ISTHMUS INDUSTRIES

Panama 2018 | INDUSTRY | FOCUS: ADDED-VALUE LOGISTICS

Added-value logistics and global logistics hubs are buzzwords around the Panamanian isthmus, but how does one actually become a world-class leader in such terms?

Along the expansion of the Panama Canal comes the strategic desire for Panama to become a top logistics hub and capitalize on added-value logistics. Economic potential for getting this formula right is massive. It will take more than just adding warehouses and industrial parks, it will also require a deliberate strategy.

The Logistics Cabinet of the Panamanian government passed, in April 2018, a National Logistics Strategy to fit this requirement. Originally conceived in 2015 as a 15-year strategy, it is now 12-year strategy that aims to make an Interoceanic Zone, or Canal Zone, the worldwide leader in value-added logistics. The main tenets of this zone: innovation and global connectivity. Also in 2018, the Ministry of Commerce and Industries (MICI) helped launch the region's first Global Center of Excellence in logistics and industry, collaborating with DHL for the project. This Global Center of Excellence is being established to fully support the aims of the National Logistics Strategy. President Juan Carlos Varela went to Germany in 2016, and the center is direct result of that mission—a result that Panama is hoping will attract multinational companies across industries to set up along the isthmus.

The Latin American iteration of the Global Centers for Excellence is based off of DHL's model in Singapore. Singapore's Global Center for Excellence aims to make the urbanized, island city-state a hub in the South Asian region. The name of the game in Singapore is quality, as quality control is the key to maximizing efficiency.

Minister of Commerce Augusto Arosemena expects Panama's Global Center for Excellence to similarly propel to country as a preferred hub for industry, logistics, and transport. One of the main focus areas of the center is making available solutions for industries to thrive.
DHL, as a partner, is keen to help develop and sophisticate Panama's industry sub-segments because more industry opportunities means more demand for logistics and transport. According to DHL's Panama Country Profile, the canal expansion and center for excellence will increase capacity by 5,000 pieces per hour, a 250% increase from before creating the hub. This augmented capacity for logistics and transport will represent a magnified opportunity for industry.

With the right strategies, policies, and partners in place, the Colón Free Trade Zone (FTZ) along the canal is better equipped to fulfill its role in Panama's industrial ambitions. Already the largest FTZ in the western hemisphere and second largest in the world, the zona libre is dedicated to re-exporting, making the opportunity for value-added logistics hub. Colón FTZ supplies goods to other free zones across the globe—to China, Taiwan, Japan, and South Korea to the west and France, the UK, Switzerland, and Italy in the east.

Not to mention, Panama's plays a significant role in the region, and the region a reciprocal role for Panama. The Latin American region accounts for some 83% of exports from Colón FTZ. Cataloging Panama's growth in value-added industries first requires taking stock of the current situation. Via Santander's Trade Portal, we know industry only contributed 15.6%, employing over 18% of the workforce, in 2017. The main sub-segments within industry included food preparation, dairy products, sugar refinery, clothes manufacturing, petroleum products, chemical products, paper products, printing, furniture manufacturing, and construction. There was an uptick in industrial production in the first three quarters 2017 following the expansion of the Panama Canal, and IndexMundi puts 2017's industrial production growth rate at an estimated 4.7%. Added to the mix of things supporting Panama's industrial targets are the stable economy and political climate, making the country's ambitions to become an added-value power player in the region and beyond a likely proposition. Strategic industry along the isthmus is paramount to building Panama's logistics hub.