The logistics and maritime hub of the Americas

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Since its discovery, and possibly even before, Panama has been a crossing point for men and merchandise. In the Spanish colonial era it began as a starting point for conquests in search of gold, but it also began a movement of merchandise to and from Spain and its colonies.

Then came a railway across the Isthmus with ports on the Atlantic and Pacific oceans. France tried to excavate a canal across the 50 miles between the oceans, which was finally accomplished by the United States 100 years ago, now operated very efficiently and being expanded by Panamanians.

Shipping, logistics & trade contribute 33.5% to national economy

So it should not be a surprise that today Panama has become one of the most important shipping and logisticss hubs of the Americas.

In a study commissioned by the Panama Chamber of Shipping and delivered in February, 2015, the consulting firm, Intracorp, evaluated all sectors involved in shipping, logisticss and trade, including the Panama Canal, airports and free zones, estimating their total impact on the economy at about $25,780.3 million, or 33.5% of the entire national economy.

According to a further breakdown in this study, in 2014 the Canal represented 53.8% of all maritime activity, followed by the port system with an impact of $1,477.9 million, accounting for 15.1%; the sale of fuels $891.6 million, 9.1%; shipping agencies and shipping lines, $850.8million, 8.7%.

The logistics and  maritime hub of the  Americas

Panama Canal

The Panama Canal is the core of the maritime-logis-ticss sector and is one of the most important contributors to the Panamanian economy. It is a key player in world trade and brings together the international transshipment complex of ports at the Atlantic and Pacific entrances of the Canal and the railroad that links the ports.

The expanded Canal with a third set of locks was 93% complete in August 2015, and is scheduled to be open for business near the end of the first quarter of 2016.

The Gatun locks of the Panama Canal.

The Gatun locks of the Panama Canal.

The Panama Canal Authority (ACP) has a number of projects planned that are linked to the expansion. Opportunities are expected to open up to private investors, such as the one already envisioned of a container barge service between the ports via the Canal.

The ACP has eight projects identified and studied for implementation as the expanded Canal begins operations: an LNG Terminal, a Ro-Ro Terminal, a ship repair complex, logisticss parks, a hydrocarbon tank farm terminal, container storage, barge services, top-off operations and a container terminal at Corozal.

The ACP does not intend to operate all these projects itself. Most will be offered to private sector investors under tender concessions as in the case of the port of Corozal, where the ACP will retain property and a reasonable portion of its profits.

These Canal projects added to port expansion and government infrastructure investment will further increase the competitiveness of the Panama logisticss hub.

The Panama Maritime Authority (Autoridad Maritima de Panama AMP)

This autonomous government body is responsible for all the matters related to the administration, promotion, regulation and execution of all strategies, norms and programs related to the operation and development of the maritime sector. It is the supreme authority in maritime matters and administers the Panama Ship Registry, the biggest in the world.

Another important function of the AMP is to propose and coordinate plans for the exploitation and administration of the port system and its services, as well as supervise those that are not under its control.

The AMP is responsible for implementing the maritime strategic plan, the main objective of which is to promote Panama’s social economic growth through the strengthening and sustainable development of the maritime and logistics conglomerate and the economic activities than form part of it.

The Dirección General de Marina Mercante ( the General Department of the Merchant Navy) is one of the most important sections of the AMP and manages the National Merchant Navy, which was created in 1925, when Law No 8 eliminated restrictions regarding nationality and residency of ship owners by adopting a system of open registry.

Model of the third bridge over the Canal.

Model of the third bridge over the Canal.

Since then, the Panamanian ship registry has accepted vessels belonging to nationasl and foreigners, under the condition that they comply with national and international norms relating to seaworthiness, maritime safety, prevention and control of contamination, title and safeguard of the seafarers, technical and social regulations and fiscal matters.

The Public Registration of Vessels Department is a section which works 24 hours, seven days a week, registering vessels and any liens (mortgages) against ships. The Container Registry and the Vessels Electronic Registry are the two new additions to this department.

Departamento General de Puertos e Industrias Mariti-mas Auxiliares (General Department of Ports and Maritime Auxiliary Industries) is another key department of the AMP. Its main function is to schedule and coordinate development plans for the National Port System and manage, expand and preserve ports and terminal facilities for public use. Additional to this, it has the responsibility of providing navigation facilities and other services that vessels require.

