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Rethinking Panama (JOSE MIGUEL GOMEZ/Reuters)
Rethinking Panama (JOSE MIGUEL GOMEZ/Reuters)

Fred Blaser

Rethinking trade with Panama Add to ...

It's been a year and a half since Canada and Panama signed a free-trade agreement that creates important opportunities for Canadian producers. Parliament should ratify it.

Panama may have a small economy, but it thinks big. During the past three years, a bad time for most of the world's economies, Panamanian output grew, on average, by a robust 5 per cent a year. In the previous five-year period, Panama had the fastest growth of any Latin American country, with the real value of national production increasing by an average of more than 9 per cent annually.

Even more important, Panama is a country with a plan. Its goal is to become the world's third great logistics centre, after Hong Kong and Singapore, by focusing on three pillars: advanced logistics, a unique commercial centre, and a strong banking system.

A new, $5.3-billion canal, scheduled for completion in 2014, will allow passage of most of the new generation of container ships. As a result, Panama will continue - for at least several decades - to be part of the main sea route between Asia and North America's east coast.

Two modern super ports - operated by Danish shipping giant Maersk, and Hong Kong-based Hutchison Whampoa - are already in place to serve canal operations. Meantime, Panama City's Tocumen International Airport has more connections to South America and the Caribbean than any other airport in the hemisphere.

Infrastructure for ordinary Panamanians is also growing impressively. Last month, Panama City started work on a $1.5-billion subway, Central America's first, and announced plans for three additional lines.

Another component of national development involves vast warehouse facilities on the Caribbean coast, an hour from the capital, to which wholesalers from all over Latin America come to buy Asian products at competitive prices, without the expense and trouble of going to Asia.

As far as banking is concerned, investors from unstable countries throughout the hemisphere have relied for decades on Panama's financial system, as a secure haven for their savings.

To achieve its goal, Panama needs to deal with several serious challenges. Too many Panamanians, for instance, are uneducated and unskilled. Panama has the third-highest gap between rich and poor of all Latin American countries, and 40 per cent of the population earns $10 or less a day. On the other hand, the government of Ricardo Martinelli plans to spend close to half of its proposed $14-billion budget over the 2010-2014 period on services related to education, health, housing and social welfare.

At the same time, Panama is shedding its reputation as a haven for drug traffickers, who want to launder money, and for residents of other countries who seek to evade domestic tax obligations. Under tax agreements being negotiated with nearly 20 nations, a country that presents evidence of evasion can get information about accounts in Panama, directly or indirectly owned by its taxpayers. Panamanian financial institutions, meanwhile, have adopted international rules, making it hard to move illicit funds through local bank accounts.

Since Panama has a small agricultural sector and makes few manufactured goods, Canadian producers have excellent opportunities in the Panamanian market, in areas that include wheat, processed and frozen foods, and industrial equipment and machinery. They would have better access to the Panamanian market if the free-trade agreement came into force.

Panama has reinvented itself. It's time for Canada to rethink its approach.

Fred Blaser is co-chair of Republica Media Group of Central America.

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