Investing In Panama: Ports and Maritime Industries

During the last 10 years, the evolution of port activities has presented its highest level in growth and development in Panama.

The Panamanian port system concluded 2006 with a movement of 3.2 million of TEUs or 20 feet containers, according to preliminary date of the Panama Maritime Authority (AMP).

The investment of US$1,600 million in the port expansion has doubled the income in the auxiliary maritime industry, from US$74 million in 2002 to US$2,410 millions in 2006.

This expansion is projected with the privatization of the main port terminals as well as due to the construction of new terminals. Manzanillo International Terminal, Colón Container Terminal and Cristobal figure as the main ports in Latin America.

The Panama Port System is made up of 18 ports of which 11 are manager by the Panama Maritime Authority through the General Directorate of Ports and Auxiliary Maritime Industries, mainly small ports that provide international transportation service and of traffic. The remaining seven ports are managed and operated by private businesses that develop their activities under the supervision of this general directorate.

The port terminals of Balboa and Cristobal are under the administration of the Panama Ports Company, member of the group Hutchison Port Holding (HPH). Likewise, there have been built new ports that are under the operation and administration of the private company such as Evergreen in Colón Container Terminal Charco Azul, in Chiriquí and Chiriquí Grande, in Bocas del Toro; Manzanillo International Terminal (MIT), operated by Stevedoring Services of America (SSA).

Panama is on its way to becoming the center for transshipping of containers in Latin America and the Caribbean.

Panama Canal Developments

Panama will launch in late 2007 the multimillion expansion of the Panama Canal, the largest investment and modernization project since its original construction. Soon to be 100 years old, the 80 kilometer canal structure joining the Pacific and Atlantic Oceans is close to its maximum transit capacity. The programmed expansion will be done at an estimated cost of US$5,250 million.

The locks construction is programmed to begin in 2008, according to the official work schedule, but before the dredging and excavation works must be done. The new locks will duplicate the capacity of the canal allowing the passageway of 600 million tons each year. Among the main clients are United States, China, Japan, South Korea and Chile.

One of the main announcements is the proposal to increase up to 47% the cost of transiting the route, with the purpose of financing the expansion. The increases between the 20% and 46% will depend upon the condition and segments of the ships, which will be gradual as of May until October of 2009.

In 2007, bids will be put forward for the dredging of the entrance of the Canal, and the awarding will be done during the month of July. These works do not affect the functioning of the Canal. The dry excavations, 30 feet deep, will be the first works that the Panama Canal Authority does in 2007. The first excavations will be north of the Pedro Miguel Locks, in the area of Cartagena Hill, where there will be done leveling works. The second dredging work will be done next to the Miraflores locks, a little more to the north.

The ACP will summon a public bid to award the works for the relocation of the towers and complete the project before the end of 2007. First ten new towers will be built, with their respective 230 kilowatt capacity lines, to remove the existing ones that are 20 years old.

Ports and Railroad

The 57% of the ports that make up the National Port System are divided in foreign and coastal trade. In this category, there are classified fruit, sugar and fishing ports, and the petroleum terminals.

The passenger movement through the maritime ports in the period of January to November of 2006 recorded a total of 305,271 visitors, providing an increase of 1.0%, which means in absolute terms that there were 2,985 additional visitors compared to the same period of 2005.

The Panamanian ports moved 2.6 millions of TEU (20 foot long container unit) between January and December of 2006, a 6.1% more than during the same period in 2005.

The major growth was reported for the ports of Cristobal (39.9%) in the Atlantic and Balboa (94.2%) in the Pacific.

For the case of Balboa, the expansion is due to the fact that Maersk and the APL/MOL Alliance, increased their transfer cargo and railway substantially last year.

The analysts’ foresee that this year will be of much economic growth, mainly due to the beginning of important investments, among which is the expansion of the Canal.

Cargo movements in million TEUs

January to November
	2005	2006	Variation %
Total	2.5	2.6	6.2
CCT	0.4	0.5	25.4
MIT	1.4	1.2	-16.2
Balboa	0.6	0.8	39.9
Cristóbal	0.03	0.07	94.2

The Agro Export Association of Panama has calculated that this year there will be exportations of 10 thousand containers of non-traditional products, and of these already one thousand 600 containers have been shipped, mainly pineapple and squash.

It is expected a strong impulse in the sale of melons, watermelons and pineapples, which should produce between 5 thousand and 6 thousand additional containers. The rest would belong to the roots and tuberculoses, squash, plantain and other cultures.

This season, the shipping companies that offer services in the country have guaranteed space for the agro exportations with destination to the United States and Europe. A review was made with Maersk Sealand, Evergreen, CMA, APL, Hapag-Lloyd, Crowley American, Compañía Sudamericana de Vapores and Seaboard Marine, regarding the availability of space and logistics planning, reason why there is expected no inconveniences for the Panamanian products to arrive this season to the main world markets.

