Moving along: Continuing to expand the Panama transport and logistics network

 

A geostrategic location and the presence of the Panama Canal make Panama a natural centre for transportation and logistics. In fact, the transportation, logistics and communication sector combined is easily the largest contributor to GDP, a fact recognised by the current administration. In its Strategic Economic Plan 2010-14, the logistics sector, along with finance, agriculture and tourism, was identified as one of the country’s four pillars of economic growth. To secure the future of the sector the administration is investing $9.6bn, equivalent to 70% of public sector investment, from 2010 to 2014 in infrastructure upgrades alone. Public spending on infrastructure extends well beyond the flagship $5.25bn Panama Canal Expansion and includes the construction of a line on the Panama City Metro, a large overhaul of the national road network and several upgrades to maritime and airport infrastructure. With the canal’s ability to attract global trade, the country has been working for nearly a decade to create a business-friendly regulatory framework – replete with special economic areas and incentives for multinational headquarters – which should serve in attracting further investment as it continues developing the transport and logistics hub. While on the one hand the government is moving quickly to ensure its infrastructure networks are capable of providing a platform for the growing logistics and value-added manufacturing industries, on the other it is aggressively revamping airport infrastructure and further pushing to establish itself as a major aviation centre.

Quantifying Progress

Figures published by the National Statistics Agency (Instituto Nacional De Estadí stica y Censo, INEC) aptly portray the sector’s wider role within the rapidly growing economy. According to the latest available figures from INEC at the time of writing, the transportation and communication sector accounted for 24.1% of the nation’s total GDP (at 1996 prices) in 2012. Moreover, the sector has grown at double-digit rates in each of the past five years apart from 2009 when the global financial crisis slowed progress in the sector to 8.2%. The sector’s average annual growth rate from 2008 to 2012 was an impressive 12.7%. It has also been a major attractor of foreign direct investment (FDI) as logistics, construction and infrastructure firms look to take advantage of the country’s expanding role in regional and global transport. FDI stock in the transportation, logistics and communication sector reached $4.52bn in 2011 and represented 19.6% of the national total of $23.1bn, according to data from the National Comptroller.

Global Rankings

Heavy spending on infrastructure development has yielded improved scores in the World Economic Forum’s “Global Competitiveness Report 2013-14”. Indeed, Panama’s score in the report’s metric on overall quality of infrastructure has improved drastically under the current administration from 67th in the 2009-10 iteration of the report to 30th in the 2013-14 edition. Other related categories also paint a similar picture. Panama improved from 54th in the 2009-10 index to 35th in 2013-14 in goods market efficiency, from 18th to sixth in quality of port infrastructure, from 32nd to fifth in air transport infrastructure, from 62nd to 30th in railroad infrastructure, and from 62nd to 48th in road infrastructure.

Sector Structure

Despite steadily improving infrastructure across the country, the transportation and logistics sector lacks a titular head in the form of a dedicated Ministry of Transportation and Logistics. In its place is the Ministry of Public Works (Ministerio de Obras Públicas, MOP) which oversees the construction and maintenance of the national public infrastructure network, though in practice the MOP is primarily responsible for the national road network together with the autonomous Terrestrial Transport and Transit Authority. Numerous additional public entities with varying degrees of autonomy oversee the rest of the sector, including the Metro de Panamá Secretariat, a special secretariat created in 2009 to monitor the planning, construction and administration of the Panama City Metro. The Panama Canal Authority (Autoridad del Canal de Panamá, ACP) has been in complete control of the Panama Canal and its finances since the country took over control in 1999. Although it possesses a board consisting of various ministerial heads, another autonomous government agency, the Panama Maritime Authority (Autoridad Marítima de Panamá, AMP) is charged with overseeing all things maritime. Meanwhile, in the aviation sector it is the Civil Aviation Authority (Autoridad Aeronáutica Civil, AAC), which also boasts a diverse board full of governmental leaders, that supervises the country’s aeronautical activity.

