IFC Considering $500 Million Loan To Support Canal Expansion

The International Finance Corporation (IFC) is considering offering a $500 million loan to help Panama finance the current canal expansion. The project, which includes adding a third set of locks to the canal, has a current estimated price tag of over $5 billion. The expansion will allow larger ships to pass through the aging American built canal. The canal is a major component of Panama’s economy, directly and indirectly accounting for nearly 19% of the country’s GDP, and 41.2% of its export volume.

The IFC, a member of the World Bank Group, is primarily responsible for providing loans to major private sector projects in developing nations. The group predicts that the Panama Canal expansion will boost Panama’s real GDP by 0.6 – 0.8% at its completion. The IFC’s board of directors is expected to review the loan proposal as early as October this year.

Source:
IFC Mulls $500 Loan For Canal Expansion (Nasdaq.com)

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Continued Growth Expected In Panama Container Shipping Industry

Despite an economic downturn in the United States, maritime authorities in Panama are projecting a ten percent increase in the number of shipping containers transported through Panama ports in the next year, as reported last week by Reuters. It is predicted that 5.6 million 20-foot shipping containers will be handled at Panama ports in 2009, up from 5 million this year. The number of shipping containers has nearly doubled since 2006, partially due to the increase in demand for raw material from China. China has been increasingly interested in investing in Panama, and has expressed interest in investing in a new mega-port project on the Pacific entrance to the canal. Panama plays crucial role in the Latin American shipping industry, as nearly 40% of shipping containers in Latin America are handled by the Panama Canal.

The projected increase in shipping volume should be good news for Panama’s dollarized economy, which is likely to feel pressure from the current downturn in the United States, and is revealing how much the high demand for goods in China may be impacting Panama’s economy in the future. As China begins to increase its influence in important shipping areas such as Panama, it will be interesting to see what effects this will have on Panama’s economy and real estate markets in the long term.

It is projected that container shipments in Panama will increase 10% in the next year (photo from http://www.wikipedia.org)

Source:

Panama sees strong shipping container growth (Reuters.com)

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American Cruise Line Pays Exorbitant Fee For Panama Canal Passage Amid Slowdown in Canal Traffic

Disney Cruise Lines paid the extremely high fee of $283,400 for one of its cruise ships to cross the Panama Canal in May.  Cruise lines and tankers are willing to pay increasingly higher fees to avoid the transportation time and costs associated with transporting goods over land or around South America.  Slots for non-reserved ships are sold at auction, and help avoid the long waiting period that has recently become common at the canal.  These fees are in addition to the standard fees for ships crossing the canal, which are determined by the weight of the ship.  The fee paid by the Disney Magic on May 16, while one of the highest ever paid, does not hold this record.  Three container ships recently paid a $313,000 fee each for passage through the canal.  The Disney Magic is based in Canaveral, Florida, and has voyages between Florida and Los Angeles, with the Panama Canal passage a major draw for passengers.

These increases in fees come amid a slowdown in overall traffic at the canal.  The current delay for vessels is now 36 – 48 hours, which is down from a peak of nearly 10 days a few months ago.  The average time it takes to cross the canal has also been decreased since March, from over 50 hours transit time to 20 hours.  The total number of ships traveling through the canal has decreased 2% in the first three months of 2008, while tonnage dropped 2.3%.

According to the Panama Canal Authority, the decrease in transit time can be partially attributed to making the passage process more efficient.  The decrease in transportation through the canal may be attributed to several factors, including the slowdown in the US economy and decline of the US dollar.

Sources:
US cruise ship pays fortune to cross Panama (Reuters.com)

Panama canal transit times fall (Lloydslist.com)

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Chevron Increasing Capacity At Las Minas Facility In Panama

Chevron is planning on doubling the capacity of its Las Minas facility in Panama to nearly 4 million barrels.  This increase in capacity is to meet the rising demand for fuel in Central America, and for ships passing through the Panama Canal.  The Las Minas facility is located near Colon, Panama, and provides fuel, derivatives, and lubricants to vessels stopping at nearby ports.  Chevron, a US based petroleum company has already invested $13 million in the Panama facility, and following this short term increase in capacity is expected to continue expanding the facility.

