Funding options remain hurdle for proposed Panama-David Train Project.

The president of the Panamanian Chamber of Construction, Alejandro Ferrer, considers that the Public Private Association figure could be an alternative for the execution of this and other projects, at a time when the national Government is highly indebted.

For Alejandro Ferrer, president of the Panamanian Chamber of Construction (Capac), it is not unreasonable that the Panama-David train project is executed under the Public Private Partnership (PPP) model.

“The train can be built under this modality, it is feasible, because it involves paying for a project in installments,” said the engineer, in conversations with La Estrella de Panamá .

Ferrer put as a hypothetical case that, if the train costs $5,000 million, the government can start the work without having to put up money and then pay it in installments over a period of 25 or 30 years.

“This model is the one that makes the most sense, at this time, because the government is highly indebted and thus can begin the works without having all the funds,” added the Capac leader.

The challenge, according to the specialist, is the little experience that both the government and the private sector have in working with this model. “It is a new tool, which requires its own structure, which implies that all sectors involved will have to train personnel in its implementation, something that takes time,” he analyzed.

Mónica López, Public Private Partnerships specialist at the Development Bank of Latin America and the Caribbean (CAF), told this medium that a lot of time is required for the country to take advantage of the full potential of the PPP. “PPPs are long-term, they cannot be done from one year to the next. Putting together a project under this model can take up to three years, which is why it cannot be seen from a short-term perspective,” she said.

CAF believes that the country has the “fundamental axes” to attract investments from this perspective, since it has an attractive currency, an adequate legal framework and a robust financial sector.

“Panama has advantages that other countries in the region, which have already applied this model, do not have and that must be taken advantage of,” López highlighted.

So far, the nation only has one project that is being executed with this mechanism, the contract for the rehabilitation and maintenance of the Panamericana Este highway, which is being led by the company Intervial Chile SA.

It involves the maintenance of a 246-kilometer highway that represents the only connection between Panama and the eastern region of the country, with an investment of $45,046,985.34, although it is estimated that there are other projects on the way.

The Minister of Public Works (MOP), Rafael Sabonge, said in an interview with BNamericas that the vision they have for this type of projects involves prioritizing roads and infrastructure in more remote areas. “Resources are not unlimited and there are many needs; So, we have tried to prioritize roads and infrastructure works in regions that are remote and that require roads due to social issues,” he alleged.

“We believe that with the mechanisms of the PPP law (Law 93 of September 19, 2019) and the Panama highway program we must intervene 2,000 km of roads on which around 80% of our vehicle fleet travels.” added the official.

Although the State has focused on the restoration, creation and maintenance of streets, engineer Ferrer believes that the Public-Private Partnership model provides much more, because, “in other countries we see that hospitals have been built, schools and airports, something that would be interesting to apply here.”

Reputational risk

The application of Public Private Partnership (PPP) projects in Panama is a challenge in the country. “The application of PPP works entails a communication risk for companies,” said Margorieth Tejeira, Director of Risk and Corporate at LLYC Panama.

Tejeira, who participated in a panel called APP’s: Transforming infrastructure development in Panama’, on June 18, indicated that, during the last six months, the communication dialogue that was developed in Panama, around the infrastructure sector, increased by 300%.

“This data is the result of information extracted from blogs, social networks and the media,” he explained.

The problem, according to the specialist, is that the largest peaks of dialogue that occurred on the subject, in the last half year, are related to concepts such as “corruption” and “poor quality of works.”

These data mean that, for many companies, being part of a PPP model represents a reputational risk, since these are very extensive projects which are linked to governments that, sometimes, do not have a country vision regarding the improvement of their infrastructure.

For Ana Lucrecia Tovar, secretary of the board of directors of the Chamber of Commerce, Industries and Agriculture of Panama (CCIP), the key lies in strengthening the communication generated about the project. “Every company that is going to enter into a PPP has to consider, from the beginning, the management of communication, because these works are projects that seek to meet citizen needs, so citizens must be involved, so that they can understand the benefits of the work,” he said.

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