U.S. economy is significantly affecting Canal traffic
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(panamasol.com) This article from La Prensa about the slow down in canal traffic seems to have significant discrepancies in the toll revenue statements being bantered about. The prospectus put out by the country to refinance it debt show gross canal revenues at about $1.2 billion for 2007 while the article states that 2009 revenues were projected to be $4.56 billion. This must be an error as it could not be possible for the revenues to go up by a factor of 4 in just 2 years. No matter, what’s a few billion here and there?
In any case the canal management now announces a significant slow down of canal traffic for 2009 due to the deteriorating U.S. economy. The canal expansion project was justified based on financial projections of a continued growth in both canal traffic and increased toll revenues. How does this change affect Panama’s plans for the $5-8 Billion dollar expansion? Not much from what I can tell. Everyone expects this to be a short flue that will blow over in a year and they can make up the shortfalls. But what if it does not end so quickly? What if we see canal traffic decline for the next 5 years? How can Panama justify the cost of the expansion in light of a deteriorating world economy? That will be a problem for future politicians to wrestle with.
Canal authorities expect fewer container ships to pass through the Panama Canal in 2009 than in 2008, a sign of economic deceleration.
Summary: Despite the decrease in traffic, officials anticipate an increase in revenues, owing to higher transit charges.
There will be a slowdown in container vessel traffic on the Panama Canal in 2009, according to projections made by the Autoridad del Canal de Panamá (ACP).The decrease is directly attributable to a weak U.S. economy, which is forecast to grow only 1.4 percent next year. The United States is the principal country of origin and destination for the majority of cargo that passes through the Panama Canal.
According to the ACP’s preliminary budget for fiscal year 2009, the total number of ships transiting the Canal will drop 6.2 percent, from 15,142 to 14,210. “This forecast is based on low expectations for the performance of the economy of the United States,” the budget explains, “which forces us to assume a conservative forecast for the movement of containerized cargo from Asia to the United States.””We are projecting that 2009 will be a flat year—almost without growth,” said Canal administrator Alberto Zubieta German. Economic conditions in the U.S. are expected to improve by the end of 2009, signalling the beginning of an economic recovery.
Economist Rolando Gordón concurs with the projections of minimal growth in the U.S. economy in 2009 and with the ACP’s forecast of a decrease in the number of ships transiting the Panama Canal. But he does not think Canal revenues will be affected since tolls were increased last May.
Although toll revenues for 2009 are budgeted at $4.56 billion, $10.4 million below the budget approved for 2008, Aleman Zubieta said those figures will vary at the closing of fiscal year 2008 and that the actual revenue numbers will be higher after the increased toll is accounted for.
Gordón also pointed out that the situation in the U.S. means the Panamanian economy overall is likely to grow far less than in recent years. The ACP’s contributions to the State could be lower, he said, although the draft budget envisages a direct contribution of $774 million for 2009, $86 million more than was budgeted for 2008.
Revenues from all services related to transiting the Canal are estimated at $432.6 million, an increase of $67 million or 18.3 percent over the current fiscal year ending September 30. The cost of most of those services rose 7 percent, with the exception of some piloting services, which rose 60 percent. Insurance costs rose 10 percent, and the cost of using locomotive cables rose 50 percent.
Source: http://primapanama.blogs.com/