Source:
Chevron To Up Bunker Capacity In Panama (Reuters.com)

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Torrijos Says Panama Canal Expansion Is On Schedule

Panamanian President Martin Torrijos has stated that the major expansion to the Panama Canal is currently on schedule. The President said yesterday that the Canal Authority is still looking at options for financing nearly $2.5 billion of the project, but that the contract to build the new lock system will be announced by the end of 2008. Companies currently bidding for the locks contract include Bilfinger Berger AG of Germany, Empresas ICA SAB of Mexico, Mitsubishi Corp in Japan, and the American firm Bechtel Group Inc.

The President also stated yesterday that nearly 283,000 Panamanians had applied to work on the canal expansion, accounting for nearly 12% of the nation’s workforce. It is estimated that 7,000 jobs will be created in the construction of the project, and that an additional 40,000 will be created to support related industries. Reassurance from Torrijos that the canal expansion project is on schedule is good news for Panama, especially with the current economic slowdown and problems with lending institutions in the United States.

Source:
Panama Canal Expansion Is On Schedule, Torrijos Says (Bloomberg.com)

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Panama Birthplace Of John McCain Very Different 71 Years Later

Current US Senator and presidential hopeful John McCain has deep ties to Panama, in fact, he was born there. The presidential candidate was born in the port city of Colon, in a neighborhood that housed US military families in the Panama Canal Zone. The Senator’s Panamanian roots have even raised some questions as to his eligibility to run for president as a natural born US citizen, yet these allegations have since been dropped as the Panama Canal Zone was considered a US territory at the time of McCain’s birth in 1936.

McCain’s early childhood residence likely looks significantly different than it did over 70 years ago. Houses once occupied by US military officers such as McCain’s father have since been abandoned and allowed to decay and collapse. Following the turnover of the Canal Zone to Panama in the 1970s, McCain’s neighborhood, an area known as Coco Solo, has become a major container terminal along the canal. The city of Colon is now one of the poorest regions of Panama, and continues to struggle with urban blight and gang related violence. Yet Panama remains hopeful as the new Panama Canal expansion projects should bring much needed jobs to the region.

source:

Tropical decay blights McCain’s Panama birthplace (Reuters.com)

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Panama Canal Improvements To Benefit Panama’s Already Booming Real Estate Market

The Panama Canal Authority has requested over $2 billion this year to finance a major expansion of the panama canal, a project that once complete will help to further boost Panama’s already growing economy and real estate market. The project, which is slated to be completed in 2014 for the centennial celebration of the opening of the canal, is estimated to cost a total $5.25 billion. According to a February 2007 Popular Mechanics article, the expansion will use state of the art techniques to create a third set of locks, significantly increasing the total capacity of the shipping lanes.

With the Panama Canal currently running at nearly 90% capacity, the Panama Canal Authority realized they must expand the aging thoroughfare to better compete in the modern shipping industry, and accommodate the much larger commercial vessels that currently transport goods across oceans. The largest vessels that can currently make the voyage through the canal are built to the Panamax standard, which take advantage of the maximum allowable dimensions to fit through the canal, often leaving no more than two feet of clearance between the ship and the walls of the canal. With the addition of the new locks, the maximum load capacity of the ships will increase from 5,000 to 12,000 containers per ship. The new third set of locks will not replace the existing ones, but instead will augment them by allowing for the passage of much wider vessels, and allowing vessels that currently meet the Panamax standard to continue using the preexisting locks system.

This news is good both for Panama’s economy, as well as for those interested in investing in Panama real estate. Real estate has been booming in Panama, yet unemployment hovers around 7%, a situation that fuels fear that the the real estate bubble may burst once the economy begins to cool off. The large investment in revitalizing the Panama Canal at nearly 15% of Panama’s GDP will provide much needed jobs for Panama’s population and continue to bring growth to Panama’s economy and real estate sector.

sources:

CIA World Factbook: Panama

The Panama Canal’s Ultimate Upgrade (Popularmechanics.com)

Panama Canal Seeks Billions This Year (Reuters.com)

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