The Panama Canal will always be the crown jewel of Panama’s transport industry, but the world should take care not to overlook the strides other areas of the sector have made in recent years. The arrival of Latin America’s first subway system, the expansion of the Pan-American Highway, and the planned expansion of the Tocumen International Airport should all have tremendous impacts on the country’s development and continued growth as a Central American business and tourism hub. The above projects represent more than USD2.5 billion in government investment over the next decade, a sign of the government’s commitment to infrastructure improvements. And the canal is far from forgotten; a USD5.25 expansion project completed in 2016 more than doubled the maximum vessel size allowed, ensuring that the canal would remain one of the cornerstones of the modern shipping industry.
Originally scheduled to be completed in 2014, the expansion of the Panama Canal was one of the country’s largest engineering projects since the canal’s original construction. Long one of the centerpieces of the global shipping industry, traffic through the canal has slowed in recent years due to its size limitations; the Panamax ships that were canal’s previous maximum capacity had a capacity of around 5,000 TEUs, but the world’s largest ships can now hold almost 200,000 TEUs. The USD9.4 billion-expansion consisted of several related projects, but most significant was the construction of a third set of locks to create an additional lane of traffic in the canal. In conjunction with this, the government also built a new 6.1km-long access channel for the new locks and dredged several channels to increase water supply and allowable volume. Labor issues involving the project’s 40,000 workers led to delays of over two years, but the canal’s inauguration in 2016 was a high point for the nation.
The canal upgrade will now allow ships of up to 13,000 TEUs to pass through the canal, more than enough to accommodate the majority of the world’s global shipping fleet. The increased volume is particularly important for regaining traffic from East Asia to the eastern coasts of North and South America; larger ships are more cost-efficient on these routes, and the canal’s ability to accommodate these ships should allow these popular routes to return to the canal. Early returns have been mixed, however; volumes have increased but not to the degree some expected. Many industry leaders are not fazed, noting that the supporting infrastructure needed to handle increased volumes is still being installed. “We have to band together to provide more services to vessels, cargo, and crews,” Cámara Marítima de Panamá (Maritime Chamber of Panama) President Rommel Troetsch told TBY. “Vessels require repairs and spare parts …The infrastructure for trans-shipment ports and the infrastructure necessary to go to the anchorage to provide a vessel’s needs must be boosted.” While improvements continue to be made, Panama’s port infrastructure remains one of the country’s strengths. Its years of experience in the international shipping industry has participants optimistic about the sector’s growth in 2018 and beyond.
The arrival of the Panama Metro in 2014 was a watershed moment for the development of the capital. The 13.7km-long, USD2 billion Line 1, Central America’s first metro system, was widely hailed as a key accomplishment in alleviating vehicle traffic and offering a new affordable public transit option. Construction of Line 1 took place from 2011 to 2014 and included 7.3km of tunnels and 1.5km of trenches. Construction was completed by a consortium of Brazilian and Spanish contractors, with a contract for the cars awarded to French firm Alstom. With the first line up and operational, the government is working to optimize current performance and ensure that future rail development benefits as many citizens as possible. The response to Line 1 was more enthusiastic than even some optimistic projections had predicted, Minister of Canal Affairs and Metro Roberto Roy told TBY, and the government is taking that demand into account in its future planning. “For Line 1, we originally calculated around 140,000 daily passengers, but we have had days with nearly 300,000 and the average is hovering around 275,000,” Roy told TBY. “This has made us place an order for additional cars… this purchase will be for both Line 1 and to cover extra demand for feeding passengers from Line 2.”
