Panama is looking to a package of multi-million infrastructure projects to act as a “stimulus” to accelerate growth, according to the country’s commerce and industry minister.
Construction is about to start on the second line of Panama City’s metro system, a $500m housing project in Colon on the Atlantic coast, while work is underway for a third metro line including a fourth bridge over the Panama Canal. This project is worth over $1bn, with a $450m bond offering to finance the third bridge completed on October 1.
Melitón Arrocha said: “We have an important group of large public spending items that will create stimulus for the economy to keep on growing,”
Panama’s economy grew by 5.9% in the first quarter of 2015, compared with 0.2% for Latin America. “We are growing at least 10 times faster than the rest of Latin America and the Caribbean,” he said.
He attributed this relative outperformance to a sound macroeconomic position that allows Panama to acquire sovereign debt, a strong budget expected to be around $20bn next year and, in particular, ambitious public and private sector investment packages.
CANAL EXPANSION
But the key driver, as always, is the Panama Canal, which is having its lock system greatly expanded. Global traffic permitting, the effect on the national finances should be transformative. “We now receive direct revenue to the national budget of a little over $1bn annually,” Arrocha said. “There are some expectations we will be able to quadruple that. For a budget of $20bn, receiving $4bn from a single project is very significant.”
When projections were undertaken for the canal expansion’s impact on the economy, no account was made of LNG, since fracking technology did not at the time exist in the US. “Now, we expect large gas tankers to pass through the canal, and we are trying to make Panama a gas hub.”
He wants the country to play a greater role in cargo and has submitted new legislation aimed at attracting manufacturing capacity to Panama.
“We have all the logistics: a railroad from the Atlantic to the Pacific, the canal, the ports, the cranes, the highways. Now we have to add manufacturing to that.”
Arrocha appears keener to attract expertise and on-the-ground commitment than foreign capital. “We have a fairly sophisticated financial system which is very liquid,” he said.
“We are not looking that much for capital. What we are looking for is people to set up national manufacturing capacity, to start looking at Panama as another option.”