Project Management Institute

Panamá City, Panamá

ALL FIGURES QUOTED ARE IN U.S. DOLLARS UNLESS OTHERWISE NOTED.

BY TEGAN JONES

PANAMÁ CITY

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FACTS & FIGURES

Population: Panamá City's metropolitan area is home to roughly 1.14 million people—nearly one third of the country's 3.3 million residents.

Language: Spanish is the official language, but English is widely spoken as well.

Currency: U.S. Dollar/Panamanian Balboa

US$1 = €0.64

US$1 = JPY 106

MARKET WATCH:

Booming transport, financial, mining and construction sectors contributed to Panamá's massive growth in 2007, helping its GDP to jump an impressive 11.2 percent. Rising inflation came on the heels of this surge, however, with a 12-month increase reaching 8.8 percent at the end of March.

The economic woes in the United States are starting to take their toll on Panamá, where the U.S. dollar is widely considered the currency of choice. The cost of living is on the rise, and the country continues to struggle with a high poverty rate. Still, Panamá's economy is expected to maintain its robust growth in 2008 and 2009 with the ongoing development of large-scale projects, including the Panamá Canal expansion.

SOURCES: The World Factbook, Central Intelligence Agency; U.S. Department of State; www.bbc.co.uk, Economist Intelligence Unit—Business Latin America; Reuters

There's more to Panamá City than just that canal everyone keeps talking about. Although the big upgrade plans for the 80-kilometer-long (50-mile-long) waterway tend to dominate any discussion about Panamá's capital, the city is rapidly becoming a Latin American business hot spot. With skyscrapers, conference centers and superhighways filling out the local landscape, multinationals are flocking to the isthmus in droves.

Along with a well-developed infrastructure, the city offers a strong financial pull. Looking to boost growth, the government has unleashed a series of economic incentives. The lineup includes waiving taxes on all foreign-earned incomes for both multinational businesses and individuals, exempting homeowners of new construction from property tax for 20 years and reducing foreign hiring restrictions for multinational corporations opening headquarters in the country.

Combine those factors with the availability of tarifffree imports through the nearby Colón Free Trade Zone and Panamá City becomes an attractive project environment.

U.S. technology giant HP, for one, is planning to open a global services delivery center in Panamá City this year. Gert Uvin, director of services location demand and capacity management, cites the location's technology infrastructure, government commitment and proximity to the United States as reasons for the company's decision.

Project management played a part as well.

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RENDERING COURTESY OF ODEBRECHT

imgA QUICKER COMMUTE

As the population of Panamá City continues to climb, the city's traffic arteries have become more and more clogged. To relieve the congestion, the Panamanian government has sponsored a $189 million project to construct a 3.5 kilometer (2.2 mile), four-lane highway following the city's coastline. The aptly named Cinta Costera, or Coastal Beltway, aims to reduce traffic on the Avenue Balboa, which currently serves 72,000 vehicles per day, and reclaim 32 hectares (79 acres) of land on Panamá Bay. The reclamation will support a large portion of the highway and a 17-hectare (42-acre) public park.

Brazilian engineering and construction firm Odebrecht kicked off the project in October 2007, and Heitor Azevedo, the Panamá City-based technical director, says he expects to close on schedule in May 2009.

With several large-scale construction projects under way at once, resources such as steel, diesel and cement are becoming more costly. Mr. Azevedo says he isn't worried about obtaining the materials he needs for the Cinta Costera project, but recognizes that once the Panamá Canal expansion kicks into high gear in 2009, the materials supply could become even tighter.

“The Panamanian government is building a public training center and has engaged with HP to drive the project, which demonstrates the importance of the project management discipline and the government's desire to benefit from reviewing project management capabilities,” he says.

In emerging markets such as Panamá City, these relationships can make all the difference, Mr. Uvin says.

“While there are many ways Central America could pursue a global competitive advantage, the best way forward lies in improving the business sophistication of the region,” he says. “Public-private partnerships are the only way to get there.”

It doesn't hurt that the biggest project player in town—the Panamá Canal Authority (ACP)—is also looking to advance the capital's project management maturity. Responsible for the operation, maintenance and expansion of the canal, the Panamá City-based organization awarded a program management consultancy contract to CH2M Hill last year.

But the U.S-based consultancy isn't just charged with running the expansion program. It's responsible—in partnership with University of Texas at Dallas, Texas, USA—for training ACP employees as well. Of the 33-person staff defined in the contract, only five will be there for the program's full term. The other positions will slowly transition from CH2M Hill expatriates to local team members.

PROJECTS ACROSS PANAMÁ

THE MELTING POT

Outside of Panamá's booming capital city, transportation and IT infrastructure are less developed. And that can make gaining stakeholder buy-in problematic.