In October 2010 the Ministry of Industry and Commerce (Ministerio de Comercio e Industrias, MICI), together with the Georgia Tech Panama Logistics Innovation and Research Centre, launched the National Logistics Council (Consejo Nacional de Logística, CNL). The CNL was created to establish a platform for collaboration among the government, private sector and academic institutions and eventually facilitate the development of the country into “the logistics and trade hub of the Americas”. However, the lack of a governmental ministry or secretariat charged with overseeing the long-term development of all infrastructures and responsible for coordinating inter-agency stratagem and budgets is a common complaint from the private sector given the already large and growing impact of the sector on the wider economy. Indeed, though the creation of the CNL represents a step forward in the logistics segment, it still falls short of the sort of authority granted the Secretary of Science, Technology and Information, for example, in driving the growth of the information and communication sector.

Legislation

The legislative environment in Panama has for the most part been conducive to business and investment in the country. Legal and tax incentives have been established through several laws for companies basing themselves in one of the country’s free or special economic and trade zones.

The Colón Free Zone (CFZ), the second-largest of its kind in the world, is a strong example of the importance of creating such areas, in particular for logistic and reexport companies. New special economic areas including Panama Pacifico and the City of Knowledge have also been created and should lead the way forward in the future (see Economy chapter).

However, in the second quarter of 2012 a new piece of legislation passed through the national legislature and was signed by the president. Known as Act 41, the legislation could cause issues with international investors within the maritime sector. The law stipulates that 75% of shares and personnel within the maritime services and auxiliary fuel distribution sector be sourced domestically. The rule sparked backlash from the EU, which considers it to be in violation of international commitments already made by Panama.

The Hub & Spoke

Panama’s location bodes well not only for its status as a trading hub, but also for its growing stature as a major regional centre of aviation. Indeed, Panama City’s location is within “narrow-body” range, the typical distance that the single-aisle airplanes which dominate the Latin American market can travel, of nearly all major cities within the Americas. Additionally, its improving airport infrastructure, expanding tourism sector and rapid economic growth are all supporting the country’s efforts to become the most important transit hub in the region.

Commercial Aviation

The impressive growth of Panama’s only major airline, Copa Airlines, also points towards a bright future for the sector. Founded in 1947, the Compañía Panameña de Aviación (Copa) is now the flagship airline of the country and one of the most prominent airlines in the expanding, yet still underserved, Latin America region.

Following the 2005 purchase of AeroRepublica in Colombia and the company’s initial public offering on the New York Stock Exchange, making Copa the third Latin American airline to list on the exchange, growth has been impressive. According to figures from Copa, from 2005 to 2013 capacity has increased at a compound annual growth rate (CAGR) of 17%, while earnings have experienced a CAGR of 21% during the same timeframe. As a result Copa has become one of the most profitable airlines on the planet, recording an operating profit margin of 17.9% for 2012. According to the latest data from the International Air Transport Association’s 2010 airline profitability report, the carrier ranked 10th in 2007 and fourth in 2008, with operating profit margins around 18-20%.

Meanwhile, the airline’s expansion plans include increasing its numbers in terms of fleet, route and frequency over the next five years. Indeed, Copa’s fleet plan includes the addition of 44 (30 firm orders and 14 optional) new aircraft between 2013 and 2018, most of which are single-aisle Boeing 737-800s with a range of 3000 nautical miles.

International Connections

Although Copa is responsible for more than 80% of daily operations at Tocumen International Airport, several international airlines also operate out of Tocumen including KLM, United Airlines, American Airlines, Iberia and Delta Airlines. In total, commercial airlines flying from Panama City service around 70 destinations – up from 29 in 2004.

The AAC has been working together with the Ministry of Foreign Relations and the executive branch to firm up accords with foreign nations over air traffic rights. According to Ivan Vergara, director of air transport at the AAC, “Over the past several years we have signed agreements with Brazil, Ecuador and Peru and expanded our accord with Mexico. In 2013 we also added or expanded agreements with Costa Rica and France as well.” Indeed, with Air France joining KLM and Iberia in operating transatlantic flights to Europe in November of 2013, Panama City could soon establish itself as a transit hub not only for travellers going from South America to North America, but to Europe as well.

Metro

One of the flagship projects of President Ricardo Martinelli’s administration, the construction of the $1.88bn Metro de Panamá should help to alleviate traffic congestion within the capital. The first line is expected to be inaugurated on March 5, 2014. The long-term master plan for the system’s development calls for the construction of four separate lines and one tramway line by 2035, though thus far construction has been started only on the first line (see analysis).

