Panama: Investing in infrastructure
Public and private infrastructure projects will continue to drive economic growth in Panama, as the government plans to invest $9.6bn over the course of the next five years on infrastructure development. While the $5.25bn Panama Canal expansion project headlines the spending, Panama City is also modernising its own transportation system to streamline movement in and around the capital.
Under the administration of President Ricardo Martinelli, construction on a new $1.5bn metro system is underway, as is the establishment of a new Metrobus system that will replace Panama City’s infamous “diablo rojo” bus system. Additional funds are being poured into public road and highway upgrades and the construction and expansion of several regional airports.
Indeed, after campaigning on promises to ensure Panama’s status as a global transportation centre, the country’s infrastructure network is undergoing a serious overhaul, despite a slight interruption in the country’s flagship project: the Panama Canal.
Construction of the $5.25bn Panama Canal expansion project was delayed in mid-January 2012, as thousands of workers went on strike over payroll disputes with construction consortium Grupos Unidos por el Canal (GUPC). The strike halted construction for a week before the worker’s demands for a higher minimum wage were met.
The project, when completed in 2014, will double the canal’s capacity and ensure it can handle the world’s largest trade ships. The Panama Canal is a vital revenue stream for the government and its expansion is expected to more than double annual revenues from $500m to an estimated $1.25bn.
Meanwhile, Odebrecht, a Brazilian multi-discipline conglomerate, is constructing Panama City’s new $1.5bn metro system. The first line of the “Metro de Panama” is currently under construction and will run 13.7 km in a north-south direction through the heart of the capital. The finished network is expected to feature four lines and will be complete by 2035. Construction of the first line is due to be completed by 2015.
For years, public transportation in Panama City consisted largely of an antiquated bus system using converted school buses from the US. The introduction of a more structured Metrobus system in place of the city’s chaotic, yet colourful, “diablo rojos” was a welcome sight for the city’s residents.
The new mass transit network, which began operating 120 buses in December 2010, will be operated by the consortium Transporte Masivo de Panamá, a Panamanian-Columbian joint venture, for the next 15 years. The consortium will invest $270m and replace 3000 buses in the city.
Roadwork to improve traffic flow is also ongoing in the capital, with $200m in road construction expected to be completed in 2013. The Ministry of Public Works (MOP) is reorganising large parts of Panama’s road network both inside and outside the capital. Combined with the construction of the new metro line and work on 17 intersections, traffic is still expected to increase throughout 2012, particularly in the metropolitan area, before completed works begin to alleviate gridlock in 2013 and 2014.
Largely a result of this focus on transportation, Panama ranked an impressive 38th in the infrastructure segment of the World Economic Forum’s 2011-12 Global Competitiveness Report, higher than regional heavyweights Mexico (66) and Brazil (64).
Away from the capital, the development of the national road network also continues. According to the MOP, efforts to rehabilitate the national road network over the past two years has seen 389,435 km of highways, 346,170 km of roads and 84,966 km of streets improved. In 2011, the MOP dedicated 54% of its $528m investment budget to provinces excluding Panama City, with the primary recipients being Chiriquí ($60.3m), Veraguas ($42.7m), Los Santos ($41.1m) and Herrera ($40.6m).
After wresting control of the country’s canal from the US in 1999, Panama has spent the past decade working to broaden its economic horizons and capitalise on the fact that the waterway handles 5% of the world’s trade. The federal government has indeed identified its trade-based logistics sector as one of four pillars of economic development in its Strategic Government Plan 2010-14, in addition to its international financial centre, tourism and agriculture sectors.
The country’s $9.6bn infrastructure outlay should sufficiently close its infrastructure gap, while the expansion of its canal should soon bring even more business to one of Latin America’s fastest-growing economies.