Route Canal

What will be the impact of the Panama Canal expansion?

The Panama Canal expansion is an essential development, and this underpins the Panama Canal Authority’s decision to proceed with the scheme. The planned investment is valued at around $5.25 billion, and we expect it to be complete in 1Q2015. We expect all the ports of the West and East coasts of the US, and also those in the Asia-Pacific region, to start adapting to accommodate the larger vessels that will pass through the canal. The new maximum capacity for a vessel coming through the canal will be about 50 feet deep. The majority of ships will hold up to 14,000 TEUs. Many ports know that they need funds to adapt to the new vessels. Hence, ports are expanding in Miami, Tampa, Savanna, Los Angeles, and Baltimore. The canal is going to be very important for them because much of the merchandise is destined to pass through them. Commerce is set to grow significantly, too. One of the main aspects of the expansion is that much of the natural gas coming from the US will go to South Korea, Japan, and China, the vessels of which will be able to pass through the canal. The canal is going to be an excellent route, enabling a greater volume of cargo between the US and Asia.

What is the significance of the Pacific Alliance for Panama?

The Pacific Alliance will be good for Panama. Today, Chile, Peru, Panama, and Mexico comprise 35% of the GDP of the entire Americas, and now Panama is set to be a part of that. We are in a country where we mostly sell services. We provide opportunities for investors to use Panama as a port of entry for goods that are being exported to all countries in the Alliance without incurring tax. I believe that it is important for us because this is a country where services contribute 82% to GDP. At the moment, we have treaties with three of the four countries, and I think that in 1Q2014 we can finish negotiations with Mexico. This agreement will grant Panama the opportunity to be part of the Pacific Alliance, which is a great source of excitement for us.

In a recent visit by US Vice-President Joe Biden, he stated that relations between Panama and the US were at their best. What is your view on this?

He saw the canal’s current capability and its future possibilities, as well as what the US has been doing to prepare for the future. Also, he was very happy with how the Panamanian government is handling the country and expansion. For instance, he was pleasantly surprised with the quality of infrastructure in the country. He was also happy concerning the efforts being made to control and eradicate drugs in Panama. People are trying to smuggle illegal products through the Panama Canal; however, we recently stopped a boat that contained contraband ammunition and tools. I think the picture that he has of Panama today will serve future US relations well across the board.

What are some of Panama’s advantages as a destination for FDI?

Currently, we have direct flights to Amsterdam, Madrid, and Paris, which are helping to attract visitors to Panama. When people see that major airlines are flying to Panama, it shows you that something is happening here in both the tourism and business markets. Air France has all of its seats fully booked five months in advance, for example. It is even considering upgrading from three flights a day to five. We always promote Panama as a point where all people from the Americas, Europe, and Asia meet to trade goods across Central America, North America, South America, and Europe. We have free trade agreements (FTAs) with the US, Europe, and certain countries in South America, such as Peru and Chile. We recently signed an FTA with Colombia and are in negotiations with Mexico, too. We have two free zones, one on the Atlantic coast and one on the Pacific coast. With that, we are opening up to the world. We are also improving our infrastructure by opening several new airports around the country.

Following your recent visit to Taiwan, what is your outlook for relations with this country?

Taiwan has an airline, EVA Air, which is part of the Star Alliance. Our main airline, 3, is also part of Star Alliance. However, they cannot do business together. Therefore, EVA Air is putting on more flights from Taipei to Latin America, while Copa is increasing frequency of flights from Latin America to Panama. We expect to see more people from Taiwan in Panama through these airlines via Latin America. Currently, it is impossible to fly from Taipei to Panama as it takes about 20 hours. However, we have a great deal of cooperation. We have a treaty and are sending goods, such as beef, to Taiwan. Also, we are trying to attract Taiwanese businesspeople to Panama allowing them to explore the advantages that Panama as a hub has in terms of sending information and merchandise from Taiwan to this region.

With Panama growing three times faster than the Central America average, what is your economic outlook for the country and which sectors have the most growth potential?

Ports are still going to be a very sound growth area. In fact, there are three new ports entering operation as a consortium, with two on the Atlantic, and one to shortly become our largest port. The latter port will be handled by the Panama Canal and will mainly be used for concessions. Its area of around 1,400 acres will provide companies with a logistics address, and we are heavily investing in both logistics and tourism. We are also promoting agriculture and financial services, as well as technology. We think that the commerce of Panama is excellent at attracting people from around the Americas. Yet the automotive market too is strong, and in 2013 sales grew by 20%, after 15% year-on-year growth in 2012. Banks offer seven-year loans on cars at an interest rate of around 7%-8%. Meanwhile, the free zone in Colombia is a major issue, and we also have difficulty with Venezuela, which is stalling our growth somewhat. The free zone accounts for around 50% of our GDP and, therefore, when a problem arises there, it impacts on GDP. However, in general, Panama is stable and enjoys solid activities. We also have a very important mining company that is planning to commence domestic operations in about three or four years with an investment of approximately $2 billion, but which is more likely to rise to $4 billion. When production starts, it expects an annual income of $2.3 billion with around $1 billion of that remaining in the economy annually. In short, we pursue activities that will promote further investment in Panama.

© The Business Year – March 2014