Q: The impact of the widening of the Panama Canal on trade patterns is potentially huge. What does it mean for Panama?
A: It is going to change global trade. It is having an impact not only in Panama, but also in the ports on the US eastern seaboard. Billions of dollars [are being invested] in increasing our capacity, and bigger ships will be passing through the Panama Canal. Currently, with the actual configuration, the biggest ship that can go through the Panama Canal can hold up to 4200 containers. With the new set of locks, the capacity will increase to a ship that can hold more than 12,000 containers, so we are almost tripling capacity with these new lock configurations.
You are going to have new trade roads. For example, commodities that Colombia produces on the Atlantic side, coal and gas, will then be able to pass through the Panama Canal on the way to Asia or Asian markets that are consuming these products. There will also be an increased flow of commodities passing from South America to Europe or to the eastern seaboard of the US, as well as an increased flow of goods from Asia to the eastern seaboard.
Q: Do you have any worries about overheating, with such a high GDP growth rate of (the highest in Latin America in 2011 at 10.6%)?
A: Inflation in 2011 was 5.9%, in 2012 it is going to be close to 6%, but a lot of it is imported. Panama imports most of its food, we are not a strong agricultural country. We are a net importer. We fully import oil, so the changes and the fluctuations in oil prices have affected us negatively in that sense.
Also, we are a dollarised country, so we depend on the [US] Federal Reserve's monetary policy. We are [in the third round of quantative easing] already, so that has affected the purchasing power of the dollar, which has a negative impact on us. But if we look at the pros and cons of being a dollarised country, obviously the pros far outweigh the cons of having our own currency. We are an economy working at full [capacity], which I think is positive if you ask the rest of the world.
Q: What are your priorities for FDI?
A: We do not have a central bank and FDI finances our trade imbalance. We are a service-oriented country. We import a lot of goods so that trade imbalance [and] that current deficit, historically, has been financed by FDI. That will change a little bit with a new industry that is starting to take off in Panama, which is mining.
Gold is [Panama's] largest single export. A Canadian company, called Inmet, is beginning investment in a copper mine. It is probably the sixth or seventh largest copper deposit in the world. It [will generate] $6.2bn in the next four to five years that we are going to be receiving, and after that the royalties that the copper exports are going to generate are close to $100m. So that is a new, separate kind of thing we are doing.
Obviously, the Panama Canal, all the logistical services around the Panama Canal – our ports, our financial centre and tourism – is growing at more than 10% a year. These are the key drivers of our economic growth.
Q: Are you worried about economic uncertainties in the neighbouring US?
A: Not so much anymore. One of the things we have been able to do is diversify our economy and our trade partners. We have free-trade agreements with Singapore, Taiwan, central America, Chile and we are [finalising one] with Mexico. We also have a free-trade agreement with the European Community. So that linkage that used to exist between Panama and the US was broken when we [gained control of] the canal. The US has been in a recession since 2008 and we are still on an upturn in our economic growth cycle.