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The health of the Panama Canal affects the economic health of Panama. The recession has reduced shipping rates slightly through the Panama Canal. However, scheduled rate increases meant to help pay for the Panama Canal Expansion, have raised concerns among shippers who have threatened to send ships around Cape Horn instead of pay increased Panama Canal fees. The Panama Canal Authority (ACP) has just announced a temporary plan to reduce rates from the level of the announced increases. This adjustment will last from June 1 to September 30 of 2009.

According its own press release the Panama Canal Authority is “demonstrating sensitivity to customer needs” as it puts a hold on rate increases. However, the way they are doing this is go ahead with the rate increases and then “provide short term cost reduction” to its clients.

The rate increases were to be put into place in accordance with talks that ACP had with the world shipping community. ACP has received loan guarantees of $2.25 Billion for the proposed $5.25 Billion Panama Canal Expansion. ACP has planned to pay the estimated $3 Billion remaining out of revenues. Shippers agreed to the increase in tolls because the completed Panama Canal Expansion will allow more traffic, larger ships, and more profits for shippers.

So, both sides have their argument. Shippers note that the recession makes it cheaper to go around Cape Horn and ACP notes that a deal is a deal. However, economics being what they are ACP is going to raise rates and then give a discount for the next few months.

The Panama Canal, Investment, and Real Estate in Panama

The Panama Canal is Panama’s biggest business. It provides nearly a billion dollars a year for the national treasury and is major employer. As the expansion goes forward there will be a big cash infusion into the country with more jobs for locals and lots of foreign engineers, administrators, and other technical personnel renting or buying real estate in Panama. The ability of ACP and shippers to come to an understanding will go a long way to keep shipping tonnage at reasonable levels as the world works its way out of a major recession.

Panama has avoided the worst of the recession so far and with President Martinelli talking about more job producing mega projects is likely return to its 10% growth rate in a year or so.

Panama real estate is likely to get a boost as the winner of the bid for the new Panama Canal “third lane” locks starts sending personnel for this multi year construction project. Those first few engineers and administrators will be pleased to get good deals on Panama property as the high end of the market continues in “pause mode.” We at ABPanama expect to see prices on high-end real estate remain low for several months before Panama property values resume their climb.

If you are interested in a home or in investment in Panama come to see us at ABPanama. We have over 23 years experience managing real estate portfolios and do business throughout the country.