Panama City, Panama – Benjamin Colamarco took over as head of Panama’s Ministry of Public Works one year ago at the request of President Martín Torrijos who is now in his second term of office. The 49-year-old economist previously served in both the Ministry of Economy and Ministry of Housing.
The Ministry of Public Works is responsible for Panama’s more than 17,000 kilometers of roadway. Less than half of this is paved. The ministry also oversees public investment in infrastructure works. These have become critical topics in recent years with the dramatic increase in construction.
The country’s recent housing boom and the promise of the $5.25-billion expansion to the Panama Canal has increased the need for infrastructure upgrades. This has been most visible in the prioritizing of many long-needed road projects.
Earlier this year, the ministry awarded Brazilian construction firm Odebrecht a 25-year concession to construct and operate a 42.7-km stretch of highway between the northern Atlantic coastal city of Colón south to the Madden dam, on the eastern side of the Panama Canal.
The two-year, $216-million project will create an alternative route across the isthmus to the Transístimica highway, which runs parallel to the Panama Canal between Colón and capital Panama City. That roadway is currently undergoing substantial repair and upgrade work.
ENR spoke with Minister Benjamin Colamarco over the dangers Panama faces in light of the current construction boom and the steps the ministry is taking to handle them.
What is the situation in Panama right now?
Panama is at the most critical point in its development in the last 20 years. In terms of macroeconomic indictors that measure overall financial health, the financial health of the national government, Panama has done extremely well. In 2006, economic growth was 8.3 percent and that is ahead of the entire region for 2006. We ended the year with zero macrofiscal deficit. Just two years ago we were dealing with a fiscal deficit of more than 4.5 percent and today it is zero. It is the same with unemployment. Unemployment has dropped over the past two years from 13 percent to 8.7 percent.
How has the Ministry of Public Works reacted to that?
The Public Works Ministry is carrying out a program of investments the likes of which has never been seen before in the Republic of Panama. In 2006, we invested $211 million in public works. In the 2007 budget we are will increase that to $273 million. But this is just a portion of the investments since it only represents the annual budgets. The total value of works underway right now is greater than $915 million. That’s an enormous investment for this ministry. We are constructing new roads and we have a series of projects to improve and upgrade the existing road network in the country.
How is the ministry dealing with the growing demand for infrastructure?
Right now, what is most important is to establish the priorities in the infrastructure work execution. Since we are dealing with a finite budget we must prioritize the main axes of the road network that we must improve, to extend, to rehabilitate or to recover what we already have. That is what we are doing now. We have a master plan approach that enables us to identify the tactically important points and to address those systematically. Over the last the two years the number of contracts for public works has fully surpassed the average of last the 15 years. The demand for public works that the state is generating is causing us to put more and more of these contracts out to bid. But we simply do not have the resources right now to handle everything that needs to be dealt with.
How has the government been able to keep up with that demand?
One way the government is moving forward on different projects has been working to introduce private investments in collaboration with the government – public private partnerships, PPPs. Although the legislation approving PPPs has not been approved, we are working toward getting it in place for future work. It is important we have this in the future because the funds of the government to do these projects are limited. This would be important because it is a way to obtain private financing that does not affect the sovereign debt of the country because there is no affect to the state because there is no direct loan from the state. Instead that loan is a trust made through commercial banks that are the real financing source for the project.
Can Panama keep up with this amount of growth in the construction sector?
The massive growth in real estate has pushed development across the board. There is a growing demand on the part of private companies for the construction of buildings, marinas, ports, houses, hotels. Then since there has been this high demand, the Panamanian companies have or are arriving at their limit of capacity to commit themselves in the construction of works. Panama has an open economy and is the interest of the national government – who has the responsibility to see these public works become reality – to open the door to companies that can do them. And that could mean foreign companies from the United States, from Canada, from England, from Italy, from France, from Spain, from Brazil. Many of these can enter our national market though associations with Panamanian companies or nationalizing companies – registering their, companies in the public registry of Panama.
Is there a danger the foreign firms will limit the Panamanian firms’ ability to compete?
The construction market in Panama is growing very rapidly. In construction alone there are 60,000 employees at work today. Imagine the number of workers when other works are bid, when the Panama Canal expansion jobs are bid. The Panama Canal is going to increase to the demand of contractors who directly or indirectly are going to be involved with the extension of the Panama Canal. For this reason it is very important we makes sure there is a sufficient capacity of contractors to meet the high demand of construction projects in Panama.
What a re the key challenges facing Panama given this amount of growth?
There are three problems Panama has to deal with to continue growth. First is infrastructure. The amount of money being put into these works is not sufficient given the amount of development projects throughout the country. We must improve the infrastructure, we must improve basic services, energy, potable water, sanitary sewage system and must improve the transport. In infrastructure we are investing of the BIF, investment is a total of 1250 million dollars, of public investment.
The next problem we have to contend with is providing the number of qualified workers to meet the demand of all these different projects. The government is committed to investing in the human capital that is needed and to do that the government has started a program, INADEH, which is currently training 35,000 workers and has the capacity to train more than 200,000 by the end of 2007.
The third problem is having the equipment and raw materials in the amounts that are needed to take care of the growing number of construction projects, public infrastructure works and the expansion of the canal. The supply is limited now but when the canal expansion gets started there is going to be a boom in demand for products and contractors.
This is an economic situation of supply and demand. We are considering expanding the capacity the country of material suppliers, possibly by changing taxes on construction and plants asphalt processors, refineries. Our role is to act in order to ensure inflationary pressure doesn’t drive the prices to the point it affects the national market.