Is the Far East losing its magic? Central America offers new vistas with Panama as the Central American fresh and fast seaport-airport logistics hotspot bringing great potential for Trans-Atlantic collaboration with the Netherlands.
This week Panama President Ricardo Martinelli visits Netherlands to discuss trade relations. Panama is apparently a small country with only 3.5 million inhabitants and probably best known for its 100 years old Panama Canal. However, Panama showed an unprecedented economic growth in the past 10 years, the average economical growth was 8.5%. Flying over Panama you will see a dynamic capital with great allure, like Singapore and Dubai. The World Bank ranks Panama as one of the best places to do business in Latin America
Panama might be the future logistics hotspot of Central America. Netherlands and Panama together can strengthen the position as logistics hubs based on the expected shift in trade flows with the expanding Panama Canal. Logistics today represents 24% of Panama’s GDP.
Panama in numbers
Panamanian ports have increased the number of TEUs handled in 2012 reaching a total of 6.8 million (plus 3.4% from 2011). Balboa was the leading port of the Panama port complex handling 3.2 million TEUs, about 47.4% of the gross total. Manzanillo International Terminal moved 2 million TEUs (30.0%), while Cristobal reached 0.9 mln TEUs (12.4%). The port of Colon Container Terminal had the best performance in terms of growth during 2012 (24.0%) handling a total of 0.6 mln TEUs. A new player in the port system is PSA Panama International Terminal who stated to report container movements since 2012.
According to the Panama Canal Authority, the forecast for Panama’s containerised cargo will be 8.4 million TEUs for 2015 and 12.4 million for 2020.
The expanded Panama Canal opens in 2014. Larger ships can now sail through the canal. Panama has all it takes to become the logistics hot spot for the Central American region, in the future linking to other countries in the region with stronger short sea, road and (future) rail connections with deepsea ports in Cristobal/Colon Free Trade Zone, Balbao, Manzanillo and Panama City and Colon Enrique Adolfo Jiménez Airport and Panama Tocumen Airport.
The Panama Canal may become a logistics platform using former US Army terrains for distribution and production facilities. This terrain consists of 900 hectares located at the west side of the access channel of the new pacific locks.
Countries in the Central American region, such as Mexico, Costa Rica, Panama, Guatemala, Honduras, Nicaragua and El Salvador, have joined forces in the Central American Common Market (CACM) and Central American Free Trade Agreement (CAFTA-DR) for e.g. more free trade and customs integration. Europe already has a trade agreement with the countries of the European Union Trade Agreements-Central America Association Agreement (EU-CAAA).
Collaboration between Central America and the Netherlands in both demand driven supply chains and commercial market deployment will lead to better yields of products and more opportunities for value creation.
World Bank LPI
The synergies within different sectors of trade, a more open and diverse economy in Panama dedicated to the importing of goods and proficient exporting services, are the main drivers to attract foreign investments.
In the 2010 report, Panama ranked number 51 out of 155 countries considered in the World Bank study Logistics Performance Indicator (LPI). For the 2012 report, the World Bank ranked Panama as number 61 within the same sample of countries. For actually becoming a regional hotspot improvement is necessary on all aspects: customs, infrastructure, international shipments, logistics quality competence, tracking and tracing and timeliness. The Netherlands holds a number 5 position in the World Bank LPI.
New technologies in the Panama logistics sector should enable to optimise operations in terms of cost and time, allow more visibility in the processes and a better traceability of the products in order to develop metrics for the decision making and demand analysis in the supply chain. These innovations should focus on fast and fresh supply chains, both air freight and sea freight.
Trans Atlantic Fresh Corridor
There are big opportunities for the Dutch mainports of Rotterdam and Amsterdam and Amsterdam Airport Schiphol to connect to Panama’s ports as the ‘gateway to Europe’.
Central America is a region where many commodities, meat, fish and agricultural products are produced; 85% of Panama’s exports are food exports. Dutch trading companies and auctions in vegetables, fruits, flowers and plants (ornamentals), meat and fish offer producers in Central America a commercial, strongly consumer demand driven, springboard to Europe with efficient markets.
At present, Netherlands is the world’s second largest importer and exporter of agrofood, after the United States, and a global hub. Today, Netherlands is the second biggest importing country from Panama (more than 10% of Panama’s export), after the United States. The potential for growth is from 1,2 bln in 2012 to 2 to 4 bln in 2030, and from 20.000 TEUs to 100.000 TEUs (reefer containers only) or more with a stronger focus on modal shift from air freight tot sea freight and growing regional hub functionality of Panama’s sea ports.
Holland’s important logistical hubs, reaching out to more than 500 million European consumers, plus the development of high-quality production methods have enabled the Dutch agrofood cluster to become a global trendsetter and the undisputed international market leader.
Besides a strong trading position and international financial institutions, the Netherlands has innovative ‘fresh supply chain concepts to European markets with multi-modal’ fresh corridors.
Cold chain technology
Innovation in door-to-door temperature controlled supply chain technology, in sea freight and air freight, is necessary for sustainable and fast and fresh supply chains. The use of deepsea reefer containers for fresh products is growing rapidly. This means that the entire supply chain must be monitored with advanced sensor technology; ‘sense and respond’.
With longer chains is a better tactical and operational planning and control needed focused on fulfilling consumer demand over seas. Transatlantic ‘control towers’ will arrange the fresh flows between Central America and Europe. The implementation of open and transparent information platforms like Dutch PortBase and Cargonaut make this possible.
In addition, further innovation is needed to ensure the development of transparency, trade compliance and secure trade lanes, reducing wastage in food chains and more sustainability in supply chains, food safety in supply chains, supply chain finance and public private partnerships.
Research and development
Several dutch universities, collaborating in Dinalog (Dutch Institute for Advanced Logistics), can play an important role in joint logistics innovations:
- Erasmus Rotterdam – MSc port management
- VU University Amsterdam – MSc Transport and distribution and Finance
- Wageningen University – MSc Food Technology and many research project on fresh supply chains (e.g. European Fresh Corridor)
- TU Delft – Trade Facilitation and Compliance and Cyber Security Research Programme
- TU Eindhoven – Fresh Corridor project
- Dinalog Amsterdam – Hogeschool van Amsterdam.
The Netherlands is leading in the development of systems for climate and process control, biological crop protection and natural pollination and plant breeding and propagation of starting material and agricultural crops.
Dutch engineers can support Panama in the development of robust and efficient terminals, Central American transport networks, port expansion and distribution centers.
Walther Ploos van Amstel.