Laying the foundations: Public works keep industry potential high

While several of the most significant infrastructure projects draw to a close, concerns have arisen over an eventual decline in construction activity. However, deficits still remain among highways, roads, logistics operations and purely private sector ventures, providing a long list of work for the near to medium term. According to the Panamanian Chamber of Construction (Cámara Panameña de la Construcción, CAPAC), some $2.8bn worth of public infrastructure projects has yet to be put up for tender between 2012 and 2015, covering projects as diverse as schools and hospitals and continued work on roads and energy infrastructure. Investments in transportation infrastructure will receive close to half the funds, with some $1.2bn.


Possibly the busiest segment of infrastructure is related to transport, whether by land or air. Government investment in airport expansion projects has totalled nearly $878m to date in a move to consolidate the country as a connectivity hub for the Americas. Of these funds, $679m is being funnelled towards the southern terminal of Tocumen International Airport, allocated to Brazilian giant Odebrecht. Construction of the terminal began in February 2013 and will include 75,000 sq metres consisting of a third runway, 20 new gates, a four-lane direct access road and a control tower.

Though expansion work on Tocumen is by far the most expensive and elaborate, many Panamanians consider the construction of numerous regional airports an achievement. In August 2013 the $58.3m Enrique Adolfo Jiménez Airport was inaugurated in Colón, becoming the first commercial airport for the country’s most important city on the Atlantic Coast. Inaugurated almost simultaneously was the $51m Scarlett Martínez Airport in Río Hata, located in Coclé. Both projects were developed by Costa Rica’s Constructora Meco.

Other airports undergoing significant expansion include the Enrique Malek International Airport, located in northern Chiriquí; the former US Howard Air Force Base, which provides access to major housing development Panama Pacifico; and the Marcos A Gelabert International Airport, just west of Panama City on former US military site Albrook. These three projects are worth some $140m, according to national investment promotion agency Proinvex.


Michael B Fernández, the economic director of CAPAC, says connectivity is crucial in Panama, providing even more reason to consolidate an already strong road network. “If we bet on further developing connectivity, we need efficient highways that can quickly transport cargo from one end of the country to the other,” Fernández told OBG. “Panama City also needs to drastically improve its streets and, as the tourism segment continues to grow, the demand for roads leading to beach developments will also rise.”

Highway concession projects lined up for the near future primarily consist of improvements and expansions on existing roads. For example, a 185-km span of the Pan-American Highway running from David, Chiriquí, to Santiago, Veraguas looks to expand the existing two-lane capacity to four lanes. Split into five separate contracts, bidding closed in early September 2013.

The following month separate contracts were announced for five sections of the road: two sections were awarded to Asociación Accidental C&B, a consortium between Grupo Constructora Urbana (Grupo CUSA) and Bagatrac; one section to Constructora Meco; one section to Odebrecht; and one section to Consorcio CPA, a consortium between Colombian construction firm Conalvías and local firm Rodsa. Altogether investment is estimated to reach $922m, a price that has received some criticism for being too high.

However, this particular concession will not be financed up-front by the government, but rather in five instalments of 20% of the contract value over a period of four years beginning in 2015. This modality, locally referred to as llave en mano, or turnkey, implies that the succeeding governments will be held responsible for fulfilling future payments.

Carlos Fábrega, the vice-president of Grupo CUSA, told OBG that highway construction in Panama tends to receive positive reception from those directly impacted by projects. “Many people recognise the benefits a highway can bring and companies take on the responsibility of communicating those aspects to the community,” he said. Only in several isolated cases has the government expropriated land.

New Needs

Tourism demand has influenced highway development as well. In July 2013 the Tourism Authority of Panama closed bidding on a 30-km, two-lane highway connecting the cities of Cuango and Santa Isabel, located on the Atlantic Coast in the region of Colón. Some $18m of estimated investment for this project aims to increase the traffic of tourists on the Atlantic Coast and act as catalyst for future development. In July 2013 President Ricardo Martinelli declared in a public address that the Ministry of Public Works (Ministerio de Obras Públicas de Panama, MOP) had already constructed 1000 km of highway during his term.

Due largely to improvements in the transport systems, Panama ranked 37th in the infrastructure segment in the World Economic Forum’s “Global Competitiveness Report 2013-14”, the same as the previous year’s ranking and inching its way up from its ranking of 38th in the 2011-12 report. Within Latin America this score is quite significant, far ahead of regional powerhouses such as Mexico (64) and Brazil (71), the assessment of which curved slightly downwards from the previous year. Indeed, the MOP receives the highest budget, along with the Ministry of the Presidency, for investment projects. Over the period 2012-16, the MOP has plans to invest $2.7bn, of which $723.5m was spent in 2012. Though Panama’s transportation infrastructure has not traditionally been a major obstacle, as in neighbouring Colombia, these sorts of initiatives aim to consolidate the remaining deficits.


Within Panama City, major construction on a new network of 23 intersections began in 2010 and is expected to be fully inaugurated in the first half of 2014. The projects, administered by the MOP and allocated to Mexico’s ICA, the Spanish construction firm FCC, Constructora Meco, Panamanian firms Transcaribe Trading and MCM Global, and Conalvías aim to decongest the infamous traffic in the capital city, which has been exacerbated by a growing population, as well as work on Line 1 of the metro. Once completed, the network will have received a total investment of $1.9bn.

Other projects within Panama City include plans to refurbish the Amador Causeway, already a major tourist attraction that connects the mainland to the three Causeway Islands off the coast. Not only does the project contemplate expanding the current two-lane road to four lanes, but it is also looking to integrate attractive features for visitors, such as green areas, bike lanes and parking along the road. Investment estimates have yet to be announced as the project will also be taken on by the following government.

Not too far away, another major investment will soon be necessary for the Bridge of the Americas, according to Fábrega. Crossing the Panama Canal at the mouth of the Pacific Ocean, the bridge is more than 50 years old and in need of reconstruction. With an influx of residential developments on the western side of the canal, the number of vehicles using the bridge has increased substantially, leading the authorities to designate three lanes in one direction and one lane in the other one, according to traffic flows and the time of the day.


On a much smaller scale, the states’ regional planning offices have continued to administer public spending towards the Community Works Programme (Programa de Obras Comunitarias, POC) and Municipal Development Programme (Programa de Desarrollo Municpal, PRODEM). In 2012 POC investment reached $9.3m, distributed among 1440 projects directly impacting more than 952,000 Panamanians, while PRODEM channelled $8.5m towards improving municipal offices and services. Recent legislation approved the unification of both programmes, along with the Local Investment Programme, to create the National Programme for Local Development, administered by MEF with a budget of $70.78m for investments in 2013.

While public sector investment has boosted the potential behind mega-infrastructure projects, the future also holds bright prospects for purely private initiatives. Emerging industries such as mining will help absorb any of the workers left over after expansion of the canal. For instance, Minera Panamá, a subsidiary of Canada’s First Quantum Minerals, is taking swift strides to become the country’s leading copper extractor and will require extensive infrastructure both for engineering, mines and transport of minerals.

“Panama has traditionally concentrated heavily on services, but we have plans to change that,” Ferná ndez told OBG. “Mining is becoming a huge niche industry that will provide the construction sector with much work in the near future.” However, logistics industries will inevitably continue to flourish in the isthmus, especially once the expansion of the Panama Canal finishes and cargo traffic increases. Port infrastructure in and around the canal is already preparing for the upcoming inauguration. “We have only begun to build the infrastructure this country needs,” Fernández added.

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