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18 STRATEGY
ECONOMY
The Name of the Game in Panama Is Connectivity
A glance at a map tells the story. There’s Panama, a narrow strip of land connecting two continents and separating two oceans. If location is destiny, it seems likely that Panama’s central location will translate into an outsized role for the tiny country on the world stage.
“Let me speak with you about the nature of this economy. I want you to understand that the name of the game is connectivity.” Dr. Nicolás Ardito Barletta, former president of Panama and Director General of the National Center for Competitiveness, is a man who is passionate about Panama’s destiny, and he sees Panama’s position as a central, connected hub as critical to that destiny.
OConnectivity and logistics
f course, the canal is all about connectivity. Since its completion in 1914, Panama has been a
bustling maritime center. It currently accounts for the transit of 4.7 percent of the world’s maritime commerce. “There are 13,000 to 14,000 transits through the canal each year from all the main ports in the world, and 39 percent of Asian exports to the east coast of the U.S. go through the Panama Canal.”
The canal also allows other industries to thrive in its shadow. “It has opened the opportunity for many maritime businesses, such as the container transshipment ports at both entrances to the canal. The container ports have 7 million container transshipments per year. By 2025, we may be at 20 million.”
The Colón Free Trade Zone, an offspring of the canal, is a commercial center in its own right. “Colón has a $30 billion turnover, some 2,900 companies that employ 30,000 people. It would not be here without the canal, and it has grown because of the banking center and because of the credit it provides to their clients.”
Dr. Nicolás Ardito
Barletta
Director General, National Center for Competitiveness (CNC)
President, Republic of Panama (1984–1985)
10 percent.” This rapid pace is difficult to sustain because bottlenecks exist and infrastructure is lacking, but he says, “If we do the right things, we can grow from 5 to 8 percent per year for the next 15 years.”
DSynergy begets synergy ... r. Ardito Barletta thinks what’s happening in Panama is illustrative of Harvard Business
School professor Michael Porter’s cluster theories: the synergy between businesses in a geographical location can create a sustainable competitive advantage. Witness Panama’s thriving banking and investment sectors: “We have built a dollarized economy and a banking center, which is fully integrated to the dollar market and has a special connotation for the stability of the monetary and credit system,” he says. “The banking center has US $96 billion in assets and more than 90 banks.”
T... and success begets success he synergy includes Panama’s business-friendly environment as well as the success of the
multinationals—both of which keep attracting more companies and investment. Dr. Ardito Barletta describes Panama as having “open trade and special incentives to investors. If you do business from Panama, outside of Panama, you do not pay taxes in Panama,” he points out.
He says investment is booming. The construction industry is exploding, largely because of the canal expansion, foreign investment, and local private and public investment. Office buildings are being built
Panama has been classified as the second most competitive economy in Latin America for two years in a row by the World Economic Forum.
The air cargo business is also moving goods; it shipped 120,000 tons last year and is growing. In addition, Copa Airlines, the national airline of Panama, now has daily flights to 69 destinations in 33 countries. It’s one of the world’s fastest-growing airlines. Through an alliance with KLM, Copa offers access to destinations in Europe, Africa, and the Middle East.
Projects such as the expansion of the canal are enhancing Panama’s position as a logistics hub. Dr. Ardito Barletta observes, “Logistics is the future of Panama. We have been growing at an average of 8.5 percent per year for 10 years, and four of those years were over
for international companies, and hotels are needed to accommodate visiting tourists and businesspeople. Even residential construction is fueled by the many international retirees who are coming to Panama. Outside demand accounts for 35 percent of construction.
“As far as foreign investment goes, per capita it has been the highest in the region for some three years. Mostly in banking, mining, ports, construction, tourism, energy, hydroelectric plants, and telecommunications.” Dr. Ardito Barletta says, “We have attracted 96 multinationals to Panama. P&G brought 1,000 employees. Dell has 2,500 employees. Caterpillar has located a center here.”
INTERVIEW