Urban Transport

In fact, the metro is just one part of a complete renovation of Panama City’s transportation system as the MOP has been in the midst of a major overhaul to the capital city’s road network since 2011. Meanwhile, structural changes to the existing public transportation system – mainly the replacement of the city’s diablo rojo (red devil) bus network – should also ease congestion in the medium to long term.

Over the course of the past few years numerous projects to improve road connectivity and traffic flow have seen various parts of Panama City turned into construction zones. In total the MOP reported in June 2013 that a combined eight road projects totalling $1.7bn were under way in the capital city. The largest project is the $782m construction of an underground connection between Avenida Balboa and Avenida Los Poetas, which was awarded to Brazil’s Odebrecht. It not only involves the construction of a new tunnel, but also renovations to Los Poetas, the construction of new sports facilities, bike lanes, gardens and even a sporting arena, the Maracanã Stadium. However, the project has become a source of controversy as it will also include the extension of the Cinta Costera (Coastal Beltway), a highway constructed a few years ago to relieve congestion inside the city and whose extension will wrap around the city’s Casco Viejo (Historic District).

While the project includes green areas and pedestrian walks it has drawn criticism as the beltway is seen as an eye sore and counterproductive to ongoing efforts to renovate the historic district. Fears that it would lead to the removal of Casco Viejo from UNESCO’s list of World Heritage Sites – due to the destruction of the centuries-old sea wall to make way for the highway – have been allayed as UNESCO announced in June 2013 the project would not impact Casco Viejo’s status.

The preservation of the historic district itself is a $175m project also being completed by Odebrecht and is seen as a key part of the country’s tourism development plan. Apart from renovating the area’s small streets and alleyways, the project also includes the construction of a new road dubbed Vía Cincuentenario. Both projects are expected to be completed in 2014.

Other projects include the $237m improvement and expansion of Avenida Domingo Díaz, which consists of the construction of three vehicular and three pedestrian bridges and the expansion of the road to six lanes.

Via Brasil, another major artery, is also being renovated in a two-phase project to the tune of $217m and $181m for each respective phase. The remainder of the investment, $76.5m, was poured into the construction of three underpasses, which are now fully operational.

On The Road

Outside Panama City, the road network is also under development as connectivity in the interior of the country continually improves. From 2009 to 2013 the MOP reported investing $3.4bn in road and public infrastructure projects, though the majority of that figure ($2.25bn) has been used to overhaul Panama City’s road network. Outside the capital the heaviest investment was found in Chiriquí, which received $262m, most of which was used to upgrade two highways from David to Boquete ($119m) and from Paso Canoas to Port Armuelles ($114m). Meanwhile, Veraguas received $179m; Herrera and Los Santos, each $156m; Coclé, $136m; Bocas del Toro, $72m; Colón, $64m; Comarca, $66m; and Darién, $61m.

In 2012 the introduction of a new stretch of highway from Panama City to Colón – easily the most important intra-city highway in Panama – reduced travel time from the capital to the Colón Free Zone to just 45 minutes. The project began in 2010, and when construction was completed in 2012, investment in the project reached $186m, MOP figures show. The $80.7m renovation of the Bridge of the Americas – which spans the Pacific entrance to the Panama Canal – is another major project which was started in 2010, though it will not be completed until the end of 2014.

Maritime Transport

Obviously many of the maritime transport activities revolve around the Panama Canal, which has extensive port facilities at both entrances in the Port of Cristóbal (Atlantic), the Manzanillo International Container Terminal (MIT, Atlantic), the Colón Container Terminal (Atlantic) and the Port of Balboa (Pacific). In total Panama boasts 14 private and 14 state-owned and operated ports. Ensuring the country is able to meet demand increases following the arrival of post-Panamax ships after the completion of the Panama Canal expansion project is crucial to sustaining the long-term growth of the sector.

“Panama needs to have more terminals built in order to continue growing, especially a new post-Panamax port inside the canal,” Ricardo Lince Boyd, the executive president of Agencias Continental, a local ports and shipping logistics firm, told OBG.

Both the Port of Cristobal and the Port of Balboa are receiving an upgrade by the Panama Ports Company, operator of both ports, at a cost of $1bn. All expansion projects at both ports are expected to be completed by 2015 and will improve their combined capacity to 6.5m twenty-foot equivalent units (TEUs).

