Infrastructure Developments in Panama

Friday, March 7th, 2014 | | Operations in Panama

Panama’s infrastructure is known to be one of the best in Latin America and is well developed in and around urban areas.  There is a network of roads and railroads throughout the country, and several international airports.  In addition, water transportation is what the country is famous for, with the Panama Canal serving as the main pipeline between the Atlantic and Pacific Oceans.  This is undergoing a large expansion project that will help to increase the capacity.  In 2013, the President of Panama launched a five year $13.6 billion investment plan to improve trade, logistics, tourism, and exports.  The plan hopes to draw in foreign investments and create new jobs, focusing on how infrastructure improvements will help to further boost the economy.  A list of major government investments is shown in Exhibit 1.

Panama’s roads are in good condition in and around its urban areas, but remain poor in rural parts of the country.  In total, only about 34% of the roads are paved (1).  The main corridor is the Pan-American Highway that runs through Panama from the western border of Costa Rica east into the Darien Province.  This road was recently expanded to four lanes and modernized for safety reasons and in order to ease traffic congestion.  There are ongoing infrastructure investments on several other major roads, including an extension of the Madden-Colón Highway between Panama City and Colón, an extension of the Cinta Costera Highway that runs parallel to the Pacific coastline, and an extension of the North Corridor Highway.  All of these projects will help to ease traffic congestion and connect more labor markets to Panama City (2).  The overall goal of this investment is to improve logistics and the supply chain for businesses, and therefore promoting an easier flow of people and materials (3).  A map of the improvements projects is shown in Exhibit 2.

Panama does not have a fully developed network of railways other than the Panama Canal Railway.  In 1998, the Panamanian government privatized the Panama Canal Railway, which connects Colón with Panama City (1).  A joint venture of two US companies invested money to revitalize and take over the operations of the railway (4).  The project took 18 months and included upgraded rails and additional two-way tracks in strategic locations for the passing of trains, and also included new stations, and new terminals.  The rail services both passengers and freight.  It caters to tourists, commuters, and serves as an alternative method to transporting goods.   A new public transportation system is in the works that will build a new subway system and expand the bus system.  The metro line will connect the Albrook bus terminal with high population areas in the center of Panama City, which will help to improve well-being and productivity in the city.  The bus system will put 1,200 new buses into service helping to alleviate traffic and encouraging the ease of use of public transportation (5).  This project began in early 2011 and the first subway line is slated to be completed in late 2014, and a second in 2017.  It is expected to carry 15,000 people per hour (6).

Airfields are popular within the country; however, only about 41 of 105 are paved (1).  Only five have full services with immigration and customs.  The major airport is Tocumen in Panama City, whose location sits between North and South America and serves as a connector for many flights.  The terminals were recently reconstructed in order to accommodate larger aircrafts.  There are government funded modernization projects spending $100 million already underway helping to better connect different areas of the country and to boost tourism.  These include remodeling the airport in Columbus, expanding the runway in Albrook, and extending and repairing the runway in Chiriqui.  The major project is building a new major airport in Rio Hato on the Pacific coast, which will allow travelers to go straight to the beach instead of flying into Panama City (2).

In addition to the Panama Canal, the country has about 500 miles of waterways that can be navigated by boat.  There are 13 ports, including five major ones with container line service in Balboa, Cristobal, Coco Solo, Manzanillo, and Vacamonte (1).  In 2012, a project launched to build a $600 million container terminal on the Atlantic side of the Panama Canal.  In 2008, $1 billion of investments were budgeted to further develop the Port of Balboa and Cristobal to add cranes and capacity.  MIT is planning to also invest $200 million to build new piers for post-Panamax ships in an effort to prepare for the canal expansion project completion (2).  This is all a result of the huge shipping industry that took shape because of the building of the canal.  The industry continues to grow, and therefore Panama must try to keep up and expand the canal in order to meet the demands and continue to be able to generate profits from the canal.  The $5.25 billion expansion project launched in 2006 and is expected to be completed in 2015.  It will increase capacity of the canal allowing the transit of larger vessels that do not meet the size constraints of the current locks.  A new third set of locks will also allow for a greater amount of ships to pass each day, estimated to be increased by 12-14 large ships.  The elements and locations of the expansion project are shown in Exhibit 3.  The result should double the capacity in terms of cargo volume, which could alter international trade flows.  It is especially important for the Far East to US East Coast route, as it is more cost effective to operate larger ships.  As shown in Exhibit 4, the top two countries that the US trades with by means of water transportation are in the Far East, and the volume is fairly great.  It would improve the ability for some US exports to compete in global markets as well.  Already ports around the world are preparing for these larger ships that will be able to navigate the canal.  Larger ship berths and cranes are needed, expanded container storage, increased gate processing for trucks at terminals, and changes to rail marine terminals are already ongoing in many places (8).  Recently, there has been a delay on the expansion project due to negotiations on cost overruns between the construction group and the Panama Canal Authority.  Independent arbitrators will rule who has to pay for the $1.6 billion overrun that was caused because the project ran out of money and continued to operate (9).  The project is expected to start up again at the beginning of March.