The Panama Canal Railway was totally renewed. Today it transits parallel to the interoceanic way, following the route of the first transcontinental railway there was in the world and its main objective is to transport cargo in containers from the ocean ports of the Pacific and the Atlantic. The passenger trains work daily, offering an interesting passageway, in less than one hour, to admire the Canal, the tropical rainforest, the flora, fauna and geography in general. The wagons count with one air conditioner and roof-free platforms. Within the National Port System, the transportation of passengers through the railway increased in 28.3% and the cargo 13.5%.

Investment Opportunities

The maritime development of Coco Solo Norte, a former navy base of the armed forces oft he United States in the province of Colón, is due to the fact that there is a complete infrastructure of transportation, interconnected through the ports, airports, railway and roads. Next to the Colon Free Zone, the greater commercial area of the western hemisphere, where there have been installed the main exporting and importing companies, as well as embarcaderos and ship builders.

The Panamanian ports represent a good option for investment due to its own and collateral advantages that characterize the same:

• Storage and transhipping
• Facilities to load and unload
• Consolidation
• Storage and distribution of loose cargo
• Lease, repair and storage of containers
• Insurances for the cargo
• Cleaning and repair of containers
• Port, financial and cruise ship management,
• Management of container terminals and processing zones.
• Credit notes, cargo expertise by way of drawn work

Rodman and Farfan have been identified as possible port and industrial development zones, as well as for the operations of cargo transfer. Rodman, the studies performed considered the possibility of building a petroleum refining plant and in Farfan a new container terminal.

Some of the multi-million dollar investment opportunities include:

• The development of major intermodal transportation and logistics centers at Colon and at the Howard/Farfan complex on the Pacific, including the construction of a new container port at Farfan.
• Ship owners services, servicing of vessels, ship repair and maintenance, container repair, intermodal cargo services.
• The future construction of the third set of locks, which will include the necessity for additional water resources, expanded hydroelectric power generation, the expansion of the entrances to the Canal and the deepening of Gatun Lake and Culebra Cut.
• Contracts related to the Panama Canal operation (provisions, equipment, material, construction, consulting etc.) that reached $135 million in 2001, not including purchases of $22 million.
• Provision of concessionary services to the ports (power, water, fuel, material, food, banking services, telecommunications, maintenance and repair, dredging) estimated at between $47 and $60 million annually).
• Services to passengers and crewmembers transiting the Canal, which in 2000 numbered 255,571 and 458,134 respectively.
• Services to smaller ships, such as yachts and motor cruisers, which totaled 1,748 in 2001.
• The relocation of approximately 8 to 10 thousand persons, as a result of Canal expansion, requiring housing and infrastructure.
• Cruise ship reception and tourism.
• Others

In terms of related air transport opportunities, Tocumen International Airport already is an international and regional hub for both passenger traffic and cargo; the former Howard airforce base should become an aviation industrial center, making use of its modern airport facilities; and construction of the cargo airport at France Field in the Atlantic must be completed.

Howard/Farfan Multimodal Project

The studies made for the development of this sector clearly indicate that their location at the entrance and west shore of the Panama Canal is ideal for the establishment of a multimodal center for industry and the commerce. The existing airport infrastructure, and advance telecommunications facilities and the integration of the just in time manufacture with the multimodal transport will provide fast and flexible connections between users, suppliers and clients.

These areas and facilities that reverted to Panama at the end of 1999 have a total area of 2,628 hectares, and are one of the most important sites based on the opportunities for the development in the shores of the Canal in the Pacific.

A New Opportunity: Container Port in Farfan

Located at the Panama Canal’s entrance, near to the bridge of the Americas, the 253 hectares of Farfan are part of the former air base of Howard, the biggest military airport that the EE.UU Armed Forces had outside of the United States.

The Japanese government through its Agency for the Development (JICA), prepared a feasibility study that reveals that after occurring the maximum development of the Balboa port and after its modernization, Farfan can become the second great port of containers in the Pacific.

This port will be part of the multimodal and intermodal center of transport that Panama promotes. With a view to integrate itself more indeed to the system of international transport its proximity to the port of Balboa and the airport of Howard makes this site especially attractive for the predicted development.

The full Howard complex was awarded in May 2007 to London & Regional Properties, a consortium that will develop directly or issue long term concession to third parties for the development of this Port as well as other areas within Howard. The Business Panama Group will be working closely with this consortium in developing investment opportunities for Howard.

If you are interested in any of the opportunities listed below within the Howard project, the BusinessPanama has a team of top experts to help you with:

• Center of repair and maintenance of airplanes and helicopters
• Development of a container port complex in Farfan
• Logistic center for manufacturing and distribution
• Industrial parks and processing zones for export
• Call centers
• Development of residential areas
• Establishment of educative and institutional centers
• Recreational parks, sports, tourist and recreational facilities.

If you are a developer or promoter, the Business Panama Group team of realtors, lawyers and other professionals will provide you a variety of services from the purchase of the property to all phases of development including structuring, subdivision, financing, contractual, design, environmental, construction, permitting and more. After beginning a relationship, we will be glad to provide you access to our “List of Recommended Professionals” formed by first class architects, environmental consultants, builders and others.

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