Game changer: The Panama Canal Expansion’s Impact on Global Logistics
One hundred years ago the cutting of a narrow land mass between Central and South America would forever change the world’s East-West trade routes. To date, more than one million ships have passed through the Panama Canal. With a new expansion underway, this historic man-made construction is expected to dramatically increase traffic and international trade.
The expansion will bring new development opportunities to Latin America and the Caribbean – provided neighboring countries can improve their logistics infrastructure. Latin American and Caribbean nations are being held back by logistics costs representing 18 to 40 percent of the final product value, making it hard for them to gain a competitive edge on large emerging economies like China, whose costs are only about eight to 10 percent.
What is the IDB doing to help prepare the region for the Canal’s expansion?
The Inter-American Development Bank has been working to prepare the region for the expansion of the canal by modernizing infrastructure, improving freight transport services, enhancing institutional coordination between public agencies and encouraging participation from the private sector. The IDB is also supporting the development of freight transport and logistics observatories and removing obstacles at international borders. This helps exporters be more competitive and productive.
The IDB is also contributing by:
- Financing programs to design public policies and incentives for better freight transport management
- Financing freight and logistics specialized infrastructures (logistics platforms, multimodal transport platforms, ports and airports and freight consolidation centers)
- Developing national logistics policies and plans
- Supporting the advancement of free-trade agreements within and outside the region that eliminate onerous tariff barriers and modernize customs procedures
- Private sector financing for more efficient equipment that lowers operating costs.
- Providing the workforce with specific logistics management knowledge that allows both the public and private sectors to monitor their globalized supply chains
- Paving the path for freight logistics innovation in the region and much-needed freight transport services and specialization
- Leading the development of methodologies, analysis and knowledge products to increase national logistics performanceWith the right infrastructure conditions, freight transport services and an appropriate competitive environment, the IDB believes it's viable for Latin America and the Caribbean to join strategic global supply chains.