More than a century after the opening of its world-famous canal, Panama is preparing for its expansion, and further global trade. Sarah Gilbert reports
Towering trees stand shoulder-to-shoulder and green reflections dapple the water. Suddenly, a capuchin monkey pokes its head through the curtains of foliage, peering at us curiously before disappearing again.
As we glide around Gatun Lake, I look behind our small craft at the vast-hulled cargo ships plying their trade along the Panama Canal.
Strategically located between the Pacific and Atlantic oceans, and North and South America, Panama City was a hub for trade long before its world-famous canal opened just over a century ago.
In 1519, Spanish conquistadors founded Panama Viejo on the eastern edge of the city, using it as a base for transporting their New World treasure back to the Old World.
Today, the city is a centre of international finance and commerce. Punta Pacifica’s skyline of glittering steel and glass towers – including the distinctive sail-shaped Trump Ocean hotel, open since 2011 – rises behind the tombstone-like ruins of Panama Viejo.
There’s so much construction under way along the coastline that the locals joke that the national bird is a crane. “It’s like a mini-Miami – with more English spoken,” an American expat tells me.
In fact, it’s Central America’s most cosmopolitan capital – numerous nationalities came to work on the canal and many stayed, with the metropolitan area now home to a third of the country’s 3.8 million population.
FINANCIAL HUB
Calle 50, a four-lane highway that cuts through the districts of Bella Vista, Marbella, Obarrio and San Francisco, is the core of the financial district.
Banking is a significant part of the economy – the sector accounted for 7.5 per cent of GDP last year, according to the International Chamber of Commerce in Panama, while estimates put the number of financial institutions operating in the city at over 90. Some 28 of them have international licences – most from Latin America, including Bancolombia, which acquired HSBC Panama’s assets in 2013.
While the banking business is largely regional, there are opportunities to be had for investors worldwide, particularly in sectors related to logistics, energy and real estate.
Mercedes Eleta de Brenes, president of Stratego Communications, says: “It’s one of the best places to invest in Latin America thanks to a dollarised economy, dollar denominated banking system, transport links, the presence of many multinational companies, and security.”
Last year, Panama City topped the World Bank’s Doing Business ranking for Central America and the Dominican Republic.
It has the fastest-growing economy in Latin America – GDP stood at US$41 billion in 2014, a growth of 7.5 per cent on the year before, and unemployment is low, at 4.5 per cent. The IMF has predicted growth of 6.4 per cent this year, still way ahead of the regional average of 2.2 per cent.
Panama’s currency is the US dollar (also known as the Balboa), with a free-market economy based mainly on a developed services sector. As well as operating the canal and banking, this includes container ports, ship registration and, increasingly, tourism.
FREE TRADE
According to the PwC report Doing Business: A Guide for Central America, Panama and the Dominican Republic, Panama’s government is actively encouraging foreign investment and working to position the country as?the primary destination in Latin America for investors.
It has developed special trading rules, introduced migration, labour and tax incentives for investors, and created the Proinvex office, a one-stop shop where would-be investors can obtain all the information they need on initiatives such as the Colon Free Trade Zone, the second largest in the world after Hong Kong.
Such measures have encouraged the establishment of regional HQs. Dell, HP, Sab Miller, GE, BMW and Procter and Gamble all have bases in and around the city, while manufacturing giant Caterpillar opened a hub for its Latin American customers early last year.
Pedro Anzola, manager of the international tax department at PwC in Panama City, says: “There are particular opportunities for construction and engineering companies. The main obstacle to doing business in Panama is the lengthy bureaucracy involved in getting permits.”
CHANNELLING INCOME
Still, the driving force behind the country’s economy is undoubtedly the world’s best-known shortcut, which celebrated its 100th anniversary last year and is undergoing a major expansion.
Stretching 77km from Panama City on the Pacific to Colon on the Atlantic, the Panama Canal saves vessels from circumnavigating the southern tip of South America, with a full transit taking just nine hours, passing engineering marvels such as the Galliard or Culebra Cut, a 13km passage through solid rock.
