Panamanian businesses seek boost from canal expansion

While ports from Miami to New York are preparing for the expansion of the Panama Canal, businesses in Panama are also hard at work to insure that Panama itself reaps maximum benefits from the $5.25 billion project.

Among the Panamanian ventures hoping for a boost is the Panama Pacifico Special Economic Area, a mixed-use project on the site of the former Howard Air Force Base on the western bank of the canal. Developers hope to leverage the canal expansion and create a logistics and back-office and services center for the Americas at Panama Pacifico.

The canal expansion, which will permit longer, wider and heavier ships to transit the canal than the current locks allow, is expected to be completed and open for commercial traffic in April 2016.

That’s way behind the original target date of August 2014, but the delay has given U.S. East Coast ports and businesses a bit more time to get ready for the historic transformation of the canal. The expansion includes two larger sets of locks on both the Atlantic and Pacific sides of the canal, new access channels, dredging and improved water supply along the length of the 50-mile canal.

A milestone in the project came in June when the new locks were filled with water. In September, the access channels linked to the new locks began to be flooded. The expansion, which began seven years ago, was 95 percent complete at the end of October.

“The expansion is still on schedule to open in April 2016, which is music to our ears,” said PortMiami Director Juan Kuryla. “It’s so critical for us.” As the closest East Coast port to Panama, PortMiami is hoping that it will be a first port of call for the bigger post-Panamax ships making their way north from the expanded canal.

To accommodate the bigger ships, Miami deepened its shipping channel, reinforced its wharves, and purchased post-Panamax cranes that are large enough to reach across the larger ships and pluck cargo-filled containers.

There are a number of projects underway in Panama that are expected to have synergies with and create business opportunities for the expanded canal, which will double the waterway’s capacity.

The Panama Canal Authority issued a request for qualifications in late November for firms interested in designing, developing, financing, constructing, operating and maintaining the Corozal Container Terminal at the Pacific entrance of the canal. When the terminal is completed, the hub is expected to distribute cargo to the West Coast of South America, Central America and the Caribbean.

The canal authority said it is the first of several planned projects that are designed to enhance Panama’s logistics capacity.

The project, which is expected to take two years to complete, is expected to create 1,300 jobs and up to 2,600 permanent positions. Thirteen of the world’s largest port operators have expressed interest in developing and operating the Corozal Port, according to the Panama Canal Authority.

“What we’ve seen confirms the strong demand existing for the canal and the need for greater port capacity on the Pacific side,” said Panama Canal Administrator Jorge L. Quijano.

Panama Pacifico, a master-planned community, is also at the Pacific end of the canal and about 15 minutes from the center of Panama City. The project is being developed by a partnership of the Panamanian government and London & Regional Panama, a joint venture of London-based London & Regional Properties and Southstone Investments. Set on 3,450 acres, it was part of the old Panama Canal Zone before the United States repatriated the land to Panama and turned over control of the canal on Dec. 31, 1999.

After the base reverted to Panama, the government consulted with the World Bank to determine the best use for the large tract. The concept it came up with was a special economic zone concentrated on 12 industries where Panama could expect to be competitive and that would serve as building blocks of the economy.

High-tech manufacturing, logistics, back-office operations, call and data center operations, business processing, maritime services, and industries linked to airport services and airplane maintenance are among the industries that Panama Pacifico wants to attract.

The concept was to create a one-stop shop where 17 government agencies under the umbrella of the Panama Pacifico Agency help companies cut through red tape and streamline the permitting process, said Henry Kardonski, general manager of London & Regional Panama.

Panama’s Law 41 sets up this one-stop-shop concept as well as provides tax exemptions and other incentives and revamps labor law to allow 24-hour operations in the special area.

“It’s a more comprehensive view of development,” Kardonski said.

Panama Pacifico, which includes office and industrial space, retail, warehousing and residential areas, is a “live, work, play concept,” said Kardonski. Currently there aren’t many synergies between the three areas, he said. But if Panama Pacifico manages to excel in all three areas, Kardonski said, the synergies will take care of themselves.

Kardonski and Alberto Alemán, the business development manager for Panama Pacifico, were in Miami recently to try to interest multinational companies in setting up shared services operations for Latin America in the special economic area. Panama’s stable labor force, stable currency and good connections are among its competitive advantages, they said.

Kardonski concedes that Miami and Panama are interested in attracting some of the same type of value-added logistics industries that will complement the canal expansion, but rather than compete head to head, he suggested each area might develop its own geographic “area of influence.”

Panama, he said, competes more with Cartagena, Colombia, and Jamaica and is better positioned for operations serving the Pacific Basin. Miami, Kardonski said, is more of a Caribbean stronghold.

Since London & Regional won the bid to become Panama Pacifico’s master planner in 2007, some 1,200 homes have been delivered, more than 230 companies — including 3M, Caterpillar, Dell, Grainger, Cable & Wireless, Avon, and BASF — are operating and some 1.5 million square feet of warehousing has been built. More than $500 million has been invested in the project since its inception.

In the past eight years, Panama Pacifico employers have created 7,300 direct jobs and around 8,000 workers have been employed in developing and building out the project, said Alemán.

While it’s still unclear exactly how the expansion of the canal will impact worldwide shipping and logistics, Kardonski said the important thing is to be ready to seize opportunities. “The goal of Panama Pacifico is to capture more of that development” — however it plays out, he said.

“You need to connect the dots. It’s a combination of government policies, private investment and hard work and planning,” said Kardonski. “What the expansion of the canal will do for the whole continent is shrink it. It’ll bring the American continent closer to Asia. The effect will be revolutionary.”

This story was originally published January 3, 2016 at 2:00 PM with the headline "Panamanian businesses seek boost from canal expansion."