Canal Prepares for Greater Global Competition as Panama Prepares for Financial Transparency
In this report, we review the most recent economic data, and present two positive themes that support our medium-term forecast: initiatives to promote transparency in the financial sector, and several logistics projects in the Canal area
Recent data show that service and exports sectors are expanding this year, and local consumption is shrinking, recent data show. While commercial and residential electricity consumption grew by 0.9% and 1.6%, respectively, car sales dropped by 11.7%. The Panama Canal continues to perform well, with net tonnage rising 28.8%, and toll revenue by 19.7%. Container traffic in ports increased by 13.2%, and Colon Free Zone re-exports grew 6.6%. Overall, IMAE grew 6.20% in June 2017.
The Ministry of Economy and Finance is veering from local interest groups that promoted the status quo in the financial sector. It is pushing to carry forth reforms that could bring Panama closer to international norms, such by creating a mega supervisor for the financial system, a clearinghouse for international transactions and adopting OECD´s Common Reporting Standards. We believe these proposals will have a positive impact on international financial businesses. While the real effect will not be immediate, these initiatives send a positive message to international markets.
Analysts assert that growth in Panama will not come from exports of traditional goods, manufacturing, or agriculture. Instead, it will come from logistics, tourism and a technology hub. Legal services were never a driver of the economy, and will continue dropping, due to the lack of transparency. Nonetheless, we project that the banking industry will grow at the same pace as the economy.
International transport and its value chain has been Panama’s most dynamic activity since the Canal handover in 2000. International transport is projected to continue growing, due to Canal expansion. Furthermore, Panama Canal Authority toll revenue is expected to increase by 12.5% and 7.8% in 2017 and 2018
Major challenges affecting ACP are the stress on the local water supply; the challenge of remaining competitive amid maritime industry changes (i.e. new regulations, the introduction of new technology); and structural shifts in global trade. Though, the growth outlook for international transport and its value chain, with the Canal as the central pivot, are positive.
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