to canal activity.