In September 2007, Sorenson Molecular Genealogy Foundation (SMGF), Salt Lake City, Utah, USA, announced a project to collect 1,500 to 2,000 DNA samples from key segments of the Panamanian population. Formerly a Spanish vice-royalty, a Colombian territory and a U.S. protectorate, Panamá's roots reach around the globe. By collecting genetic information from those in Panamá's rainforest, urban areas and everywhere in between, the organizations hope to provide new insights into the country's history and cultural diversity.

Retrieving data from Panamá City and other locations with easily accessible clinics was fairly straightforward.

But connecting with communities outside of the urban grid proved to be more of a challenge. As in the city, the company relied on help from its project partner, Panamá City-based Instituto Conmemorativo Gorgas de Estudios de la Salud, or the Gorgas Memorial Institute of Health Studies.

“Things that we were not going to be able to do alone we were able to do just because of the Gorgas Institute,” says Ugo Perego, director of operations and study research coordinator for SMFG. “They have a system in place to reach even the rural areas—something I could not just walk there and do.”

To secure samples, project team members had to understand native power structures. They also had to navigate an undeveloped network of local roads and identify the areas to avoid during the rainy season. The only way project managers can obtain that kind of information is to build genuine relationships with local partners.

Fortunately, Mr. Perego says, Panamanians are generally happy to be of assistance. “Yes, there is bureaucracy, there are permits,” he says. “You still need to do things the right way, but they are very open.”

PHOTO ON THIS PAGE COURTESY OF IFAD/F. MATTIOLI

FUNDS FOR FARMING

On a farm near Manding in the Los Santos province

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PHOTO ON THIS PAGE COURTESY OF IFAD/F. MATTIOLI

The government of Panamá and the World Bank are teaming up for a new project to help small-scale farmers increase their productivity—and decrease the country's poverty rate.

The project targets the provinces of Herrera, Los Santos and Veraguas, which are home to 70,000 farms with 130,000 cultivated hectares (321,237 acres), according to the World Bank. Set to close in January 2013, the project aims to expand market access for small- to medium-scale farms and increase producer incomes. Making local producers more competitive will create overarching benefits for Panamá's population, 40 percent of which lives in poverty, the World Bank reports.

“The project will bring technical and financial support to some of the poorest rural areas of Panamá to brighten the economic prospects of small-scale farmers,” said Héctor E. Alexander, Panamá minister of economy and finance, at the signing ceremony. “This project supports one dimension of the government's overriding goal of reducing poverty and inequality in Panamá.”

The project's primary activities will include supporting business skills and organizational training for small-scale farmers, identifying and strengthening production chains, and creating alliances between rural producer associations and commercial partners.

BUILDING A BASE

Following the recent relocation of its Central American district office to Panamá City, heavy-equipment manufacturer Caterpillar Inc. announced in late 2007 an agreement with the government of Panamá to build a demonstration and learning center. Slated for completion in 2009, the project is being constructed on a 100-hectare (247-acre) plot of land near the capital.

In addition to the development facility, Peoria, Illinois, USA-based Caterpillar also announced plans in May to build its first Latin American corporate headquarters in the Panamá Pacific Special Economic Area. The $25 million project is expected to create jobs for 300 local citizens, according to EFE News Service. As a part of the project, Caterpillar has committed to improving the area's infrastructure by building electric interconnections and a 1-kilometer (0.62-mile) highway between local neighborhoods and the headquarters.

The projects are aimed at helping the company further its efforts to build a relationship with its Latin American base, says Don Elder, a Latin America project manager for Caterpillar.

“This is a long-term strategic move to get closer to the customer and closer to the market where we can be more responsive,” he says.

Relying on that kind of mentoring, the ACP plans to integrate project management principles throughout the entire enterprise, says Jhan Schmitz, Panamá City-based vice president, CH2M Hill transportation business group and program manager for the canal expansion.

“We are setting about to do something that we will leave in place for the benefit of ACP in future years,” he says.

As part of the effort, staff members are trained on A Guide to the Project Management Body of Knowledge (PMBOK® Guide). And several people on the ACP program team recently obtained the Project Management Professional (PMP®) credential, Mr. Schmitz says.

“[ACP] wanted training services that would be consistent with PMI and the PMBOK® Guide,” he says. “We felt that was very good in terms of training them for the day they would have to undertake program management of something that was much more complex and of a magnitude they had never experienced before.”

THE BIG EVENT       PANAMÁ CANAL

By far the city's largest initiative is the expansion of the world-renowned Panamá Canal. To accommodate the new class of ships too big to travel through the canal, the Panamá Canal Authority (ACP) has initiated a $5.25 billion program to update the waterway. Slated to close in 2014, the program will:

  • Build two new sets of larger locks
  • Construct a 6.1-kilometer (3.8-mile) access channel
  • Create wider, deeper shipping lanes that can contain the bigger barges.

