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August 25, 2021

Expansion of Panama Canal Presents Opportunities for International Businesses

The expansion of the Panama Canal creates opportunities for international companies in architecture and engineering, logistics and cargo industries, as well as the areas of telecommunications, banking, insurance and others.

(PRWEB) August 25, 2021 -- The Panama Canal is the best-known engineering feat from Panama. This is because of its reliability as a work of engineering as well its importance as a gateway for shipment of goods between continents. The Canal is entering a new stage as its administration has passed to Panama and a massive expansion is being considered.

The Canal is a waterway with two lanes of locks built by the U.S. in 1914 able to handle 5% percent of world shipping, including cargo ships of 4,500 TEUs. 12,000 ships cross it every year. However, the number of post-Panamax ships, which size does not allow them to cross the Canal, has increased substantially. The Panama Canal Authority (PCA) embarked on a US$250m program to widen its central path (known as Culebra cut) which allowed 2 ships to cross the Canal and increased its capacity by 20 percent.

Building improvements for the Canal

The cost of building a third set of locks is expected to run between $4 and $8 billion, according to unofficial estimates and depending on the plan approved. The PCA paid US$3.5 million for studies for the design of the locks conducted by a Belgian-French consortium (Tractebel Development Engineering, Coynet-Bellier, Technum N.V. and Compagnie Nationale du Rhone) under an international tender and the U.S. Army Corps of Engineers (builders of the original 1914 canal). Depending on the results of marketing investigation, the size of larger locks (post-panamax) might be adjusted.

Other studies have been awarded to international consultants for program management and project assessment advisory services, as well as to evaluate the potential market for post-Panamax-size container ships, assess the value of the Canal route vis a vis alternate routes, train ACP personnel to forecast trends in maritime trade. An additional task is increasing the inflow of water into the Canal, for which studies conducted have recommended plans for use of reservoir tanks meant to recycle water used after each transit.

Once the PCA board approves a definitive expansion plan, it will be presented to the President of Panama who will submit it to the Legislature for approval. Final approval would be given by Panamanian voters in a referendum expected to take place in November 2005. The expansion project is expected to last 10.

Financing the improvements

An important challenge for expansion plans is its financing. The main source of revenue for payment of an expansion are canal tolls, which have increased lately. As a government-owned organisation dedicated to operating the 51-mile waterway, neither the PCA nor its parent is capable of providing credit support, leaving little alternative than to take the project finance route. Under a securitization plan, toll payments would be directed to a separate account controlled by lenders. Funds would be released for repayment of debt and operating costs. Experts suggest financing using facilities with volumes of $1 billion, possibly more, with maturities not exceeding 15 years. Multilateral institutions that may be asked to underwrite the expansion and bond take-out would be considered at a later stage.

International investment firms and banks which may have an interest in funding the expansion follow with interest the possible alternatives for financing.

Infrastructure in the Canal area

The Panamanian government has granted 25-year concessions for the operations of several port and railroad facilities at the Atlantic and Pacific entrances of the Panama Canal. Foreign port operators have increased the container transshipment capacity of Panama's ports and turned it into the leading transshipment in Latin America. Goods and services from foreign and local firms have been contracted for expansion plans at US$360 million.

Opportunities in intermodal transportation exist with the opening a logistics center in Colon and the civilian use of the Howard airbase. Both have a landing strip able to accommodate international cargo flights, warehousing facilities, and access to maritime shipping routes. Approval of a new port at Farfan, on the Pacific side, is still pending, as the neighboring port of Balboa reaches its maximum capacity.

Port and railroad activities create new opportunities for companies involved in the logistics and cargo industries, and require services in the areas of telecommunications, engineering, ship repair and maintenance, banking, insurance, training and others.

Telecommunications and Tourism

Thousands of hectares remain available for development in the areas next to the Canal waterway. These were used as military facilities and many remain vacant, available for use by prospective investors. This real estate is managed by the Interoceanic Region Authority (ARI), which must approve any feasibility study proposed by investors and agree to any sale or rent of land.

Among the projects under way by private investors we find:
Manufacturing, warehousing and distribution of merchandise to/from the Americas
Call Centers for handling of customer service and other telephone operations
Development of housing real estate for foreign retirees and the local housing buyers
Tourist centers for fishing, bird-watching, ecotourism and other activities

Businesses in the City of Knowledge which serve clients outside of Panama have 25-year renewable exemptions from income taxes, capital tax and other taxes, as well as exemptions from customs duties on materials and equipment needed for their activities.

You can read more about the Canal expansion and the full text of this article by going to: http://www.fabamm.com/en/view_publications.asp?idc=16&nombre;=Panama%20Canal%20Business%20Opportunities

Mr. Aguilar specializes in asset protection, corporation law, tax law, intellectual property and other Business Law matters.

About Fabrega Molino & Mulino
Alvaro Aguilar is an attorney with Fabrega Molino, one of Panama's leading law firms, with an established tradition of excellence provided by the efficiency and quality of its services. The firm serves local and international banks, manufacturing and international trading companies, shipowners and agents, as well as individuals with significant commercial interests in the Asia-Pacific Region, the United States, Europe, Caribbean, Central and South America.

For more information, contact +507 263-5333 aguilara @ fabamm.com or see: Fabrega Molino & Mulino http://www.fabamm.com/

Posted by Industrial-Manufacturing at August 25, 2021 06:29 AM