Since the discovery of the Pacific coast of Panama, visionaries dreamed of one day creating a great passageway from the Atlantic to the Pacific, thus avoiding the 12,000-mile journey around the tip of South America. That day finally came in August of 1914, after decades of planning and excavation. Although only 40 miles from shoreline to shoreline, the ingenuity and tenacity of the canal's creators are evident with each and every movement of this magnificent lake-and-lock-type canal. It's bound to be a voyage you will never forget.
The Panama Canal extends approximately 80 km. (50 miles) long from Panama City on the Pacific Ocean to Colon on the Caribbean Sea. It is widely considered to be one of the world's great engineering achievements. The United States is the largest user of the Canal in terms of cargo tonnage, as either port of origin or destination, although Asian countries are beginning to close the gap. About 12% of U.S. sea-borne international trade, in terms of tonnage, passes through the Canal annually. Ships bound for Japan from the East Coast of the United States save about 3,000 miles by going through the Canal; ships sailing from Ecuador to Europe save about 5,000 miles.
On June 26, 2016, the new extended Panama Canal formally opened for business, promoting economies of scale, which is great, but how to attract new clients when maritime activity drops with 2% a year, shipping companies seek lower costs and competition from Suez Canal and US is high? There is only one way and Panama is already taking action. To be the most competitive transport route, the country is transforming itself into a maritime and logistics hub of the Americas. And Panama is not doing it alone. The Inter-American Development Bank (IDB) released a dense blueprint on how to organize a national logistic system with value added services. Their recommendations are taking form in everyday life. Panama created a Logistics Cabinet directly under the Presidency and maritime organizations like the Panama Canal Authority are issuing tenders for logistic megaprojects. The port of Corozal will be tendered soon, as is a Roll-on Roll-off port on the Pacific entrance of the canal.
The Panama Canal can also play a role in the global shipping industry’s transition from fuel oil and diesel to natural gas. Canal authorities are studying the possibility of building an LNG receiving terminal both for local power generation and with the aim of bunkering to provide LNG for ship borne propulsion. The move would further entrench Panama’s role in the new LNG market, both in the region and the world.
Panama has one of the most advanced airport infrastructures in Latin America. Given its position, the Tocumen International Airport has become a hub for the Americas connecting North and South America, the Caribbean and Europe. Tocumen International Airport is home for COPA Airlines, the largest Panamanian Airline, and has more than 20 other actively operating airlines including Lufthansa, United, Turkish, Delta, American and more. The Tocumen International Airport is expanding at an unprecedented rate. Tocumen International Airport is the regional hub for several commercial and cargo airlines. It connects passengers and moves cargo to more than 34 countries and 84 destinations all around the world. For connecting flights, there were approximately 8.5 million passengers that used Tocumen International Airport in 2014 in direct transit (which is more than twice the population of Panama City). The cargo terminal itself handled over 110,186 tons of cargo with a large proportion being transshipment. The expansion programs will provide more capacity to both passenger and cargo terminals allowing a larger number of aircrafts, cargo and passengers to use our country as a connecting point to the world. It is the home port for Copa Airlines.
Regarding regional flights, the local network includes six more international airports, as well as 24 landing strips that allow passengers and a small volume of cargo to move around Panama easily and safely.
This cargo movement through air has prompted an unprecedented development of logistics parks and warehousing centers near the Tocumen airport.
Panama has a network of state of the art seaports that provide a variety of services to containerized, bulk, liquid and general cargo, as well as to passengers in cruise terminals. Panamanian seaports in the National Port System (NPS) are divided into two groups: state ports and private ports. Private ports have been given to terminal operators after a privatization process of former state ports (concession). State ports are still operated by the government under the management of the Panama Maritime Authority (AMP), and basically provide dockage and other related services for local users and short-sea services.
Panama has several seaports in the Atlantic area mainly serving the East Coast of North and South America, and the Caribbean: Manzanillo International Terminal (MIT), Cristobal-Panama Ports Company (PPC), Colon Container Terminal (CCT) and Colon Port Terminal (CPT). At the Pacific area, the port of Balboa is currently the only terminal performing container’s handling service. Both, Balboa and Cristobal are being operated by Panama Ports Company, members of the Hutchinson Port Holdings. A new container seaport is being under construction at the Balboa area by the name of PSA Panama International Terminal, as part of the Port of Singapore group.
