The Hub Concept

What has your growth strategy been since commencing operations in 1995?

We began in 1995, shortly after the Noriega era, hence at a time of skepticism toward Panama in terms of investment. We decided to build a terminal on a former US base with an investment of $150 million, and to date have invested $650 million with plans to invest a further $250 million. When we arrived in Panama there was a total shipping volume of 100,000 TEUs, while in 2013 the level was at almost 7 million TEUs. As pioneers, we ourselves moved 2 million TEUs, and we became the first company to establish the hub concept in Panama.

How does Manzanillo International Terminal (MIT) contribute to national development?

When we set up in Panama, the unemployment rate in Colón was very high. Moreover, many didn’t believe that local labor could manage an efficient port. Therefore, we not only trained our people well, but actually created careers for them. Some of them have been with us for 18 years. We have therefore provided good-quality jobs with opportunities to move up the ladder. MIT has created 1,200 direct jobs, and 90% of the workforce is from the Colón area. We also contribute by generating the economy surrounding the terminal. Apart from these 1,200 direct employees, we employee around 300 security guards and 500 individuals from other unions in Colón

MIT is affiliated with Carrix Inc., whose main division, SSA Marine, is based in Colón, from where it monitors its operations abroad. What is the importance of Panama for Carrix Inc. and what are its expansion plans?

Our company is based in Seattle, Washington, but our international branch was established in Panama. We did so before anyone else started to look into Panama because of its regulatory advantages. And from here we supervise our operations in Vietnam, Mexico, Colombia, Chile, Panama, and Costa Rica. We’ve been able to grow from here and today have three operations in Colombia. We also may establish operations in the Caribbean very soon. The plan is for Panama to be our springboard for operations not only in Latin America, but also throughout the world.

Which routes are the most important for MIT’s business activities?

Basically, our core business comes from Asia into Latin America, although lately we have a large volume of business within Latin America, too. By Asia I mean China, Taiwan, and the Philippines as they are the key exporters of goods. China and Hong Kong would probably hold the number one spot.

What was the financial performance of MIT in 2013 and what are your expectations for 2014?

In 2013 there was a slight decrease in volume based on prices in neighboring countries like Venezuela, and some restrictions in Colombia. We are looking to other markets in order to resolve this issue. However, after growing by rates of 15%-20% every year, such a reduction is not significant in a business like ours. What Panama has to do is not only look at the traditional markets like Venezuela and Colombia, but also other growth markets such as Mexico, Ecuador, or Chile.

As a leading company in port services for shipping lines, how would you assess the level of competition in a logistics hub like Panama?

We are definitely a unique offering because this is the only country where you can unload in one ocean, and then transport by rail or truck to another. You can do that by train, by truck, or by ship transit via the Panama Canal. This unique advantage that Panama has I call the “Panama Product,” which is basically the ability to take advantage of our geographic position to move cargo from one ocean to another.

What will be the impact of the Panama Canal expansion project for MIT in terms of growth?

Ultimately, we are set to invest $1 billion in Panama, and we believe in putting your money where your mouth is. This is clear evidence of our belief in this commitment. The options were simple; if we didn’t expand the Panama Canal, Panama would no longer be competitive in the international arena. Expansion required a bigger canal. Every terminal in the country has plans to build larger capacity terminals to handle today’s large vessels because the options were simple; you either accommodated them or the business will go to our competitors. So we all decided, separately, but ultimately jointly, to make this investment.

According to the Panama Canal Authority, the expansion is going to create around 30,000 jobs related to the logistics industry. What is your assessment of this estimate?

Ports are not a job-generating industry, though auxiliary industry and services involve a substantial need for logistics. The problem is that Panama today does not need to create jobs, as the available jobs outnumber the people available. We foresee more jobs being generated in the logistics supply chain, for which we need to train our people. Everyone needs to be clear about the fact that no economy can sustain this current pace of growth. We would prefer to see growth of 4%-5% over the coming years in order to avoid an inflationary environment, which Panama normally does not experience.

How will the free trade agreement (FTA) signed between Panama and Mexico affect MIT?

We should be cautiously optimistic as all FTAs do not create more trade. Yet the biggest issue is that the agreement needs to be reinforced by other economic issues or programs such that our country can be both an export and import economy. We do feel that the FTA will generate more trade, and Panama can become the hub for countries in the Americas.

How would you assess Panama’s port infrastructure and the government’s efforts to improve its capabilities?

We probably have some of the best maritime infrastructure in the world. That is not our problem. Our problem, rather, is how to best connect that infrastructure. We need to be more dynamic in terms of the utilization of e-commerce, and we need to improve customs procedures through the use of electronic document transfers. In short, while we’ve been successful in establishing the infrastructure, we now need to concentrate on the process itself. The next step for us in Panama is to be able to move cargo between air, rail, ports, and trucks, electronically. That is why we have been sitting down with the government and the private sector on a logistics committee addressing this part of the business, with careful attention to the land transportation part of the equation as well as the sea component.

© The Business Year – May 2014