Although the ACP introduced the main referendum in 2006, the prep work has been under way for years. In 2001, the organization began widening the canal, stretching it to 192 meters (630 feet) in straight areas and 222 meters (728 feet) in the curves. Eventually, the expansion will enable two wide-beam ships to travel safely in either direction through the canal. Most of this work, which required the removal of 23.2 million cubic meters (30.3 million cubic yards) of dry material and 12 million cubic meters (15.7 million cubic yards) of underwater material, is already finished. But an additional project to straighten some curves is still under way and is expected to close in January 2011.

Similarly, the channel-deepening project began in 2002 and involved dredging 6.7 million cubic meters (8.8 million cubic yards) of material from the canal. With an estimated close date later this year, this project will augment the canal's overall water reservoir volume by 25 percent, reducing the effect of drought on both the shipping industry and local communities.

But one of the most complicated projects proposed is yet to come: the construction of a third lane created through the addition of two lock complexes at each entrance to the canal. The ACP is slated to award the contract for the locks' construction and design by the end of this year.

To coordinate the independent program pieces, ACP leaders knew they needed stronger management support. So the authority established a department of engineering and program management in 2007. In partnership with CH2M Hill, the ACP uses the department to define the policies and processes used in the administration and execution of the expansion program.

The goal, of course, is to keep the canal running smoothly.

“We want to keep the canal operating efficiently to provide the best service possible to our customers while we're doing this job,” says Jorge Quijano, executive vice president, engineering and program administration at ACP.

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GREEN GOVERNMENT

The U.S. embassy in Panamá City has added some green to its traditional red, white and blue color scheme. Incorporating a wide range of sustainable technologies and strategies, the building earned the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) certification in March.

Project leaders improved the building's energy efficiency by upgrading the roof insulation and heating, ventilation and cooling standards. Nearly one-third of all building materials were produced within 500 miles (804.6 kilometers) of the project site, decreasing the amount of energy used in construction. The U.S. Department of State also provides an educational program for the building's inhabitants to ensure they get the maximum benefit from the design's green elements.

The Panamá City compound is only the second U.S. embassy to receive LEED certification. The first was in Sofia, Bulgaria.

TALENT WOES

Panamá City's increasingly complex projects and programs have brought the importance of strong talent to the fore. Yet finding specialized workers can prove challenging in such a hot market. And some labor groups have used the increased demand as leverage to voice long-standing concerns. For all of its growth, the country still faces a high rate of poverty—making the country ripe for protests.

In February, thousands of people took to the streets in support of a call by the construction workers' union for more stringent industry health and safety standards, better wages and a freeze on the cost of groceries. The Panamanian government passed the union's safety legislation after a day of negotiations. Now companies will have to make significant upgrades to meet the new requirements, Eduardo Rodriguez, head of the Panamanian Construction Chamber, told EFE News Service.

The IT workforce is getting an upgrade as well.

Although Panamá City's telecom infrastructure and facilities are well-developed, Cisco Panamá has been strapped for the talent it needs to provide more advanced services, such as data-network implementation.

“The country is expanding at such a rapid pace that there is hardly enough certified and trained personnel to operate and support the infrastructure,” says Jose Troitiño, Panamá City-based manager at Cisco Panamá.

The company has attempted to bolster the workforce by opening seven of its training academies in the country. And since the program's inception in 2000, 4,585 students have attended.

Talent troubles don't seem to be stunting Panamá City's exponential growth yet.

The Woodlands, Texas, USA-based Benchmark Hospitality International has committed to building three hotels in the capital, with the first to open in October 2009. With both a flurry of international projects bringing team members to town and a booming tourism industry, the capital would seem like a solid investment.

“Panamá City has become what is called the ‘hub of the Americas,’ but it lacks adequate hotel infrastructure at international levels,” says Juan Carlos Contalba, the company's director of international development.

Of course, it's not just hotels that are under construction. So to get the project staff it needs, Benchmark Hospitality is teaming up with Panamá City-based developer Proyectos Construccion Administracion S.A.

Having a local partner has helped ensure the company has the right people, Mr. Contalba says.

But building that relationship took time. As in most of Latin America, courtship is embedded in the Panamanian business model.

“Business ventures are a result of relationships,” Mr. Contalba says. “People have to trust you. They have to like you and they have to obviously know that you know what you're talking about.”

And given the booming market, if they don't like what they see, they just might find a different project partner. PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK SEPTEMBER 2008 WWW.PMI.ORG
SEPTEMBER 2008 PM NETWORK

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