Meanwhile, the MIT and the Colón Container Terminal (CCT) serve the CFZ and have also received sizeable investments in recent years. According to information published by Georgia Tech, the CCT recently spent $100m upgrading its terminal to its current capacity of 1.3m TEUs. The MIT is currently investing $270m to upgrade capacity to a total of 4m TEUs per year.

Logistics

Identified as one of the four pillars of future economic growth, the logistics sector is arguably the most integral piece in further developing the Panamanian economy. According to Proinvex, the investment promotion agency, roughly 3% of global maritime trade, including 10% of US international seaborne trade, passed through the canal in 2013. These figures are likely to swell upon the doubling of the canal’s cargo capacity once the expansion project is complete. This fact alone gives the country an edge over competing logistics centres in the Caribbean and along the Atlantic coasts of the US and South America. Still, obstacles do stand in the way, mainly a lack of qualified personnel.

Outlook

All of the ingredients for Panama to become a centre for transportation and logistics are beginning to coalesce. Domestic connectivity is being upgraded via major infrastructure projects such as the Metro de Panamá, the Panama-Colón Highway and an overhaul of the national road system. Meanwhile, international connectivity is also being improved thanks to continued investment in airports and seaports. Nevertheless, if the goal of improving national transportation infrastructure is to capitalise on goods moving through the canal by expanding the logistics and transport sectors, there are still obstacles to overcome such as the short supply of labour and strong regional competition.

 

Full text in http://www.oxfordbusinessgroup.com/overview/moving-along-continuing-expand-transport-and-logistics-network

 



Can Panama Become the Singapore/Rotterdam-style Hub for Latin America?

at 11:25 am by David

• Keynote: H.E. José Domingo Arias, Vice Minister of Commerce and Industry, Panama
• Keynote: Philip Yeo, Chairman, SPRING Singapore, Special Adviser for Economic Development, Prime Minister’s Office (view background presentation)
• Keynote: Frank Heemskerk, Member of the Board of Management, Royal Haskoning
• Moderator: Don Ratliff, Executive Director, Georgia Tech Panama Logistics, Innovation & Research Center

Frank Heemskerk: Happy to see economic relations between Panama and Netherlands growing stronger. President Martinelli is visiting Netherlands this year, discussing how to avoid double taxation between the countries. These have been some of the fastest negotiations ever.

Location is important, but it needs to be maintained and shared. The Netherlands’ success is a combination of location, business/tax climate, and quality of life. Education is very important and people want the best environment for their children. Freedom of press and freedom of speech — this is what people want. The Netherlands has met these goals and this the reason for their success.

Panama outpaces the Netherlands on GDP growth, but this an advantage to the Netherlands and to Singapore as it creates more wealth and more trade for the entire world.

José Domingo Arias: Panama has been developing it’s place as a trade and logistics hub for 400 years, starting with the gold trade from the continent’s Pacific coast to Spain. Terms have now changed. Trade comes from the west of the United States and travels to the east.

The Canal will expand its capacity to be able receive bigger ships. This takes a great deal of investment. Panama is already the eleventh most competitive country in the world, and offers the most efficient and competitive port in the Western Hemisphere. The free trade zone of Colon moves $20 billion in trade a year. The airport Tocumen is seeing 12 million passengers per year and expected to see this grow to 14 million. The government is also in the process of building the highway between Panama City and Colon and extending the highway across the country. The most important thing is that the government is doing all this with global commercial partners.

We are focusing on developing teaching and education in Panama, especially executive education. Most of these students are from the public sector. Our long term project is to renovate the country’s entire education system. Our private partners and universities have the capacity to identify their needs are and will handle their training.

Experience exchange with Singapore and the Netherlands is vital for us. We have studied their model. We are learning enormous amounts from Singapore in terms of technology, a field in which they have considerable experience. Someone from the private sector asked me what guarantees we could provide that we can deliver. Our prestige is on the line, and our style of the administration is to get things done.

Panel conversation: Success comes from collaboration of the private sector, the public sector, and investigations. The impressive thing about Singapore is they never stop trying to be the best, even though they are considered by many to be the best. Panama is trying to encourage entrepreneurship. How can it encourage creating a “critical mass” of ideas?