Also, two additional ports provide commercial services to containerized cargo: Bocas Fruit Co. terminal at Almirante and Rambala terminal at Chiriqui Grande both located at the northwestern part of Panama in the province of Bocas del Toro. These ports handle bulk and general cargo, but the container segment is dedicated to the reefer liner service of banana exports.
The small size of Panama allows a close interaction among different assets: seaports, airports, railroad, special economic zones and the local market. This condition facilitates the establishment of specialized and dedicated areas for warehousing and other third-party logistics operations that leverage the accessibility to world class transportation services and trading tradition.
Logistics parks are being developed as a new model of logistics integration in Panama where specialized operators take advantages of the existing platform. Other potential areas are being promoted and segregated to provide business opportunities and to attract new companies to set up operations for storage and distribution in the country.
A study conducted by the IDB allows investment opportunities in infrastructure, logistic services and processes in Panama. Some of these projects are currently been initiated by public and private sectors of the country.
One of the biggest and latest developments is the new port of Corozal by the Panama Canal Authority (ACP). Though they are still working on a bill to start its development, soon the ACP will initiate the process of prequalification and tender negotiations. The Corozal project will be developed in two stages; first they will construct a 1350-meter dock and a container park, then they will construct a second dock of 731 meters. Companies such as Manzanillo International Terminal (MIT) have already shown interest. The port will be located in the entrance of the pacific side of the Canal. This makes for technical challenges – such as the coordination between ships passing through the canal and ships entering and leaving the docks - for which Dutch expertise can provide solutions.
The Maritime Authority of Panama (AMP) and the Latin American Development Bank CAF announced they want to develop the Port of Armuelles, known as a deep sea port and for its former banana transport, and explore the development of an intermodal dry canal. This should connect the port of Armuelles on the Pacific side to the Atlantic. The Development Bank of Latin America CAF and the Ministry of Finance will also invest to initiate a new type of maritime industry for the Port of Vacamonte.
The ACP signed a cooperation agreement with the Port of Lake Charles in Louisiana, the United States. This is part of a strategy to attract players of the Natural Liquefied Gas (LNG) market as the expansion of the Canal route allows for more and bigger LNG vessels.
The international airport of Tocumen is analyzing the feasibility to create a free trade zone located at the cargo terminal. The plan to develop a new cargo terminal with value added logistic services is foreseen to be crystalized in the next 6 months. Tocumen Airport will release tenders to increase the number of shops at the airport as they’ve planned to increase their capacity from 8.5 million to 10 million passengers.
Other investment projects promoted by the IDB and the Government of Panama are:
Also, the government of Panama is working towards the implementation of benefits and the improvement of processes that goes along the investment opportunities listed above. Some of those efforts are the following:
Furthermore, the government has shown interest in developing a cruise terminal in the area of Amador, Panama City, a project left by the former government. New studies showed that the area with most potential to construct a cruise terminal is the beginning of the Causeway Amador. The necessary investment is recommended to come from both the private and public sector. Currently an agreement is negotiated amongst the Cruise Association of Florida and the Caribbean (FCCA) to include Panama in their routes.
The Ministry of Public Works announced the construction of 19 road infrastructure projects foreseen in 2014-2019. They’ll have a budget of USD 899,6 million starting 2015.
There are also many initiatives and tenders regarding potable water and irrigation systems. Restoration of Colon and the construction of sanitary units is also high on the public agenda.
There are numerous of benefits that makes Panama attractive and competitive for investments in the air, port and logistic services that provides opportunities for economies of scale. The country is working to integrate the Panama Canal, its multiple ports and airports to improve efficiency and extend Value Added Logistics Services (VALS) capacity, which includes the infrastructure, human resources, its legal frameworks and regulations.
Below is a list of strengths that makes Panama attractive for investors in this sectors:
Companies established within one of these zones receive the same benefits as those established for the Colon Free Zone, the Special Area of Panama Pacifico and of the Trade Zones in General. Below are some of those benefits:
Special immigration regime, which consist of:
Special labor conditions, which provide more flexibility than the companies in the rest of the country:
The Panama Canal Authority just announced on October 2016, new port projects -
If you want to set up a business or investment in Ports, Airports or Logistics Parks, we can provide you our well-known One Stop Shop services since we have licensed real estate agents, excellent lawyers, insurance specialists, investment advisors and other professionals to assist you on all your business needs.
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