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Panama Canal Expansion

The Panama Canal Expansion is a $5 Billion (US Dollar), ten year project to double the capacity of the Panama Canal. The Panama Canal is the system of man made channels, locks, dams, and artificial lakes that connect the Pacific Ocean to the Atlantic Ocean across the Isthmus of Panama. Since its completion in 1914 the Panama Canal has allowed shipping to cross the fifty mile wide isthmus at the narrowest part of the Americas. The Panama Canal locks allow ships to enter the system from either ocean and to be raised to the level of artificial Lake Gatun, 26 meters above sea level, to transit central Panama before being lowered to sea level on the other side.

The Panama Canal locks, finished in 1914, do not allow passage of the world’s largest ships. The new locks and widened shipping lanes will allow passage of larger, “post Panamax” vessels.

Panama Canal Expansion Financing

On October 16, 2008 the Panama Canal Authority announced lenders and debt financing structure for the first half of the estimated 5.25 Billion USD Panama Canal Expansion. Lenders include the European Investment Bank, the Japan Bank for International Cooperation, the Inter-American Development Bank, the International Finance Corporation, and the Corporacion Andina de Fomento. The average interest rate will be 5.49% and the loans will be for twenty years with a ten year grace period. The Panama Canal Authority will cover the debt repayment with its cash flow. The high credit rating of the Panama Canal Authority which allows these loans is a reflection on its professional management and upon Panama’s economic growth and prospects.

The breakdown for financing of the Panama Canal Expansion’s first $5.25 Billion USD of an estimated $10 Billion USD project is shown on the following table.

ACP administrator, Roberto Aleman said [that the ACP] "has not made a decision yet" whether they would announce a further toll increase next year. The last toll increase took place in 2006 extending the 30% increase over a period of 3 years.

"We are confident that this financing package will provide the financial backing the ACP need for the [Panama Canal] expansion program," said Aleman. "This signifies complete trust and confidence in the solid financials and management of the ACP and the strength of the Panamanian economy," he added. The participation of the multilateral agencies shows their confidence in a well structured project and the importance of the Canal in the world economy and global trade,” said Aleman.

Moody’s recently gave ACP an A1 rating as a “government related issuer” and a grade A2 rating for the $2.3B loan for the Panama Canal Expansion.

We wish to call the attention of those interested in investment in Panama to the Moody’s rating and Mr. Aleman’s comments regarding the strength of the Panama economy. When Panama took over the management of the Panama Canal there were many worries about efficiency, corruption, and possible insolvency. In the years since Panama took over the Panama Canal has improved transit times. The Panama Canal Authority is seen as an excellent investment by the above noted lending agencies.

Investment in Panama has succeeded in the last decade or more as Panama has poured investment into its infrastructure and maintained an investment-friendly attitude. Investment in Panama real estate has done well whether for investment in homes by retirees or investment in commercial real estate by those hoping to grow their fortunes with Panama’s prosperity.

If you are interested in investment in Panama real estate contact us at ABPanama where we have over 23 years experience managing real estate portfolios.