Will East coast U.S. ports on the East Coast be able to handle new big ships that will be passing through the expanded Canal? If not, this will be to Panama’s advantage as it mean ships will be unloading their cargo, although the United States will catch up eventually.

Panama is more of a logistics hub than a trade hub. Panama needs to build on this and improve. Suggestions include broadening the agenda using better social policy and better water management. Singapore and the Netherlands have been able to convince shippers of the value of going through Rotterdam’s and Singapore’s ports. They’re efficient, tariffs are cheaper, and they’re easier to use. Panama should follow these models.

More in http://www.as-coa.org/blogs/panama2011/

24 Feb 2011: Panama - Where the World Meets

PANAMA
WHERE THE WORLD MEETS

Thursday, February 24, 20118:00 a.m. to 3:45 p.m.Registration: 8:00 a.m. to 8:30 a.m.Presentation: 8:30 a.m. to 3:45 p.m.
Panama Marriott HotelSalon Campo AlegreCalle 52 y Ricardo AriasPanama City, PanamaMap of location

Panama is set to continue growing at one of the fastest paces in Latin America. For 2010, Panama’s growth is expected to be 7 percent, and the IMF and UN forecast the country will lead GDP growth in the region over the next five years thanks in part to its public investment plans, which is close to $20 billion for the 2009 to 2014 period. More than 40 multinational headquarters have moved their regional operations to Panama due to its economic and political stability and have taken advantage of its strategic position and government incentives to attract investment. By continued strengthening of its logistics sector, Panama may be well positioned to become the Singapore-style hub for Latin America, providing foreign investors with a high-standard regional platform to develop its products and services in order to reach other markets.
For the second consecutive year, AS/COA, together with the World Bank and the government of Panama, is organizing a conference to provide an in-depth analysis of these issues. This year, the conference will be focused on the country’s economic prospects and the efforts and challenges to improve its competitiveness in the logistics sector.
Please join us as we address these issues with a group of internationally recognized senior business executives, government officials, economists and investment analysts.
CONFIRMED SPEAKERS:
Ricardo Martinelli, President of Panama
Demetrio Papadimitriu, Minister of the Presidency, Panama
Alberto Vallarino, Minister of Finance and Economy, Panama
Roberto Henríquez, Minister of Commerce and Industry, Panama
Alberto Alemán Zubieta, CEO, Panama Canal Authority
Edgar Blanco, Research Director, Center for Transportation and Logistics, MIT
Tanya Avellán, Director, Central America, Coca-Cola FEMSA
Frank Heemskerk, Member of the Board of Management, Royal Haskoning
Samuel Israel, CEO, Latin America, DHL Global Forwarding
Felipe Jaramillo, Central America Director, The World Bank
Sergio Luna, Vice President, Department of Economic and Sociopolitical Research, Citi Latin America
Rubén Ramírez, Representative Director, Panama, CAF
Don Ratliff, Executive Director, Georgia Tech Panama Logistics, Innovation & Research Center
Stefan J. Roehr, Director, Latin America Supply Chain, Sanofi-Aventis
Jordan Schwartz, Lead Infrastructure Economist, Latin America and the Caribbean, The World Bank
Peter V.A. Shaw, Regional Credit Officer for Latin America, Fitch Ratings
Carlos Urriola, General Manager Manzanillo International Terminal and Senior Vice President, Stevedoring Services of America
Philip Yeo, Chairman, SPRING Singapore, Special Adviser for Economic Development, Prime Minister’s Office (view a background presentation on Singapore’s economic development)
Susan Segal, President and CEO, Americas Society and Council of the Americas
ACCESS THE AGENDA.*

To register go to http://www.as-coa.org/blogs/panama2011/

Panama as Regional Business Hub

Because of the geographical position of Panama, located in the center of the American Continent, with access through land, sea and air, with a tropical year round climate, free of natural disasters. With an open service economy, capable human resources, dollarized economy, the international finance center, world class logistics platform and economic political and social stability, make Panama the ideal site for making businesses in the region.

WHY INVEST IN PANAMA?

