Ocean cargo: Final financing for Panama Canal Expansion Program approved

Patrick Burnson, Executive Editor -- Logistics Management, 10/14/2008

PANAMA CITY, Panama—As global financial markets continue to fluctuate wildly through investor panic, one crucial ocean gateway expresses measured confidence. Indeed, five major multilateral agencies from Europe, Asia and Latin America have offered to finance the Panama Canal expansion project, and the Panama Canal Authority, after months of extensive negotiations.

“The very nature of ocean borne business is cyclical,” said Panama Canal Authority (ACP) Administrator and CEO Alberto Alemán Zubieta. “We have been through the market crisis of 1987, the Asian crisis in the 1990s and the crisis caused by the 2001 attack on the World Trade Center. All of this we have survived, and we are confident that the world’s banks and financial institutions will get through this, too.”

Meanwhile, Zubieta told LM that he is forecasting a slackening of cargo throughput in the coming year due to the erosion of consumer confidence.

“This may have a short-term affect on our projections for Canal-generated cash flow, but we are not worried.”

The $2.3 billion financing package will cover a portion of the $5.25 billion total cost of the project and will be allocated as follows: European Investment Banke ($500 million); Japan Bank for International Cooperation ($800 million): Inter-American Development Bank ($400 million); International Finance Company ($300 million); Corporacion Andina de Fomento ($300 million).

The ACP is the autonomous agency of the Government of Panama in charge of managing, operating and maintaining the Canal. Recently, the ACP received its first-ever prospective investment grade rating. Moody’s Investors Services, one of the world’s top credit rating agencies, gave the ACP an A1 as a government-related issuer, and a prospective A2 investment grade for the possible $2.3 billion financing for the expansion project – thus reaffirming Panama’s growing presence in the global marketplace.