The Maritime Tribunals

The Maritime Courts exercise jurisdiction over vessels or cargo calling at the Panama Canal and ports throughout the country. Jurisdiction is acquired by the attachment of property pertaining to the defendant which may consist of a vessel, cargo, bunkers, or any other property.

Maritime Tribunals can handle lawsuits from other jurisdictions provided that they receive the necessary paperwork from the foreign courts. Then an order to arrest the ship in the conflict is issued. The court’s marshal serves the seizure warrant in Spanish to the vessel’s captain. The claimant must pay for the launch that takes the court officials to the ship, because the maritime tribunals do not have their own craft.

When the matter is resolved and the claimant wins, the Maritime Tribunals can sell the ship on his behalf and send the money to the claimant. If he loses, then the claimant must pay all the expenses of the defendant, with the added problem that the offended party could present a lawsuit for costs and damages.

The Maritime Tribunals form part of the cluster of services available to the maritime industry in Panama.

The Panama Port System is formed by 41 ports, 22 of which are administered by the AMP through the General Department of Ports and Maritime Auxiliary Industries and they are mainly small terminals which give service to international transport and cabotage. The other 19 ports are administered and operated by private enterprises that develop their activity under the supervision of the AMP, through the harbor master’s offices located on both the Atlantic and the Pacific sides.

Panamanian ports are a very good investment option, because of their transshipment, storage and distribution facilities.

Port complex

Panama’s port complex currently comprises five major terminals, two at the Pacific entrance to the Canal and three on the Atlantic side.

These are Panama Ports Company (PPC) Balboa, a subsidiary of Hutchison Port Holdings, of Hong Kong, and PSA International, a subsidiary of the Port of Singa-pore Authority. On the Atlantic side of the Canal are Cris-tobal (PPC), Manzanillo International Terminal (MIT), operated by the Carrix Group of Seattle, and Panamanian investors, and Colón Container Terminal (CCT), a subsidiary of Evergreen Marine, of Taiwan.

Port movements

Container movement in the national port system increased 4.2% in the first half of 2015 compared to the same period last year.

From January to June, movement of TEUs (20-foot container equivalents) amounted to 3,454,008, or about 140,436 more than that recorded in the same period last year, when it reached 3,313,610, according to a recent report by the Panama Maritime Authority (AMP).

The AMP data reveals that the movements in the ports of Balboa and Cristobal (PPC), and Manzanillo International Terminal (MIT) lead the movement of container cargo.

The port of Balboa registered a movement of 1,549,630, or 31,720 TEUs more than in the same period of 2014, when it totaled 1,517,910.

Container movement in the national port system increased  4.2%  in  the  first  half  of  2015  compared  to  the  same period last year

Cristobal handled 399,485 TEUs, an improvement of 14,597 over the amount recorded in the same period of 2014, which was 384,838 TEUs.

MIT ranks second in port movements, but from Janu-ary to June showed a negative variation with a level of 1,003,343 TEUs.

CCT followed with a movement of 373,885 TEUs in the first half, representing a positive variation of 100,642 more than last year, when it totaled 273,247 TEUs.

PSA Panama International reached 126,994 TEUs in the first half of the year, 931 movements more than in the same period of 2014 when it was 125,063.

Boca Fruit Company movement in the same period was positive, totaling 373,885 TEUs, about 100,642 over the same period of 2014, when it amounted to 273,247.

PSA Panama International has been operating in a small area but has now won government approval to expand over a further 76 hectares, with an investment plan of $400 million. When completed, in the second half of 2016, it will have a capacity to handle 2 million TEUs.

Panama Railroad

Panama Canal RailwayThe Panama Canal Railway Company (PCRC), a subsidiary of the US Kansas City Southern Railway, connects the ports on both oceans. It is a vital link in the transshipment movement between ports, taking a large part of the heavy load movement off the transisthmian highway.

PCRC is investing some $15 million a year in improvements. These include upgrading locomotives, rolling stock, lines, signals and other maintenance requirements. It is currently building new terminals on each side of the isthmus.

