OBG talks to Leopoldo Benedetti, General Manager, Colón Free Trade Zone

Interview: Leopoldo Benedetti

What opportunities do Panama’s new free trade agreements (FTAs) offer the retail sector?

LEOPOLDO BENEDETTI: Panama is naturally a commercially oriented economy for several reasons. First, we do not have strong industry, because of our lack of skilled workers and raw materials, and the high price of energy. Second, our geographic position plus our canal made Panama good transit territory. We specialise in importing and re-exporting. Because of all this, Panama will obtain benefits only through signing as many FTAs as possible. We need to avoid hurdles to maintain growth in international commerce. By doing that, Panama will avoid some of the difficulties we currently face, such as Colombia’s new high taxes on textiles and shoes coming from Colón Free Trade Zone (CFTZ). With the Cuban government’s new announcement about a ban of CFTZ products there, plus the liquidity issues that our Venezuelan partners are suffering, FTAs are more crucial than ever for the future growth of our retail, logistics and transport sectors.

The lack of storage for containers and goods is becoming acute. What is being done about this?

BENEDETTI: Both the public and private sectors are working on this. It is crucial for our future. CFTZ has built a 28-ha storage area in Coco Solito and is also building a road to an additional 108-ha plot we have on the other side of the port. We have another 250-ha area available in Isla Pallares, but it will take more time to develop it for container storage. The Evergreen port in Colón started an expansion programme in 2013 and will be ready soon. In total, there are 10 new logistics and storage areas being built in the country. I estimate that in three years storage needs will be covered and, thanks to these developments, storage costs will be cut.

What other new infrastructure is needed to keep pace with commercial growth?

BENEDETTI: Due to the increased amount of trade, the CFTZ’s administration is building a highway around Colón City to alleviate traffic jams caused by trucks transporting containers. The new Enrique Adolfo Jiménez International Airport has recently opened too. It will make logistical connections by air, land and sea faster and easier. However, there is still work to do.

Container transportation by train is growing between ports. A parallel railway to the existing one will be needed soon to allow more frequent services and double train cargo movements from the Atlantic to the Pacific and vice versa. With the new post-Panamax vessels crossing the canal expansion, new cranes will be needed. Another important issue is the lack of sufficient car park space, especially in CFTZ, but not only there.

What will be the key drivers of the retail and distribution sector over the next decade?

BENEDETTI: It must continue growing, not only in terms of numbers but also in added value. Some public initiatives such as the Cold Chain (Cadena de Frío) will increase the exports of selected high-quality agricultural products from Chiriquí. One of the best examples of sound growth is what is happening with the pharmaceuticals industry. It is using CFTZ as a distribution point for Latin America, consolidating shipments from plants around the world. This activity encouraged some leading pharmaceuticals multinationals to base their regional headquarters in Panama. We must continue to attract value-added industries through offering better infrastructure, connectivity, fiscal incentives and so on, to make our economy more sophisticated.

How seriously do you take the idea of a rival canal?

BENEDETTI: A new canal in Nicaragua made sense before the current Panama Canal expansion. Now it seems an overambitious project at huge expense, with unclear economic returns. Global trade projection trends show that another canal is superfluous. In addition to the complicated geological conditions, Nicaragua does not have the infrastructure a canal needs, such as ports, free zones, container storage areas and so on.