Panama and Houston Strengthen Strategic Partnership
By Amb. Juan Sosa, general consul of Panama in Houston
The Panama Canal inaugurated its third set of locks on June 26, 2016 amid a wave of enthusiasm that large infrastructure projects usually have in a small country.
In the case of Panama, the expansion of the canal goes well beyond emotion as the country updates its stature as one of the premier trade corridors in the world.
For Panama, this is nothing new. The country, whose seal reads Pro Mundi Beneficio (for the benefit of the world), has a 500-year history serving the world’s trade needs beginning with the first trade corridor in continental America when a trail was established between the port of Portobelo in the Atlantic Ocean and Panama City in the Pacific. This route served to move people, goods and gold from South America to Spain. Portobelo became famous for its 40-day fairs where trading was done between the old and new world.
In 1848, a maritime route was established between the east and west coasts of the United States and a land bridge across the Isthmus. This was complemented in 1856 with the construction of the first cross-continent railroad whose main mission was transporting people from the east coast of the U.S. to the west coast who were attracted by gold discoveries in California. Panama became the “gold route” as the precious metal was shipped back to the east coast through Panama.
Panama again made history in 1914 as the United States built the Panama Canal at a cost of $375 million—the largest infrastructure project undertaken by the U.S. at that time. The results of the canal during the first half of the century were modest as the world was affected by the cautious post World War I period, the great depression, an increase in import duties, and then World War II.
The second half of the twentieth century was another story. Countries became part of trade groups, free trade agreements were signed, trade became an integral part of the diplomatic agenda, container cargo made its appearance and the economies of the Far East became key trading partners with the Americas, most notably, China at the end of the twentieth century. With more trade and bigger ships, the Panama Canal that was built with a 100-year vision, became too small for the bigger ships that were being built and could not transit the old canal.
Panama assumed full responsibility for the administration of the canal on December 31, 1999 in compliance with the Torrijos-Carter Canal Treaty of 1977. The administration of the canal gave Panama control over its most precious asset and the country recognized that the canal and surrounding areas could be the engine of growth of the country. In 2006, Panamanians approved a referendum by 79 percent to expand the canal, an enterprise that was inaugurated in June 2016 at a cost of more than $5 billion.
The expansion of the canal allows bigger container ships that will bring economies of scale and give Houston and Texas the potential to handle cargo destined for the central region of the United States, a territory of 14 states, 82 million people and twenty of the top 100 metropolitan regions of the country.
The implementation of projects that provide Houston and Texas a competitive advantage over west coast ports could be a game changer for designing new trade routes, improving infrastructure in the state, enhancing what are already premier logistics centers in the United States, Houston and Dallas- Fort Worth. This can enhance what is already a robust trade corridor by increasing trade especially with the Far East and the Pacific south and Central America.
Dramatic changes are already taking place in the state. The Port of Houston installed four new post-panamax cranes at its Baytown container terminal last year and recently approved the acquisition of three more. Improvements have been made in the handling of containers at the port and the operation of its multi-modal terminal. A new route of a ship with 6,700 TEUs (twenty foot equivalent unit, the capacity of a container ship), has been inaugurated and the logistic platform is clearly in expansion.
South of Houston, the Port of Freeport is working with the counties of Brazoria, Fort Bend and Waller to establish a trade corridor from Freeport to Rosenberg, a railroad hub in an effort to connect to Dallas-Fort Worth, the main in-land port in the United States. Port Freeport recently inaugurated a container terminal that is serving Mexico, Central America, Panama and the Caribbean.
The lieutenant governor of Texas, Dan Patrick, has appointed a special select committee in the Texas Senate to study the impact of the Panama Canal expansion on Texas ports. Texas has more deep water ports than any other state and several have connections with the Panama Canal. With the development of liquid natural gas (LNG) terminals in Port Arthur/Beaumont, Port Freeport and Corpus Christi, the expanded Panama Canal will allow transit of LNG ships to the Far East, increasing export opportunities for the United States.
Mexico will also benefit. The improvements in the infrastructure of the state and the enhancement of trade corridors with logistics support will improve transportation patterns between Mexico and Texas, making trade more efficient and improving even more the large trade that exists between the two countries.
In conclusion, the opportunities for Texas are enormous but so are the challenges that will require taking appropriate actions within a reasonable time frame to improve trade corridors and strengthen economic opportunities. This will be the real game changer.
