Panama: Beneficial for American business

The relationship between the US and Panama is about to see new heights. The United States, thanks to some economic incentives from the Fed, has perceived a growth of around 4.6% in the expansion of its GDP. I think this is for the second quarter. And if for the third quarter this growth is maintained the country could see some growth peaks that would be similar to those of the past decade, from about 2004. From your point of view—you are heading Panamcham and have been the regional manager for Caterpillar for some years now—how will this growth affect the relationship between Panama and the United States? How would this affect the Panamanian economy? Of course, keeping the canal expansion in mind.

We’ve had an outstanding relationship for a number of years, going back to the founding of the Republic of Panama. I don’t see that changing and now with things like the Free Trade Agreement I only see it getting stronger, both politically as well as economically; number one, the Free Trade Agreement is bringing new companies here. But forget the Free Trade agreement for a moment, new companies were coming here beforehand anyway. For example, Caterpillar and Dell where here before the FTA.

That’s due to a variety of reasons: from stable interest rates, the presence of 91 banks, obviously from a geographical perspective, you can look at it as a place to sell your product or as a regional hub, 33% of the local population speaks fluent English, and that’s very helpful when you’re looking at regional centres, call centres, like what Dell has employed here. Looking into the future, I see the expansion of the Panama Canal making this relationship even stronger, because you are going to see infrastructure development in the United States getting prepared for in places like Louisiana, Florida and up the Eastern seaboard. I see nothing but positive results from what’s currently taking place here in Panama.

The Commerce and Industry Minister, Mr Melitón Arrocha, was telling us that his administration is especially focused on taking advantage of the TPA and sort of forming the exporters of Panama on the niches, the special places the can export into in the US. How do you see this task and how do you see Panama taking full advantage of the TPA?

We need to understand what the TPA is. And if you look at one of our key sectors, the agro sector, we have a number of small to medium sized businesses, so the idea—and that is one of the reasons why AmCham is here—is to be a collaborator, but also help in capacity building, helping these small and medium sized businesses understand what the Free Trade Agreement is, and understand how they can leverage it, I think that’s extremely important. The relationship with the specific commercial organisations, such as the US Chamber of Commerce is also key, and that’s another one of the reasons why we are here, to help facilitate that relationship not just with them, but with some of the municipal chambers that are throughout the country. We went on a roadshow about Panama, going to some of the local chambers in the United States, to help facilitate bilateral trade for our local members, as well as individuals in the US looking to come here. But aside from the US, we are actually under an umbrellawhich is the US Chamber of Commerce, but then beneath that is AACCLA, the Association of American Chambers of Commerce in Latin America, we are building a network throughout the region, throughout Latin America, helping these various chambers from Bolivia, chambers from Brazil, Chile, we’re helping connect these chambers, so the US companies not only are looking to do business in Panama but they can also leverage in the network, in the AACCLA network here in Panama, to go do business elsewhere throughout the region. This is definitely something else that is absolutely key and important looking into the future.

As you said before, it is very important to understand what the TPA is. There are many voices that say that the agreement is benefitting more the US than Panama, because of course of the size of the US economy. Now, Mr Thomas Donohue was saying back in 2010 that TPAs with Colombia, Panama, Korea were crucial to maintain around 400 thousand jobs in the US. From your point of view, is the TPA also benefitting Panamanian jobs?

Absolutely, clearly as I mentioned earlier in the agro industry, and it’s key in this particular industry. But again it goes back to my point about capacity building, and one of the reasons why we as an organization are here is to help improve that. Let’s be honest, the TPA has been in force for a little over a year now. So it’s just starting. In the world of free trade agreements it takes a while to start to see benefits across the board. That’s one of the reasons why Pananmcham is here, to help with capacity building for some of these various sectors. I think we’ve got opportunities for growth in the energy sector, we’ve got opportunities for growth in the commodities sector with Minera Panamá and some of the expanding mining operations here. So it will grow, I agree with you, if you look at the numbers today, we are exporting more out of the US to Panama than vice versa, that’s one of the reasons why we will be working on this regard..

Another of the reasons you’re here, as you were saying, is to project a business image of Panama. When you were back with Proinvex in the US, if I am not mistaken in New York and San Francisco, what was the feeling you got from the US investors on these issues we were just speaking about? The delays of the canal, the grey list, etc. How were they coping with that and what were their main questions?