The long-term plan for the rail system is for a seven-eight-line network with around 90 stations to be constructed by 2040. Line 2, which will be a 21km above-ground line connecting the city with Tocumen International Airport, is expected to be finished by 2019 despite delays that have come about due to the Odebrecht Lava Jato scandal. The connection to the airport is of particular importance due to the planned expansion of Tocumen Airport; a new terminal is expected to increase annual capacity by more than 5 million passengers per year by 2022, and strengthening the city’s public transit options will be necessary to fully reap the benefits of said expansion. Meanwhile, Lines 3 and 4 are currently in the planning stage; a USD2.6 billion loan agreement for the funding of Line 3 was signed between Panama and Japan in 2016, and construction on that line is expected to begin in late 2017 and conclude in 2021. With these long-term goals in place, the Panamanian government’s current challenge is the fiscal health of the system. Several analysts believe that the current fare of USD0.35 per trip is too low, pointing to state data that showed a USD1.7 million gap between expenses and income collected via fares—a deficit that is only expected to increase as time goes on due to the arrival of new wagons and lines in the coming years. Still, the popularity and demand for the system means that its fiscal issues should be easy to overcome. “If you look at national polls, the metro is the number-one entity in public satisfaction,” Roy told TBY. “We are always above 80%, which gives us a lot of happiness. We are proud to have done something that has really changed people’s lives for the better in Panama.”
TOCUMEN AIRPORT EXPANSION
Panama’s Tocumen Airport plays a key role as a connector for North and South America, and is currently undergoing a series of modernization projects to expand capacity and secure the airport’s position as a hub for Central American travel. Tocumen Airport saw 14.7 million passengers pass through in 2016, a 9.7% increase over 2015 and almost three times that of the next-busiest Central American airport. More than 70% of Pamana’s international tourists pass through Tocumen thanks to flights to 35 countries. The steady, continued growth of Panama’s tourism, finance, and international investment sectors can be seen in the increase of volume through Tocumen; as recently as 2011, annual traffic was fewer than 9 million passengers. A series of infrastructure projects from 2015-2016 added a terminal and raised capacity to 15 million passengers per year. Recognizing that further improvements were needed, 2016 saw the beginning of an ambitious expansion plan that is expected to double passenger capacity upon completion in 2022. The expansion program, which is projected to cost USD800 million, will include the expansion of the airport’s northern runway, and, in the longer term, the construction of a new passenger terminal, a new runway, and corresponding access roads to handle the increase in flows. Though the pace of development is rapid, careful stewardship by airport officials has kept the sector flowing smoothly. Felipe Bonifatti, Lufthansa’s General Manager for Central America and Caribbean, summarized the aviation industry’s confidence in Panama in an interview: “The central location of Panama City, especially in terms of reaching destinations all across the Americas, is key,” Bonifatti told TBY. “We are also pleased with the airport infrastructure here at Tocumen International Airport… the smooth flow of traffic and travelers through the airport makes everything much easier for us.”
Panama is also investing heavily in road infrastructure projects to generate new avenues of commerce, link previously underdeveloped areas of the country, and increase overall efficiency. The nation’s roads are a mix of overused and underdeveloped; the lack of public transportation options in developed areas has placed considerable stress on the country’s urban roads, yet over half the nation’s 15,000km of roads were unpaved in 2010, according to the CIA World Factbook. The 2016 World Economic Forum ranked Panama’s port and air transport infrastructure fifth and sixth in the world, respectively, but assessed its road quality as 48th-best. Well aware that its roads are the weak link in one of Central America’s best transport infrastructures, the Panamanian government has launched a number of major projects in recent years. The government’s 2015-2019 Strategic Plan has road infrastructure as one of its major areas for investment, with almost USD3 billion allocated for road and civil works over the five-year lifespan of the strategic plan. Some of the largest projects include an expansion of the Pan-American Highway, the construction of a fourth bridge over the Panama Canal, and an extension of the North Corridor Highway. All told, more than 200,000km of road construction are underway over the next five years. The interconnected nature of a country’s infrastructure means that it is only as robust as its weakest point, and Panama’s government has taken actions to increase flows in areas of greatest need. In recently awarding a tender for a USD335 million Pan-American highway project that will expand a 10km stretch of road by the Pacific entrance to the Panama Canal, the message was clear; Panama’s transport industry plays an essential role in the country’s economic development and the state is willing to make the investments needed to keep it moving smoothly.
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