July 2015 | Commentary | EcoDev

Start Now to Leverage the Benefits of the Panama Canal Expansion

Tags: Ocean, Supply Chain Management, Ports, Transportation, Logistics

Doug Davidson is Global Commercial Banking Market Executive, Bank of America Merrill Lynch, 813-225-8137

The expansion of the Panama Canal, scheduled between late 2015 and early 2016, is one of the most important infrastructure projects of the past century. The upgrades mean that massive post-Panamax ships will traverse the waterway, leading to a significant shift in trade patterns and increased global trade.

Global companies typically grow 15 percent faster, pay 15 percent higher wages, and are 12 percent more profitable than firms operating only in the U.S. market, according to the Florida Trade and Logistics Study 2.0. And, more than half of all U.S. companies have some foreign market involvement, reports the Bank of America Merrill Lynch 2015 CFO Outlook survey.

But what are the best ways to begin or enhance international expansion via the Panama Canal? Consider the following three steps you can take right now:

  1. Establish operations in port cities. The $5.25-billion Panama Canal project has spurred billions of dollars in spending in the port cities along the canal, to make those regions more competitive.Businesses should consider whether any of these areas make sense for expansion plans:
    • Florida. Coastal Florida cities have been upgrading their port systems. Companies with headquarters in Latin America often establish operations in Miami; the expansion makes it logical for companies to consider other cities, such as Tampa Bay.
    • Virginia. Virginia ports are undergoing infrastructure projects to accommodate post-Panamax vessels. Virginia has also invested heavily in its transportation infrastructure, to better move goods to final destinations.
    • Georgia. Federal and commercial entities in Georgia have been courting both U.S. and foreign companies, while developing a coordinated network of transit modes to move products.
    • South Carolina. The Port of Charleston is deepening its harbor to upgrade strategic gateways, which will benefit the already busy port city.
  2. Upgrade supply chain needs. Infrastructure upgrades do not stop with public works projects. Companies need to assess where opportunities exist, and invest in their own infrastructure accordingly.

    For example, one furniture retailer invested in sophisticated supply chain and logistics needs to take advantage of the goods that will come into the East Coast via the Panama Canal. The new infrastructure makes it possible to move quickly, and the company is ready to deliver to customers more swiftly.

    Caterpillar is another example. The company began building a $200-million construction equipment plant in Athens, Ga., which should be operational in 2015, and ready for the larger container ships that will be coming into Savannah.

  3. Invest in business infrastructure. Financial executives need to understand what technology and financial solutions are required to conduct efficient global business. Many banks and other financial services groups offer sophisticated services that allow managers to view data in real time. As companies look to scale growth, they need to have the right tools in place to manage risk and thoroughly understand capital needs. A careful review of offerings with banks or financial consultants is a good first step.

Going forward, U.S. companies have a unique opportunity to grow and gain market share because of the Panama Canal expansion. Now is the time to maintain momentum by focusing on updates to infrastructure and business strategy to take advantage of the new trade route.






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