Panama is a country with a service vocation, that possesses a privileged geographical location, that has allowed us to become one of the most important logistic centers of the Western Hemisphere for the storing and distribution of world cargo, a bridge for the mobilization of passengers to the entire American Continent and facilitator of efficient and modern communication services. As a commerce promoter, both nationally and internationally, Panama enjoys political, social and economic stability.

Panama has gone from being a bridge to becoming a logistic platform by air, sea and land, with the Panama Canal as main axis, transporting over 300 million of CPSUAB (Container, Bulk, etc.) presently serving more than 14,000 ships through 144 maritime routes and complementing with a system of container terminals in the Pacific and the Caribbean, that serve as cargo transship and redistribution, that recorded an annual movement of containerized cargo of 4.25 million TEU's, added to the inter-oceanic railroad that has a capacity 330,000 containers per year from one coast to anther. Panama also has the Colón Free Zone, the most important one in the Western hemisphere, with an annual trade exchange of over 19 thousand million dollars through its approximately 3,000 companies established in the Colón Free Zone. The development of the Panamá Pacífico Special Economic Area, in the former Howard Air Station, will serve as a space destined to the production of goods and high technology services.

We offer an efficient air service through the Tocumen International Airport, presently undergoing a remodeling process for offering a comfortable and safe atmosphere to all the travelers that visit our country and an expeditious and efficient attention to the transiting passengers, who do not go through customs or migration checks. From the airport the Copa Airline operates its Hub that offers more than 46 destinations to 25 countries in America and excellent connections, some of them with three daily flights to the most important cities of Latin America. In addition we account for with an excellent internal offer of direct flights to the principal cities of the interior of the country.

Panama has become the preferred center for the installation of five submarine optical fiber cables, turning into the ideal place for telecommunication companies and data centers since we have the advantage of offering great connectivity with North and South America, Europe, Asia and the Caribbean, advantages that companies have learned to use effectively, such as MCI, Cable & Wireless and Movistar that offer cellular telephony services and first quality internet to the international market.

Our prestigious International banking Center, with over 93 internationally renowned banks, reflected for the first Quarter of 2010, assets in the order of US$ 65,000 millions.

Our medical and health services are well known internationally and they have the two best private hospitals of the Central American region; equipped with the most recent medical technology, and they are affiliated to world famous hospitals such as the Baptist Hospital in Miami, Florida and the Johns Hopkins Medical Center in Baltimore, Maryland.

Our tropical climate and varied tourist offer sets us among those preferred for the travelers that can find in our country picturesque indigenous and colonial communities, white sand beaches and coral reefs with indescribable beauty, mountains with fresh climates and tropical jungles with an exuberant vegetation, habitat of innumerable flora and fauna species. And with our excellent highway network and short distances the country can be toured in only six hours.

For these reasons, Panama has been chosen by important multinational companies such as Samsung Electronics, Inc., DHL, DELL, Hutchinson Port Holding Group, HSBC, BICSA, SCOTIABANK, Assicurazioni Generali, American Life Insurance Company and many more, as main offices for their regional operations. In addition, some of the most recognized International Organisms such as UNICEF, UNDP, OAS, the Spanish Agency for International Cooperation (AECI, initials in Spanish), and the BLADEX [Latin American Export Bank] among others, have chosen Panama for establishing their operations.

Panama offers goods and services at reasonable prices as compared to its nearest neighbors, with Free Trade Treaties (TLC, for initials in Spanish) with Taiwan, El Salvador, Singapore and Chile. Furthermore, we are going through the final negotiations of a TLC with the United States and Central America and we are preparing our entrance in the G-3.

http://proinvex.mici.gob.pa

Is the Colon Free Trade Zone for you?

The Colon Free Zone was formed in 1948 with 10 companies in 38 hectares, after a 1946 feasibility study was made by U.S. free trade zone consultant Thomas E. Lyons.

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COLON FREE ZONE MULTIMODAL LOGISTICS CENTER OF THE AMERICAS

About a year ago, the Management of the Colon Free Zone, together with the Inter-Oceanic Region Authority, the Directorate of Civil Aeronautics and the Maritime Authority of Panama, started an ambitious project to turn the Colon Free Zone into the largest Multimodal Logistics Center of the Americas. This project includes the development of multimodal transportation and logistics services for Free Zone in the Coco Solito, France Field and Telfers areas, covering the use of the adjacent cargo transportation centers such as the maritime ports of Manzanillo Internacional Terminal, Colon Ports Terminal, Colon Container Terminal, Panama Ports, the Panama Railroad and the Enrique A. Jimenez Airport at France Field.

