October 23, 2007

Is it any wonder that international media and organizations already refer to Panama as Latin America’s fastest-growing economy? Those of us who live here already see the results firsthand, of course, but economists say that Panama’s healthy economic growth will make it the fastest-growing economy in the region by year-end. The nation has been a top contender for the past two years, with economic growth above 8%. Now, experts are projecting a 2007 growth of between 8.5% and 11%, based on the first six months.

But will this growth continue, in spite of dire projections for the U.S. economy? The U.S. government website www.Export.Gov.com (dedicated to helping U.S. export companies) featured Panama as its "Market of the Month" for October. The report highlights Panama’s growing popularity as a business and investment destination. It also lists major projects in Panama that will fuel economic growth during the next few years. Here’s a rundown of some major projects and how they’ll contribute to Panama’s economy:

Maritime Opportunities:

• The Panama Canal Expansion Mega-Project: This $5.2 billion project is one of the region’s largest and most ambitious. In fact, it is the biggest project in Panama’s history since the original Canal was built. Export.Gov cites the project for: "tremendous commercial opportunities for U.S. firms, including maritime equipment, construction equipment, heavy machinery, engineering and architectural services."

• Port Expansion: Panama’s major port operators will invest some $350 million over the next few years. Panama Ports Company (PPC) says it will implement the third stage of the Port of Balboa expansion (on Panama’s Pacific coast) at a cost of $200 million; Manzanillo International Terminal (MIT)—on Panama’s Atlantic coast—will invest $35 million in dock expansion. The Colon Container Terminal (CCT), also an Atlantic coast company, plans to implement stage two of an expansion program to increase its service capability and container storage area, to the tune of $55 million. Other port projects in the works, if approved, will increase cruise ship handling capabilities here and expand fishing and general cargo ports. Cruise companies like Royal Caribbean (RCL) are being drawn here; RCL will make Panama one of its home ports in late 2008.

• New Port: The Panama Maritime Authority (AMP) plans to build a new Pacific port—complete with container port and access yard—at the entrance to the Panama Canal. The port will likely be a part of the Panama-Pacific Special Economic Area (AEEPP) located in the Howard district. International companies such as Cosco and Evergreen have expressed interest in learning more about and possibly taking part in the project.

Energy Projects:

• Hydroelectric projects: Twelve hydroelectric projects are currently in the approval process for the provinces of Chiriqui and Bocas del Toro. They represent an estimated investment of $680 million over the next five years.

• Refinery projects: Projects proposed by Occidental Petroleum and Plan Puebla-Panama (PPP) are currently being considered by the Panama government. These projects represent investments totaling over $10 billion.

• Energy highway: A billion-dollar project proposed by an international firm called Energy Center of the Americas (ECTA) is also under review here. The project encompasses three oil refineries as well as petrochemical plants, hydrocarbon storage facilities and a 56-mile oil pipeline under the Panama Canal to connect energy parks in the Atlantic and the Pacific.

• Ethanol production: Brazil’s Petrobras wants to process ethanol in Panama. Petrobras says the centrally-located country is the perfect "redistribution point" for ethanol moving between North, Central, and South America.

Telecommunications:

• New concessions: The Panama government will grant two new cellular phone concessions in 2008. At present the cellular industry in Panama is monopolized by two companies—Movistar and Cable & Wireless. (Panama has more than 1.5 million cellular lines and 370,000 fixed lines.)

• Call centers: Panama has long been developing the call center industry. The country offers attractive incentives for companies wishing to establish call centers here. Dell Computers was one of the first major companies to take advantage of the incentives, establishing a large operation in the Panama-Pacific Special Economic Area (AEEPP). Aside from Dell, large call centers operating here include National Asset Recovery Services (NARS), Language Line, and Sitel. On October 11, Hewlett-Packard announced that it, too, plans to open a call center in Panama in 2008. The call center will be part of a global delivery center that aims to employ more than 1,000 people here in 2009.

Best regards,

Jessica Ramesch
Editor, Panama Insider