A talk with Daniel Abrego, CEO of ILC, about how Panama is putting itself forward this year.
How did the overall economy perform in Panama in 2017?
While 2016 was marked by the fallout from the Panama Papers and a multi-year low in GDP growth across Latin America, our recovery has shifted Panama into such a higher gear that the country is on track to being the best performing economy in the region. I have always said, even during downtimes, that waiting for an opportunity and perfect market conditions is not my style. That being said, we are lucky our economy is solid, stable and growing and that our people are hardworking and seek new challenges.
Have you seen an impact from the expansion of the Canal?
For sure. During the first seven months of this year, cargo movements at Panamanian ports grew in the double-digit rate and canal transits rebounded to 6% growth from the previous year. This year, the biggest RoRo (Roll on/Roll off) ship passed through the canal. Mexico, now a major car exporter, has begun using the canal to reach the East coast of America. In fact, there is need for a special port for cars from Asia, which can be offloaded in Panama, customized (such as with Spanish language specifications), and then reloaded for destinations across South America. 2017 also saw the biggest natural gas ships pass through the canal and there is the potential to build a port on the Pacific side to supply natural gas. LNG has definitely seen a major impact and gas demand in the Caribbean and Central America is going to surge in the next few years. In Colon, there will be a LNG terminal and power project coming up. So, overall, the impact from the expansion of the canal has been highly positive. But rather than see all this happening solely in the logistics sector, we need to see it extended across other industries such as infrastructure, trade and commerce, labour, education etc. We need to ensure the changes do not remain only at the ports.
What areas of improvements need to be addressed?
We are the only port with two oceans, so logistics will always one major driving force of growth in Panama, but some processes are still slow. For example, getting license approvals for medicines and personal care products, even food registries as well as customs paperwork should be reduced to none (paperless). Acknowledge reengineering is possible. Automation should be developed further in customs too. We must appreciate that the Panama Canal is ours, and it works. It’s proof that we are capable of much more.
Take, for instance, the concept of free trade zones. Customers send orders to a Miami zipcode which then gets forwarded to the rest of Latin America. Why not do this with Panama and make it a major point of redistribution with all the logistics capabilities we have? Make it more welcoming for giants such as Amazon and Alibaba and become a major hub for regional distribution. Our ports and airports are not at maximum capacity or efficiency. And we must simultaneously build up infrastructure and human talent across the country to meet the increasing demand which is coming.
In this regard since the importance of education in various supporting industries is paramount, ILC is collaborating with Universidad del Istmo to fill in gaps that we see in daily operations. I’m especially excited about this joint journey to exchange education and workplace ideas, experiments and internships.
What are your targets for 2018?
We are seeing aggressive growth, that is keeping us in the double digits. Our goal is to continue to provide logistics services for large development projects in transportation, storage, distribution and disposal management. But I do have three priorities for this year. Since we specialize in all stages of supply chain with pharmaceuticals, we are about to tie a deal with a major Indian supplier to bring affordable and wide-ranging medicines to Latin America. Second, we will further develop our consulting services in areas such as business intelligence, process improvement and intra hospital logistics.
Finally, with President Varela’s recent trip to China, a trip to that side of the world is also in the works to welcome Chinese companies looking to further invest in Latin America and we want to facilitate their operations. We’ve got some Chinese giants already and we expect their presence to grow even more. Therefore, we have growth expectations that we are confident to meet and are open to pursuing avenues which we can all benefit from.