PCRC has been approached by major international shipping lines interested in the planned terminal of Corozal, which it hopes will lead to more capacity. It is currently building new terminals on each side of the isthmus.

Other ports

Panama has an extensive network of ports that provide a variety of services to ships, containerized cargo, bulk shipments, liquids and general cargo, as well as passenger facilities in cruise terminals. The terminals of the National Port System are divided into two categories: private ports and State ports.

The private ports have been leased under concession to port operators after a process over some years. The state ports are those operated by the government under the administration of the AMP and mainly provide berthing, mooring and other related services for domestic users.

Port projects

A project being promoted by the Panama Maritime Authority is to develop a multipurpose terminal in the area where the Port of Aguadulce once operated, about 200 kilometers west of Panama City, on the Pacific.

The port would serve the transport of agricultural goods, and strengthen export and import of fertilizers and grain. The AMP says the project consists of a complex of logisticss activities around a multipurpose port, including areas of generation of added value (logisticss parks).

In consideration of the investors in this port, the AMP will guarantee both the land areas of support to the activity, such as priority in the use of the seafloor required for construction of the complex to facilitate the development of the model it deems most adequate.

Also, in the provinces of Chiriqui and Bocas del Toro the AMP has commissioned a study to evaluate the feasibility of a “dry canal.”The study has not yet been made available, but according to statements from the AMP, it would connect Puerto Armuelles on the Pacific with the Atlantic ports of Chiriqui Grande and Bocas del Toro and, possibly, extend to the port of Moin-Puerto Limon, in Costa Rica. It is unknown if the recommendation will be a road or rail link.

The Panama Metro

The Panama Metro (Metro de Panamá) is a metropolitan rapid transit system in Panama City, Panama, which currently links the San Isidro area with the city center. It began operation in April 2014.The aim of this system is to alleviate the vehicular traffic in Panama City.

Panama Metro.

Panama Metro.

Panama Metro is part of a major “National Master Plan” to improve transportation in Panama City and the west side of the country, which includes the construction of two more metro lines and a light rail line. It currently consists of one 13.7 kilometer (8.5 miles) line.

There are plans to build two new lines: one linking Tocumen area and a second one going to the Panama West sector. It is expected that the lines will be completed over the next five to ten years.

The construction of Line 1 cost $1.5 billion and the Line 2 project will have a cost of $2.2 billion.

Line 2 is planned to run over a mostly east-south route, from 24 de Diciembre district to Punta Pacifica. Due to its length, this line will cost about twice as much as the construction and completion of Line 1 and to ease the burden Line 2 will would be built into two phases.

The first phase will run from 24 de Diciembre district to San Miguelito district, intersecting with the first line. It extends over 23 kilometers (14 miles) of route, and it will include up to 16 elevated stations and a branch line to Tocumen International Airport. The second phase will then complete this line from San Miguelito to Punta Pacifica located in the south part of Panama City. It is expected that the first phase of construction of Line 2 will take around four years.

Road network

The Five-Year Plan of the Ministry of Public Works (MOP) began in 2015 and is aimed at increasing connectivity of all communities around the republic to optimize economic and social development. The MOP, as the entity responsible for planning, construction, rehabilitation and servicing the entire national road network and regulating public works, plays a predominant role in the economic development of the country, respecting the principles for conservation of the environment.

The government has developed a strategic plan that started in 2015 with 13 new projects that are the macro works investments.The three main projects are the widening to four lanes of the Pan American Highway between Santiago, Veraguas, and David in the west of the country; reconstruction of a large section of the Pan American Highway through Darien, in the east and reconstruction of the road from Puerto Armuelles to the Pan American Highway near the border with Costa Rica.

Santiago – David

The widening and upgrading of the Pan American Highway between Santiago in the province of Veraguas to David, in the province of Chiriqui, is considered a comprehensive improvement for trade and tourism with Central America and internally in Panama.

Carretera Santiago-David

Carretera Santiago-David

The road carries constant container traffic to and from Central America, internal heavy load movements and bus and car traffic to the border and to and from Central America. The project is being built by a group of local and international contractors. The rehabilitation and expansion of the Santiago-David section has a length of 185 kilometers and a cost of over $1,086 million.