Background

At the beginning of the year 2000, representatives of each one of the entities involved in the project’s development gathered together in a meeting and approved the establishment of a technical commission to design and draw up the conceptual planning and development scheme of the areas making up the multimodal center. Apart from agreeing that there should be a conceptual plan for the reverted areas, the port, airport and railroad systems, and an integral segregated zone promoting the development of a logistics center for trade, services, transportation and industry, the project’s vision was defined, as well as the actual borders of the expansion area.

The Reasons behind the Project

The project was carried out, considering several factors that directly affected the efficiency of the center and consequently the internationalization of the production, the technological and regional economic changes. The search for an optimization of the efficiency in the means of transportation and the new modalities of world trade, are important to maintain the quality of the business undertaken in the Colon Free Zone.

The transfer of merchandise from our territory to the rest of the Americas and the rest of the world, together with strengths like our geographical position, the dollar as legal currency, the financial and insurance center, forces us to maximize all our other resources of the reverted areas, ports, highways, railroads and airports to ensure a site with excellent cargo services generated from this trade center.

The conjunction of all those indicated strengths make all users and customers of the Colon Free Zone to keep up the highest international competitive levels, reducing production, distribution, marketing and logistics costs in general and especially transportation efficiency. As a consequence, the reliability of delivery terms and the frequency of the services provided would also improve, so that this sector in the free trade, industry, transport, services and logistics zone would become the largest in the Hemisphere.

This would be an effort in enlarging and improving the currently existing facilities and infrastructure in the Colon Free Zone, by the private as well as the public sector in order to achieve a common benefit.

Other Reasons

The Colon Free Zone expansion and Multimodal Logistics Center Project is not only linked to transportation, but it is rather more of a strategy to improve the goods and services supply chain as well as looking to achieve an optimal competitive level towards the latest modalities and requirement of world trade, making the real difference between temporary users and permanent and satisfied customers.

Benefits Of The Multimodal Logistics Center

• Development of multimodal transport for world trade.

• Establishment of a customs storage and distribution center.

• Installation of guard houses to check merchandise entering and leaving the Multimodal Center.

• Establishment of Hi-Tech industries and, light manufacturing companies, taking advantage of a part of the reverted areas.

• E-Commerce development opportunities.

• Private investment for more than US $700 millions dollars.

• Enhanced competitiveness upon becoming a logistical center for trade, service, industry and transport and its consequent positioning in every sphere world-wide.

• Development of a new model strengthening international trade activities.

• Improvement of public services and utilities.

• Increase tourism.

• Increase in national and foreign investment in the Colon region area.

• Generation of thousands of jobs.

REQUIREMENTS TO OPERATE IN THE COLON FREE ZONE

General Rules and Regulations

Pursuant to Law-Decree 18 of 1948, corporations operating in the Colon Free Zone must comply with the following requirements:

• No minimum investment capital requirement

• No business license required

• The following documentary evidence is required:

Articles of Incorporation, Bank and Commercial references.

• Employ at least five (5) local workers

• Re-Export at least 60% of the imported merchandise

• Pay rent in the first five days of every month.

Management will collect a surcharge at an annual rate of 10% on late payments. If the client is more than two months behinds, the Operating code, it will not be possible for the company or corporation to operate in the Colon Free Zone.

• Report the commercial movements of all the merchandise entering and leaving the Free Zone, on the approved forms at the time of the operation.

