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Caribbean Nations Urged to Take Advantage of Panama Canal Expansion

Caribbean Nations Urged to Take Advantage of Panama Canal Expansion

Posted by Shanelle Weir on June 09, 2014

Caribbean countries are being urged to position themselves to take advantage of greater trading opportunities that may derive when the Panama Canal Expansion project is completed and commissioned by the first quarter of 2016.

When it is completed, the Panama Canal will be able to facilitate the crossing of larger ships between the Pacific and Atlantic Oceans, and, as a result, there would be a need to set up at least two transshipment points in the Caribbean.

Rodolfo Sabonge, expert external adviser for the U.S.-based management consulting firm McKinsey and Co., told the Caribbean Media Corp.that there is already competition among Caribbean islands as to where that transshipment point should be.

“It would be where there are other services and cluster activity, maybe in the maritime sector that would be able to contribute an added value to the shipping lines,” Sabonge said.

He is encouraging the competing Caribbean countries to do an in-depth risk analysis to avoid the pitfalls of making investments where there will be no real opportunities.

“So you need to understand better: What are your advantages? What [do] you bring to the table in terms of competitive advantage? What is the country good for? What other things can be offered or provided as services?

“It’s a challenge, but it’s also an opportunity. You can make something good of it, but if you don’t do the right homework, you can end up with failed dreams,” Sabonge added.

His comments were made during the second day of the CIBC First Caribbean International Infrastructure Conference here as regional governments were being urged to venture deeper into public private partnerships (PPPs) with the private sector.

Richard DesLauriers, a partner in the multinational professional services network Pricewaterhouse, said regional countries should proceed as a regional bloc to enter into PPPs.

He said the Caribbean needs infrastructure and the PPPs can be part of the solution. However, he said based on investor analysis, the economies of most countries in the region are too small and their credit ratings are too weak to interest large private investors and to equitably sustain PPPs.

“Before investing in a project, a lender or investor would look at the probability that it has of being repaid over the long term; the credit rating is an indication of that.

“So if a country has a poor credit rating, lenders will be reluctant to get involved with that government,” DesLauriers said, suggesting that the regional governments whose credit ratings are not favorable to investors seek help from financing institutions such as the Inter-American Development Bank or the Caribbean Development Bank.

On the issue of going forward as a region, DesLauriers said that though PPP projects are done between governments and private investors and at the end of the day, the agreement would be signed by individual governments, presenting the region as a “bloc” is a better marketing strategy.

“To create a better awareness in the market outside the Caribbean that there are opportunities here, these projects could be presented and marketed more on the regional basis … to show that there is a lot of opportunity in the Caribbean.”

He added that going forward as a region will also help to develop a level of expertise that individual governments may be hard pressed to do on their own.

“Each government cannot necessarily afford to create its own body of experts, but there can be sharing of expertise on a regional level between governments,” DesLauriers said.

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