Caribbean & Central America - July 2016 (ISSN 1741-4458)

“A new era” is how Panama Canal administrator (ACP) Jorge L. Quijano described the official inauguration on 26 June of the Panama Canal expansion project – the first expansion of the waterway since its original construction more than 100 years ago. Completion of the US$5.3bn project, construction of which began in 2007, was a welcome boost for President Juan Carlos Varela who, two years into his five-year term, has suffered a drop in his popularity as a result of transparency concerns stemming from recent scandals like the ‘Panama Papers’ – the biggest leak of secret information in history [RC-16-05].

At a ceremony on 26 June attended by some 20,000 people, with official delegations from more than 60 countries, a container vessel of China Ocean Shipping Company (Cosco), ‘Andronikos’, which has a maximum capacity of 9,400 twenty-foot equivalent units (TEUs), became the first ship to transit the expanded Canal. The third set of locks – the biggest project under the expansion plan, which was carried out by multinational consortium Grupo Unidos por el Canal (GUPC) – are 427m long, 55m wide and 18.3m deep, allowing vessels up to 366m long, 49m wide and 15m deep to pass. Quijano told reporters that “we currently have 170 reservations for Neopanamax ships, commitments of two new liner services to the Expanded Canal, and a reservation for the first LNG [liquid natural gas] vessel, which will transit in late July”.

The ACP calculates that in the first fiscal year after the Canal expansion, revenues will increase by 40% to US$1.4bn. By 2021, it is estimated that revenues will have grown to US$2.1bn or 2.8% of GDP. Panama is already forecast to register the highest growth of any country in Latin America & the Caribbean for 2016. In a January 2016 report, the United Nations (UN) Economic Commission for Latin America & the Caribbean (Eclac) forecasts GDP growth of 6.2% for Panama for 2016, up from 5.9% in 2015 (compared with 6.1% in 2014). Eclac also notes the positive impact of the Canal expansion on other indicators such as foreign direct investment (FDI). A June 2016 Eclac report on FDI to the region notes that in 2015 FDI flows to Panama rose by 17%, to reach US$5.04bn – a record high, positioning the country as the leading recipient in Central America, and the seventh in Latin America and the Caribbean. The Eclac report notes that “during 2016, the work of widening the Panama Canal will be completed and a number of firms involved in Canal-related activities have made major investments to expand their capacities”.

Improved logistics performance index

On 28 June, the World Bank (WB) published its “Logistics Performance Index (LPI) 2016”, an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. The 2016 LPI showed Panama overtaking Chile, the best performer in the previous (2014) report, to take first place, ranking 40^th out of 160 countries. As well as Chile (which ranked 46^th), this is also ahead of Mexico (54^th) and Brazil (55^th). The 2016 LPI also showed Panama ranks fifth in the sub-classification “top-performing upper-middle-income economies” ahead of South Africa (20^th), China (27^th), Malaysia (32^nd) and Turkey (34^th).

In a press release trumpeting the result, President Varela highlighted efforts by his government to boost the logistics sector, such as the approval in October 2015 of a permanent consultative committee with the private sector. This has the objective of guaranteeing dialogue as well as the approval of a priority roadmap for the logistics sector with public and private sector participation and with the support from the Latin American Development Bank (CAF).

• Popularity

The latest survey by pollster Dichter & Neira, released on 21 June, showed President Juan Carlos Varela with just 37% approval. This was his lowest rating of the past 12 months and down from 57% in July 2015. According to the survey, which interviewed 1,200 people across the country bar the comarcas (indigenous administrative regions) and Darién jungle region, just 19% of respondents thought the government – which has been struggling to restore credibility to the country in the wake of the ‘Panama Papers’ and the US government’s blacklisting of one of Panama’s most important business groupings, the Waked family – operated in a transparent manner. This was again the lowest rating of the past 12 months and down from 34% in July 2014.