Tax Benefits

• 0% Tax on Export Profits

• 0% Duties and Quotas on Imports and Exports

• 0% Billing Duties

• Very Competitive Costs

• Immigration visas for executives

Importer Advantages

• To be able purchase IN A SINGLE PLACE an excellent range of products

• With Credit Facilities

• With dispatching in less than 24 hours

Exporter Advantages

To have access from one site in the Heart of the Americas to consumers in:

• The American Hemisphere

• Europe

• Asia

• Africa

• Australia

• Ship Chandlering Services

WAYS TO SET UP OPERATIONS IN THE COLON FREE ZONE
Lease Agreement Operating Costs: A, C, D and E	Urbanized Areas France Field $0.35 m2 Colon $0.50 m2 Non-Urbanized Areas $0.20 m2 (The customer assumes the cost of urbanization. None available)
Building Lease Agreement Operating Costs of a property in the Free Zone: A, C, D and E Operating Costs of a private property: A, B, C, D and E	Free Zone Property Colon: $2.40 France Field $1.75 Coco Solo $1.65 Private Property Rent agreed upon between the parties, authorized by the General Manager’s Office based on resolution Nº 04-92 dated 25 March 1992. Operating Permit
Representation Agreement Operating Costs: A, C, D and E.	Percentage (For storage, handling, etc) Agreed upon between the parties
Public Warehouse Operating Costs: Only A and E	0.5% of the merchandise’s F.O.B. value (Freight on board)

OPERATING COSTS

A. Operating code (Annual) $200.00
Given to a Company in order to be able to make commercial transactions in the Free Zone

B. OPERATING LICENSE (Annual) $1,200.00
Given to a Company after its establishment in the Free Zone has been approved and all legal paperwork has been done.

C. RENT (Monthly)
Cost per square meter multiplied by the number of square meters, (depending on the area)

D. GARBAGE COLLECTION (Monthly)
Minimum $ 30.00
Maximum $ 120.00

E. SECURITY (Monthly $ 30.00)

Source: Colon Free Zone

For more information, contact www.laglex.com

NEW COMMUNITY: Logistics hub in the making

Tuesday Jul 24 2007 07:10

By Adam Thomson

Think of Panama City and one of the first images is the crescent-shaped bay, defined on one cusp by the growing sky-rise residential area of Punta Paitilla and the picturesque old centre of 19th century pastel-shaded waterfront buildings on the other.

But if London and Regional, a UK-based construction company, gets its way, the city could soon outgrow its traditional boundaries to occupy a huge area of land just across the Bridge of the Americas spanning the Panama Canal: Howard, the former US Air Force base.

This month, the company, together with Jaime Gilinski, the Colombian banker and entrepreneur, signed an agreement with the Panamanian government to build what it hopes will become a new business and residential hub within just a few miles of the existing capital.

The company has three months to present its master plan for the 1,400ha site and, as yet, few details are known. But London and Regional has pledged a minimum investment of $405m during the first eight years of the 40-year concession. A further $300m will follow during the remaining years.

This month, after paying the government a one-off fee of $20m to seal the contract, Ian Livingstone, who heads the company said: "We hope to exceed the spending limits established with the government quite dramatically."

Indeed, Mr Livingstone and Mr Gilinski believe the value of the finished project could top $10bn, equivalent to more than half Panama's gross domestic product. The idea, they say, is to construct a large industrial park, a media village, a downtown area with plaza, restaurants and shops, a showcase building to mark the nearby entrance of the canal and a swathe of residential buildings – for both the wealthy and low-income segments of the population.

"Our intention is to create a community, and that won't work unless you have a representative mix of society and a critical mass to achieve a stable and permanent population," says Mr Livingstone.

That is a far cry from how the area looks today. Large white houses adorned with red-tiled roofs and built up on stilts line grassy streets named to make the US soldiers to feel right at home.

On one side of the area lie a 3.2km runway and four huge hangars which served as centres of aviation maintenance and storage up to 1999 when the US packed its bags and went home.

Economists and town planners say that one of the measures of success will be the amount of interest and the number of firm offers from companies looking to use Panama as its centre of regional operations.

Mr Livingstone says he has already initiated detailed talks with many multinationals. "We have had between 20 and 30 serious approaches from companies whose names everyone is very familiar with," he says.

If they end up moving to the site, it is likely to be for two main reasons. The first is Panama's increasing emergence as a logistics hub for the wider region. Since the government of Martín Torrijos came to power in 2004, it has set in motion a plan to encourage shipping and transport companies to use its strategic position as a centre of distribution.

The second could be a series of tax benefits. Officials say companies involved in industries such as aviation and related activities, and information technology, will not have to pay any taxes or import and export duties.

"What we want to generate is investment and employment," says one official, who estimates that the project could create between 20,000 and 25,000 new jobs.

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