The Port of Balboa, circa 2019. Panama Maritime Authority photo.
A new ports deal could become
the template for other things
by Eric Jackson
Since this past Thursday, May 27 the Panama Maritime Authority (AMP by its Spanish initials) has been in “permanent session to consider the application of Panama Ports, a subsidiary of Hong Kong based Hutchison Ports, for a 25-year renewal of its 1997-2022 concession contract for the ports of Balboa and Cristobal.
Originally the deal called for a $22.2 million base rent, plus 10 percent of gross revenues. However, these requirements were waived in a 2002 decree by then-president Mireya Moscoso under a “parity” deal with respect to other port operations. The deal was again changed under the 2004-2009 Martín Torrijos administration, with the Panama government acquiring a 10 percent stake and presumably that percentage of profits or dividends. However — and the concept is relevant to other concession contracts — there were usually no profits, nor any dividends. Those were eaten up by overhead expenses and capital investments, some visible at a glance in all of those modern new cranes.
So the allegation against Panama Ports isn’t exactly fraud. It’s mostly that they reinvested their revenues in expanding and improving the ports. In the first 23 years and five months of the concession, Balboa and Cristobal reportedly generated $909 million in gross revenues, but Panama only received $8 million. Now it is claimed that with the canal expansion bringing bigger ships what load and unload more containers, notwithstanding the epidemic that ports are much busier and generate more revenue.
This, just at a time when Panama in free falling into a debt crisis and looking to generate more income. Other companies — Maersk subsidiary APM Terminal is one that’s mentioned — have expressed an interest in taking over from the Hutchison subsidiary if no deal is reached..
There is a deadline of sorts. The contract runs out next January and if no deal is reached then by the terms of the original contract there would be an automatic 25-year renewal.
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