The big three U.S.-based credit ratings agencies have been slow, to say the least, in handing out upgrades of credit ratings or outlooks for anyone not included in the BRIC nations (Brazil, Russia, India, China) since they were universally lambasted for their poor analysis and risk assessment in the run-up to the global economic downturn. That what makes the late-week gushing over Panama by Moody’s Investment Services all the more noteworthy.
Though leaving the nation’s credit rating unchanged, Moody’s upgraded Panama’s outlook to positive from stable. Perhaps more significant was the agency’s statements lauding Panama’s economic evolution, centered largely on the $5.25 billion Panama Canal expansion project. Said Moody’s, “the Panamanian economy has continued to show remarkable and enduring dynamism, and is well positioned to grow at rates above its potential thanks to the expansion of the Panama Canal and the government's ambitious efforts to improve and modernize the country's infrastructure…Panama continues to be one of the fastest growing and diversified countries in the Baa rated category.”
As discussed in a Selected Topics story in the November/December edition of Business Credit Magazine, the expansion of what had become an antiquated pass-through will allow much larger cargo ships, among other vessels, to travel through canal, opening up much faster and more direct shipping options to and from many ports, especially in the United States. To wit, the biggest benefit to domestic exporters and those abroad is cheaper shipping costs for reasons including less fuel costs because of shorter routes from the biggest ships, the lessened needs for larger ships to stay in ports longer to get a full load and competition largely absent from the market at present. Additionally, the expansion should spur more choice and variety as far as ports that realistically can be used. With an open, expanded canal, ports such as Savannah, New Orleans and Houston become much more important.
Additionally, it expands capabilities of small business exporting efforts routed from the West Coast ports to access emerging economies on the eastern shores of Latin America. This includes the pearl of economies in that part of the world: Brazil. The nation was ranked 10th among nations receiving exports from U.S. companies, taking in $41 billion in products in 2008, according to the U.S. International Trade Commission and a July report from left-leaning Washington think tank the Brookings Institution. And that number is expected to rise among nearly all predictions as Brazil’s growing appetite for products emanating from the transportation equipment industry as well as consumer products aimed at its newly emerging local middle-class and tourists en route there for the 2014 FIFA World Cup (soccer) and the 2016 Summer Olympics.
Brian Shappell, NACM staff writer