CMP: The State must join forces Port of Corozal requires final push

Por Franklin Castrellón

Following the absence of proposals by the four global port operators that had prequalified to develop and operate the port of Corozal on the Pacific side of the Canal, the Panama Chamber of Shipping (CMP) called on the Canal Authority, the Judicial Branch and the Legislative Branch to resolve the problems that prevented the submission of proposals and to promote the implementation of that project.

CMP President, Rommel Troetsch, believes that there were six factors that influenced that decision, led by the economic issue and legal remedies. In his view, the economic factor was decisive, because under the terms of reference of the bidding documents was the non-application to the new port of tax exemptions enjoyed by other ports, so that Corozal could not compete with them.

Panama is ready for a new port

Troetsch identified the factors, in order of importance as: 1) The terms of reference on the cost of operation; 2) Failure to approve the tax benefits enjoyed by other transshipment ports; 3) The legal appeals filed in the Supreme Court of Justice; 4) Competitiveness with other ports in the region; 5) Global competition for Foreign Direct Investment (FDI); and 6) The opposition of some neighbors of the area that would be influenced by the port.

The Bulletin considers that another factor that may have had some weight is the uncertainty generated by the shipping industry for the future of world trade, particularly that of US trading partners, as a result of the protectionist policy that US president Donald Trump intends to impose.

Regarding the terms of reference, the president of the CMP pointed out that the operator of Corozal would have to pay about $18 million annually in a canon for the use of seafloor and water surface, rates that are not paid by the other port operators. In addition, the operator of Corozal would have to pay the ACP an 8% rate on gross turnover. Nor has the law been approved that would extend to Corozal the same fiscal benefits that the ports of Balboa, Cristobal, Manzanillo and CCT receive.

Port of Corozal.

Port of Corozal.

Added costs, and assuming that it handled 2 million Teus in the first year of operations, Corozal would have to pay the State about $50 million. compared to $13- $ 15 million paid for the same volume by any other local transshipment port.

“The numbers did not come under the terms contained in the statement of requirements,” said Troetsch, adding that in compliance with the law, the ACP designed a project profitable for them, but less unattractive for port operators.

“The government must seek the most viable way to extend the tax benefits enjoyed by other port operators and free zones to the port of Corozal,” added Troetsch after warning that an international port is a free zone that exports transshipment services. “When the proposal period expired, no guarantee of tax equalization was offered for Corozal,” he said.

In his view, the high port costs here also had some effect on the decision compared to other ports in the region, the strong global competition for Foreign Direct Investment (FDI) and – to a lesser degree – opposition from some neighboring area of influence of the port legal resources.

The ACP wants to continue with the project of the Port of Corozal.

The ACP wants to continue with the project of the Port of Corozal.

The large number of legal appeals filed against the project in the Supreme Court, and the delay in solving them, created an environment of legal uncertainty. The first action was a request of guarantees filed by Panama Ports Co., operator of the ports of Balboa and Cristobal, against the resolution of the ACP Board of Directors that authorized the administrator of to carry out the process that would conclude with the concession to an operator. This was rejected in a unanimous vote of the Court on October 28, 2016.

Then came a flood of eleven appeals filed by PPC itself, a group of Diablo Heights residents and individual lawyers. The CMP’s call to the Judicial Branch to accelerate the resolution of these suits is due to the risk of a repeat of what happened in 2006, when a similar project in Farfán was attacked by Panama Ports, a subsidiary of the Chinese multinational Hutchison Port Holdings.

Panama Ports Company (PPC), who operates the Port of Balboa, is against the project.

Panama Ports Company (PPC), who operates the Port of Balboa, is against the project.

Impact of Corozal

The development of a transshipment port on the Pacific coast is urgently demanded by the local and international maritime community due to the growing traffic generated by the expanded Canal. Other ports in the region have been preparing to attract such growing traffic and serve as transshipment hubs.

Shipping lines have the option to carry cargo directly from source to destination, but the current trend is to use transfer centers where large Neo-panamax ships arrive to drop off and pick up cargo. This is distributed to the destination ports with smaller feeder vessels.

The maritime sector accounted for 6.7% of national employment in 2016, representing more than 112,800 well-paid jobs. Of these, just over 47,000 jobs are generated directly and the remaining 65,800 are allied. It is estimated that once the two phases of Corozal are completed, this port complex will generate another 3,000 jobs.

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