The work is divided into five sections reflecting substantial progress on many sections of well over 50% at the end of 2015. The sections are Santiago to Vigui, 71.24 kilometers; Vigui to San Felix, 41.08 kilometers; San Felix to San Juan, 14 kilometers, San Juan to La Pita, 39.79 kilometers; and La Pita to the bridge over the Risacua River, in the city of David, with a length of 19.33 kilometers.

Panama’s Minister of Public Works, Ramon Arosemena Crespo described this work as of great importance for the international community, mainly the Central American countries, which will contribute to revive internal and external tourism throughout the region and link Panama’s sites of crop and livestock production within the country.

The project calls for total elimination of ditches on the Pan-American Highway and for concrete barriers in order to have higher safety standards to reduce accidents.

Darien road reconstruction

A total of approximately $148.6 million is being invested through the MOP on the “Design and Rehabilitation of the Pan-American Highway Agua Fria-Yaviza” in the eastern province of Darien, bordering Colombia. The project involves four sections of construction over 102 kilometers. The sections start from Agua Fria-Santa Fe; Santa Fe-Metetí; Meteti-Canglón and Canglón-Yaviza.

The construction, rehabilitation and maintenance of this highway is being done with quality control of the materials, proper construction techniques and within the applicable time period for completion of each section.

Construction of new roads by the government aims to modernize the management of the road network to achieve more efficient operation and increase the quality of services offered on the country’s roads.

Darien province has a rich culture and biodiversity, so these works will contribute to connect it with development in the rest of Panama.

Puerto Armuelles highway

The government has begun the reactivation of the Baru district of the province of Chiriqui with an investment of $25 million on the Puerto Armuelles road in the former banana zone.This is the first step by the government to achieve the economic revival of the area. This project of modernization aims to improve the road network in this region, making its operation more efficient.

Logistics parks

Logistics parks are beginning to appear all over Panama as national and international companies are starting to realize the potential of the country as a platform from which to send products all over the world. The privileged geographical position of the Isthmus together with the widening of the Panama Canal, the expansion of the Tocu-men International Airport and the recent improvements to the domestic airports have created opportunities for multinationals that want to take advantage of the fiscal, immigration and labor incentives on offer.

Logistics Activities Zones or logistics parks are those where activities like storage, transport, transfer, logistics added value activities such as custom service, inventory management, assembly and labeling take place. There are currently eight such parks close to the Canal in the provinces of Panama and Colon. Logistics parks complement the government’s efforts to promote Panama’s image as the logistics hub for the region.

Logistics parks play a key role in transforming the country into the logistics hub of the region and there are already several in the works, scheduled to open with the next two years.

Container Movement - Latin American ports - 2013

In 2014, there were five Industrial/logistics parks (ILP) and seven Free Trade Zones (FTZ) in operation in Panama City and Colón. There is a strong possibility for that number to increase, once the expanded Canal enters in operation and the Corozal Port is built.

Daniel Isaza, former president of the Enterprise Logistics Council (COEL) said that over the next five years $1 billion will be invested in logistics parks not only to complement the maritime hub, but also the air hub, which has already received more than $200 million for logistics parks, near the International Tocumen Airport.

Approximately 60 percent of quality industrial space is located in the Corredor Sur submarket. This submar-ket will see and increase in 2015, adding almost 160,000 square meters of new space, or approximately 80 percent of total expected production.

Hotels and business centers are being built around the Tocumen area. The want to take advantage of the number of customers the logistics part will bring.

The logistics parks development is part of the strategy that COEL is implementing. However, in order for the country to become the Logistics Hub of the Region more ports must be built on the Pacific and the Atlantic entrances of the Canal, according to Alberto Aleman Zubieta, the former Panama Canal Administrator, who stated “Ports cannot live without logistics parks and viceversa.”

Another area which needs to be addressed is the state of disrepair of the roads in Panama which causes delays for terrestrial transport making the country less competitive.

The Terrestrial Transport Association (ATRACAPA) has a project to create a central station for trucks which will operate from Juan Díaz, in the East of Panama City. This truck park could give support to the logistics parks that are area sprouting up around Tocumen International Airport.

Similar proposals have been put forward for the central provinces, Veraguas and Chiriqui.