Although historically the Panama Canal has been the top revenue earner, the contribution of canal revenues as a percentage in the transport and logistics sector has been gradually declining. In 2008 income from the canal represented 46.6% of sector GDP, while in 2013 it amounted to 37%. This shows that other transport modalities, mainly land-based cargo, have increased in size. Most of this success comes from the sector’s expanded capacity for intermodal transport options. The most important intermodal transport modes have been maritime-land-maritime, using the railroad, and via truck using the highway.

Rail & Road

The term trans-shipment refers to the cargo that is unloaded and reloaded and has multiple modalities. In some cases the operation is done within the same port from larger transoceanic vessels into smaller feeder vessels. This is the case for cargo that comes from Asia to Central America and South America Pacific. However, in Panama most trans-shipments are land-borne. The railway is operated by Panama Canal Railway Company, which has a 50-year concession on the route.

The company is a joint venture between Kansas City Southern and Mi-Jack Products. On the Pacific side the railway starts at the Balboa terminal, and on the Atlantic side it splits into two branches, one serving the Cristobal port and the second serving Manzanillo International Terminal and Colón Container Terminal via the Coco Solo terminal. Using a trucking service and highways is another option.

Although highway transit time between the oceans is typically less than two hours, sometimes it can take considerably longer, depending on traffic. According to Stacy Hatfield, general manager of Manzanillo International Terminal, “Greater efficiency would be achieved by streamlining Customs processes in ports. This would allow for higher traffic volumes and more revenues for the country.”

Studies by shipping firms estimate Pacific-Atlantic trans-shipment time from vessel arrival to vessel departure is three to four days. The road trans-shipment itself can take four to eight hours from the time the truck comes to the terminal to unloading. Some plans have also considered utilising the canal for trans-shipment using barges or smaller vessels.

New Investments

In January 2015 Panama signed a cooperation agreement with the Development Bank of Latin America. The $545m agreement includes an economic and technical feasibility study for the Puerto Armuelles “dry canal” project. Initially $100,000 will be used by the Panama Maritime Authority to kick off the project, which aims to connect the existing port of Puerto Armuelles in the Pacific coast to a planned new port in the Atlantic coast, in the Bocas del Toro province. The Puerto Armuelles port already has an approval for a special economic zone, which would further incentivise the project.

The connection could be established by building a highway parallel to the Petroterminales oil pipeline or a railway line. The details will be defined in the feasibility study. Chinese investors, specifically Shanghai Haojun Investment and Management, have already shown interest in the project.


Air-based intermodal transport has also increased in the past year. Tocumen International Airport has seen 34% growth in cargo operations in the past seven years, with numbers rising from approximately 82,000 tonnes of cargo in 2006 to over 110,000 tonnes in 2013. A report by Oxford Economics shows that the global air cargo represents just 0.6% in volume but more than 34% in value. In Panama, air transport, including both cargo and passenger travel, represented on average 15% of the transport GDP from 2008 to 2013.

Tocumen International Airport is home to both DHL’s and Copa Airlines’ cargo operations. Together they amounted to a total of 4700 operations and over 50,000 tonnes of cargo in the first half of 2014. The value of the air cargo sector in Panama is estimated at more than $165m annually, according to the International Air Transport Association data. Most of the cargo that comes to Panama via air is destined for regional consumption. Inbound cargo comes to Tocumen airport where it is unloaded and reloaded into trucks for shipping to its final destination within Panama or in neighbouring Central American countries. Outbound cargo has two main sources, the special economic zones, mainly Colón, and Panama’s local products such as fruits, seafood and others. The Panama Centre for Competitiveness estimates that in a short period, DHL may duplicate its cargo activities in the country.

Value-Chain Focus

The centre reports that the air terminal is looking at opportunities such as adding redistribution centres for pharmaceutical firms and partial assembly facilities for IT companies. This would further contribute to the added value chain. Developing logistic services targeted at small and medium-sized enterprises (SMEs), is an increasingly important part of Panama’s transport value chain. Rubén Gómez A, general manager of Correos y Telégrafos (COTEL), told OBG, “Courier providers and the freight forwarding industry need to be able to fulfil the requirements of SMEs which have the potential of exporting their products.”

Another important source for intermodal air transport is the Colón Free Zone (CFZ). Enrique Herrera, international affairs and air transport regulation coordinator at the Civil Aeronautic Authority, explained to OBG that “Cargo comes via ship and it is re-exported via air. Today, the biggest amount of cargo is loaded into trucks and brought to Tocumen airport.” He also explained that the need to re-export cargo from the CFZ is the main reason for the construction of the Colón Airport, which should be operational in 2015.

The intermodal business has matured greatly from the first import/re-export schemes. However, it is unclear if the containerised cargo trans-shipment will continue to flourish after the expansion of the canal is completed. Some of the container volume that today is unloaded and reloaded, particularly that going from large vessels to large vessels, may decrease, since the new expansion will allow for larger vessels to cross, making trans-shipment unnecessary. However, the sector’s recent specialisation into more added value activities centred around Panama being a regional hub could make up and surpass such losses. Important upcoming works like the Puerto Armuelles dry canal and the opening of the Colón Airport will increase the importance of the intermodal subsector. As the country diversifies its transport and logistics offer, an increasing number of companies are willing to take advantage of the multiple opportunities available in Panama.

A number of challenges are still to be tackled though, such as infrastructure and Customs integration, paperwork standardisation and bottleneck reduction, but with a firm commitment from all key sector participants Panama could be on its way to further consolidate the country’s position as one of the top multimodal logistics hubs around the globe.