Multilaterals Lend $2.3B for Panama Canal

December 9, 2008—Today, IFC and four other development finance institutions joined forces to support the expansion of the Panama Canal, one of the most vital infrastructure projects in Latin America and the Caribbean. Other partners in this effort are the Andean Development Corporation, the European Investment Bank, the Inter-American Development Bank, and the Japan Bank for International Cooperation.

At an event hosted by Panama's President Martin Torrijos, the five multilaterals signed a landmark agreement to provide $2.3 billion for the much-needed expansion, which includes building new water-saving locks and improving navigational channels. The joint financing package will cover a significant portion of the project's $5.25 billion total cost. IFC's contribution includes a $300 million, 20-year loan to the Panama Canal Authority.

This successful cooperation demonstrates the capacity of the multinationals to support strategic projects jointly even during times of financial crisis.

"IFC's participation in the Panama Canal expansion reflects our confidence in the project, which is essential for the country's international competitiveness and economic growth." —Lars Thunell, IFC Executive Vice President and CEO

Expansion is Critical for Panama

The Panama Canal, an important element of the global marine transportation industry, handles 5 percent of marine trade among all major economies worldwide. Its revenues generate significant fiscal resources for Panama, directly contributing about 12 percent to the government's 2007 budget. Expanding the canal will provide the government with additional revenues for improving basic services and infrastructure and promoting social and economic development.

The expansion is also necessary because the canal has reached capacity and faces congestion during seasonal peaks. About 27 percent of the world's container ships are too big for the 50-mile canal, and this figure will increase to 37 percent by 2011. After construction of the new locks, the larger and more economic container ships that have become industry standard will be able to travel the canal.

The expansion is expected to nearly double the canal's capacity upon completion in 2014. Ports, shipbuilders, and the wider shipping industry are already making preparations to take advantage of the new canal. Higher traffic levels through Panama would reinforce the country's position as a major regional transport node, as well as improve the efficiency of global trade flows.

Supporting the Panama Canal

IFC's loan to the Panama Canal Authority is part of a new subnational finance program, jointly developed by IFC and the World Bank. The program provides financing without sovereign guarantees to well-run local governments and public enterprises for essential infrastructure investments.

Supporting the Panama Canal project is consistent with one of IFC's strategic priorities in Central America—helping develop physical infrastructure to improve competitiveness and regional integration. It also complements the World Bank Group's partnership strategy with Panama, which aims to help the government improve and better target the use of its resources, including revenue generated by the canal, to achieve more inclusive growth.

For more information contact:
Adriana Gomez
Senior Communications Officer
Phone: (202) 458-5204
E-mail: agomez@ifc.org