Everybody’s different, and depending on who you talk to, you get a different story and a different feeling, but overall what I saw in the financial sector specifically, is a lot of optimism about what was going on in Panama, and we have seen increased optimism, again, going back to the free trade agreement, we saw that increased optimism because along with the agreement both countries have to increase transparency and ensure that they are very rigid from a rule-of-law perspective, and that does nothing but help foster business.

Having said that, you did talk about corruption before and that is an issue on people’s minds. American companies looking to go do business elsewhere in the developing world are concerned about that. And that’s another one of the reasons we’re here, is to help work with the political system to foster transparency and rule-of-law, because without that nobody will come here and do business. I see cautious optimism on the part of many, because we’re still worried about the transparency and rule-of-law piece.

Your in charge of Caterpillar here. How is the state of mind of construction companies coming back to Panama? Construction companies in the US have sort of focused on their own market other than the global market. How is this going to change in the next years and what should Panama do in order to attract them?

If you look at the construction market right now, if you just look at the numbers, there are by far more European contractors or Brazilian contractors doing business here in Panama than there are American contractors. That in itself says something. It’s a statement. So, again, it goes back to transparency and rule-of-law.

Our local members would love to see more American contractors come down here because competition breathes, increases efficiency from a cost perspective, it’s better for the consumer because you have more competitors here doing business. So it’s better for the local Panamanian. So we want increased competition, and we want American contractors to come down here and do business.

I’ve seen that you have a lot of activities in the CSR role. PanamCham is a well-known institution here and all over the world. How do you focus your CSR approach in Panama?

For a variety of reasons we focus on CSR. Number one, when you start doing business you need to make sure that you do business sustainably, and in order to build a sustainable business you have to be a part of the community, you have to help the community, you need to ensure that there is an educated community as well. The lack of qualified education, is an issue, so how can we work with local communities to ensure that we help provide them with jobs.

CSR is about economic sustainability, community sustainability, educational sustainability. This is the fifth year we have the CSR award, ad that's one of the ways we help recognize some of the various companies that are doing well within their communities. Most of the major companies have CSR initiatives, so the idea is to look at those CSR initiatives, and help replicate those types of initiatives for other member comapnies who are looking into doing something similar. So we are very proud of out CSR reputation.

We’ve been speaking about some main issues about transparency, clear rules of engagement, education… of course these are all areas in which the government has to improve.  What is the role of the private sector in all of this? What does the Panamanian private sector have to do in order to make a more competitive country?

Foreign Direct Investment is key. As you mentioned earlier, this year is estimated to come to 4.5 billion. That creates an increase in competition, but it also increases the presence of companies here looking for transparency and rule-of-law, and with organizations like AmCham, we are all pushing for an open and transparent government. So I think the more individuals, the more companies and the more people that are here doing business you start to see that noise level increase, and starting to push together in different directions. But I think ultimately, one of the things that we’re very optimistic about is that our current administration seems very focused on this.

We have a responsibility, as various private organizations, to help our employees, and to work with them to ensure that their lives tomorrow are better off than their lives today. Because that’s all of our goals. And I think that's why private companies lobby with the government for various initiatives, precisely because helps do that. So I think it’s absolutely critical that we play our role. Having said that, you know we can talk about it and we can push for it, but the government needs to provide the transparency and rule-of-law.

As an American citizen working and living in Panama. How is Panama treating you? How do you feel here?

I love it. I’ve been here for 7 or 8 years and I wouldn’t have been here if I didn’t love it. It’s phenomenal; it’s a great country. For my kids it’s their home, and for me it’s my home. Having said that, from a security perspective, it’s good relative to the rest of the region, but we need to keep an eye on that, because that can very quickly turn, and over the past couple of years we’ve seen some things happening more recently that concern individuals that are coming here to do business. So I think we need to keep an eye on that.

As a last question, you’re managing regionally Caterpillar, you’re the head of the AmCham here in Panama and if I am not mistaken you’re only 35 years old. How did you accomplish that?

Well, I manage Caterpillar’s global construction business for the region and I’ve been doing that for a while now. We’re able to succeed because we’ve got great people. I just happen to be one of the people that’s involve, but I’m just a piece of an overall team. It all has to do with the people you have around that help you succeed or not.