Logistics Zone, the major challenge for the development of Panama

On the Pacific, Balboa has no room to set up a logistics zone.

Panama has become a leader in port operations in Latin America, but now the challenge is to develop a logistics area and establish centers that allow added value on the cargo that moves through the ports.

For some analysts, the country has time to make decisions and establish the areas where these logistic areas would be located on the Pacific side, as there are still lots available.

Although the Panama Canal Authority (ACP) promotes the construction of a container port in the area of Corozal, Panama Ports Company (PPC) estimates that this land would be more beneficial to establish an area of logistics and air cargo handling. Based on the experience of other countries, such as Dubai (Jebel Ali) and the Netherlands (Rotterdam), PPC says it is best to establish a logistics area next to or very near to the ports to reduce freight costs.

“These have been successful because they have achieved the minimum in the movement of cargo, as they are very near the port,” says the manager of PPC, Luca Versari. In Panama, one of the first operators to add a port logistics zone was Manzanillo International Terminal in Colon. In this sector there are several companies that add value to their products. One is Caterillar, a company that repairs computers and then distributes them in the region.

On the Pacific, Balboa, which has achieved great development after 15 years of operations, does not have space to establish a logistics zone. The idea of a port in Corozal (Diablo) is not bad, but the question is what is the best place from the point of view of a real logistics center, says Versari.

He explains that if the port develops in these areas, there is success because there is sufficient demand, but it would not be the right strategy.

Competition

Panama has the geographical advantage as a route for cargo transport.

However, there is a risk that this logistics zone could be established in other port cities in the region, Kingston (Jamaica), Limon (Costa Rica), Cartagena (Colombia). “The owner of the cargo is having it moved to the place where he gets cheaper service,” notes Versari referring to the possibility of shipping companies looking for other destinations other than Panama.

On the Pacific it is important to have a logistics area because it is the side facing Asia, a sector which produces most of the goods due to the low cost of labor. This becomes an advantage for Panama to establish a logistics zone.

Value Added

Passing through the canal are ships loaded with cargo for other places where there are logistical areas. For example, in Panama there could be assembly plants for television sets, cars, fruit packing and other activities that could be redeployed to the region. The country has seen several companies interested in establishing logistics centers on the Pacific, but they have not received a response. The area of Corozal, on which the port would be established, covers 43 acres, added to other areas that are adjacent and that would total over 100 acres that could be used for a logistics area, experts said.

Analysis

The Economic Commission for Latin America and the Caribbean (ECLAC) has warned of the increasing port congestion observed in major regional ports, in addition to widespread connectivity issues that occur in the interior areas of various countries. According to the agency, this situation affects not only an increase in logistics costs and loss of national competitiveness, but also significantly affects the quality of life of surrounding communities in these areas.

Panama has a geographical advantage as a transportation route. However, there is a risk from logistics areas in other port cities such as Jamaica, Costa Rica and Colombia.

The Panama Canal expansion, the operation of increasingly large ships off the coasts of Latin America, the restructuring of port logistics networks and the presence of integrated global operators are some of the factors to be considered in the urgent need to invest more in better infrastructure. This investment is not limited to ports, but includes the entire logistics chain.

In the case of Panama, mainly on the Pacific, there is no area that allows merchandise logistics, assembly of equipment and packaging of products.

Industry analysts warn that if the country does not take the step, the Panamanian ports will continue to be places of cargo transshipment, as they are so far missing the opportunity to capture revenue and generate jobs.

“This is the time to make the decision to prepare and respond to employment of thousands of workers who will be unemployed when the Canal expansion work ends in 2014,” indicated a business source. In Panama there are over 60 cranes in the Panamanian port system and in 2011 more than six million TEUs or containers of 20 feet long, moved across the country.