In an epic tale of tragedy – around 30,000 people died during the construction – and triumph, it was started by the French and finished by the Americans. The canal and the 1,400 sq km Canal Zone around it were controlled by the US until it was handed back to Panama on December 31, 1999.
Last year, 327 million metric tons of cargo traffic passed through the canal, with a toll revenue of US$1.9 billion.
Those figures are set to double as the expansion of the canal nears completion.
While the US$5.3 billion project – the largest since its original construction – has experienced delays and increased costs, it is scheduled to open in April next year, with two new sets of locks providing access for far larger ships. It’s expected to double the amount of cargo to 660 million metric tons per year, while a proposed new toll structure will boost government revenues.
ROUTES AND ROOMS
Other major infrastructure projects include the construction of the Metro, the only urban rail system in Central America, which has eased the city’s notoriously bad traffic.
The north-south Line 1 was inaugurated in April last year, while Line 2 is due to be completed in 2017 and will include a stop at Tocumen International airport, 25km from the city centre.
Until then, the airport can be reached by bus, shuttle or taxi; taking the toll road cuts the journey time from over an hour to 20 minutes.
International flights into the city are increasing. While there are no direct routes from the UK, Air France introduced a thrice-weekly service from Paris in 2013, and Lufthansa will launch a five-times weekly route from Frankfurt in November. Iberia also boosted its services from Madrid to six-times weekly last year.
To meet growing demand, the airport is being extended. The new North Terminal opened in 2012, doubling capacity to 10 million passengers a year, with the South Terminal expected to be ready in 2017. The plan is to accommodate 18 million passengers by 2022.
Meanwhile, the number of hotel rooms in the city has grown by 209 per cent in recent years.
Openings include the Hard Rock Hotel Megapolis and Hilton Garden Inn Panama in 2012, the first Waldorf Astoria in Latin America in 2013, and Hyatt Place last year. The Crowne Plaza Panama Airport opened this year, the Ramada Panama Centro is due to follow later this year, and an AC by Marriott in 2017.
Luxury boutique group Grace Hotels opened its first property in Central America here last year. The 60-room Grace Panama is located on the ground level and six upper floors of the striking corkscrew-shaped Twist Tower in the upscale Obarrio district.
Akis Neocleous, its general manager, says: “We have a strong belief in Panama City as a growing global commercial hub. We are also seeing some exciting developments in Obarrio, such as the Soho project.”
At an estimated cost of US$360 million, the Soho Panama complex is one of the country’s biggest building projects, with twin skyscrapers containing office space and a 226-room Ritz-Carlton property, in addition to apartments and a 120-store luxury mall. The mall is due to open this year and the hotel in 2016.
HERITAGE BUILDING
Development isn’t limited to modern architecture – Casco Antiguo, on the city’s south-eastern tip, is also undergoing revitalisation.
Founded by the Spanish in 1673 after the plundering of Panama Viejo by British pirate Henry Morgan (of Captain Morgan rum fame), this mini-Havana was granted UNESCO World Heritage status in 1997 but had fallen into disrepair.
Now it’s becoming the cultural cornerstone of the city, as an influx of investment is turning the pastel-coloured colonial buildings along its cobblestone streets into galleries, restaurants, bars and boutique hotels. US-based group Ace Hotel opened the 50-room American Trade property here in 2013.
A ten-minute drive away, the Amador Causeway – a road built by the Americans that connects the city with four small islands that once guarded the entrance to the canal – is the site of the US$193 million Amador Convention Centre, due to open at the end of 2016. The building’s design resembles an eagle in flight, a reference to the country’s national bird.
As I join the locals jogging, rollerblading and cycling along the causeway, I stop off at the brightly coloured, Frank Gehry-designed Biomuseo, a 4,000 sqm exhibition space and botanical park that opened last October.
It makes the perfect spot to take in the city’s architectural contrasts – and to watch the ships queuing to enter the canal, as it prepares for its next chapter.