Panama is a fast growing region of the world using commerce as the main source to boost and grow its economy.  The canal continues to serve as a crucial part of the global transportation industry, and Panama has learned how to exploit that.  They are investing in infrastructure and trying to keep up with the demands of the world.  There are an abundance of big projects, but an even a greater amount of smaller projects in other areas such as the agriculture cold chain and improving the electrical and telecommunications infrastructure.  It has become a modern and high tech country that will continue to grow as they pursue projects to improve roads, airports, railroads, and expand the central part of their economy, the Panama Canal.

 

Exhibit 1 – Major Investments in Panama (7)

Government Investment

  •   Expansion of the Panama Canal – $5.2 billion.
  •   Panama Metro Line – $2.2 billion.
  •   Road Projects – $1.1 billion.
  •   Airport Expansion – $200 million.
  •   Cold Chain distribution network – $65 million.
  •   Government City – $360 million.
  •   Financial Tower – $200 million.
  •   Mining Projects (copper and gold) – $665 million in revenues   projected.
  •   Colombia – Panama Electrical Interconnection – $415 million.
  •   Water Supply & Sanitation – $ 540 million.
  •   Public Hospitals – $358 million.
  •   Curundu Housing Project – $100 million. DONE Delivered Feb. 2012
  •   Bridge of the Americas reconstruction – $80 million.
  •   Air-Sea Stations – $37 million.
  •   New Prisons – $156 million.
  •   Energy Generation Projects – various, hydro/wind/LNG – over $1   billion.
  •   Panama Pacifico – conversion of Howard Air Force Base to mixed   use – $750 million.

Private Investment

  •   Colon Free Trade Zone and transshipment ports expansion.
  •   20 new Hotel construction projects – $700 million.
  •   Westland Mall – Grupo Los Pueblos – $200 million.
  •   First Quantum in Minera Panama copper mine – $7.0 billion

 


Exhibit 2 – Road Improvements (3)

exhibit 2


Exhibit 3 – Panama Canal Expansion Projects (8)

exhibit 3.jpg


Exhibit 4 – Top US Trading Partners via Water Transportation (8)

exhibit 5


Bibliography

  1. http://www.nationsencyclopedia.com/economies/Americas/Panama-INFRASTRUCTURE-POWER-AND-COMMUNICATIONS.html
  2. http://www.businesspanama.com/investing/why_invest/transportation.php
  3. http://proinvex.mici.gob.pa/index.php?option=com_content&view=article&id=6:proyectos-infraestructura-panama&catid=38:cover&Itemid=102&lang=en
  4. http://www.panarail.com/en/new-pma-railroad/index.html
  5. http://www.meetpanama.com.pa/meet-panama/infrastructure-investments.php
  6. http://www.railway-technology.com/projects/panama-metro/
  7. http://export.gov/panama/majorprojectsinpanama/
  8. http://www.marad.dot.gov/documents/Panama_Canal_Phase_I_Report_-_20Nov2013.pdf
  9. http://online.wsj.com/news/articles/SB10001424052702304026804579410342453924378?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304026804579410342453924378.html

 

Questions

1. How does the Panama Canal Authority keep operations running normal while pursuing the expansion project?

The construction team was careful not to impede any existing routes and equipment used for current canal operations.  Special construction sites were create to store equipment and materials and the expansion locks were strategically mapped so they can be built without interfering with other locks.

 

2. Has Panama found any negative effects of many foreign investors coming to the country to fund and execute infrastructure projects?

Panama has encouraged foreign investment as the government believes that is the best way to boost the local economy.  There is an abundance of wealth outside of the country that they are trying to bring in.  It is the belief that this will help the economy to grow and create jobs for local Panamanians that will help to build internal wealth as well.  The government is funding many projects as to have a say in how their country is built.

 

3. Did Panama try to model its subway system after another city’s system?  What were the planning steps to determine how to navigate the route underground?

Panama research subway systems in other cities and tried to bring in best practices around planning, logistics, and operations.  There was a lot of pre-project testing to determine where underground the subway should route and how to keep noise and vibration to a minimum.  The routes were determined by high population and congested commute areas.