Here is a great interview in World Folio magazine with David Carius, the head of Panamcham and regional manager for Caterpillar about the business relationship between Panama and the US.
President of Panamcham, Mr. David Carius, sits down with United World to discuss how trade agreements and other changes make Panama an enticing place for doing business.
The relationship between the US and Panama is about to see new heights. The United States, thanks to some economic incentives from the Fed, has perceived a growth of around 4.6% in the expansion of its GDP. I think this is for the second quarter. And if for the third quarter this growth is maintained the country could see some growth peaks that would be similar to those of the past decade, from about 2004. From your point of view—you are heading Panamcham and have been the regional manager for Caterpillar for some years now—how will this growth affect the relationship between Panama and the United States? How would this affect the Panamanian economy? Of course, keeping the canal expansion in mind.
We’ve had an outstanding relationship. We’ve had an outstanding relationship for a number of years, going back to the founding of the Republic of Panama. I don’t see that changing and now with things like the Free Trade Agreement I only see it getting stronger, I think both politically as well as economically, for a couple of reasons; number one, I think if you look at it, the Free Trade Agreement is bringing new companies here. But forget the Free Trade agreement for a moment, new companies were coming here beforehand anyway. For example, Caterpillar was here before the Free Trade Agreement, Dell was here before the FTA.
But there are a variety of companies that have come here prior to, and that’s due to a variety of reasons: from stable interest rates, 91 banks, obviously from a geographical perspective it’s extremely important, you can look at it as a place to sell your product or as a regional hub, 33% of the local population speaks fluent English, and that’s very helpful when you’re looking at regional centres, call centres, like what Dell has employed here. Looking into the future, I see the expansion of the Panama Canal making this relationship even stronger, because you are going to see infrastructure development in the United States getting prepared for in places like Louisiana, Florida and up the Eastern seaboard. You are going to see that roads, rail, companies coming together much more so than you are right now. I see nothing but positive results from what’s currently taking place here in Panama.
The Commerce and Industry Minister, Mr Melitón Arrocha, was telling us that his administration is especially focused on taking advantage of the TPA and sort of forming the exporters of Panama on the niches, the special places the can export into in the US. How do you see this task and how do you see Panama taking full advantage of the TPA?
All in number one, we need to understand what the TPA is. And I think if you look at one of our key sectors, the agro sector, I think we have a number of small to medium sized businesses in this sector, so the idea—and that is one of the reasons why AmCham is here—is to be a collaborator, but also help in capacity building, helping these small and medium sized businesses understand what the Free Trade Agreement is, and understand how they can leverage it, so I think that’s extremely important, but the relationship with the specific commercial organisations, with the specific US chambers in the United States is also key, and that’s another one of the reasons why we are here, is to help facilitate that relationship not just with the US Chamber of Commerce in DC, but with some of the municipal chambers that are throughout the country. We, as a matter of fact, went on a speaking tour, if you’d call it that, going to some of the local chambers in the United States, talking about Panama, helping facilitate that trade, because, again, we’re here to help facilitate bilateral trade for our local members, as well as individuals in the US looking to come here. But aside from the US, we are actually under an umbrella where the umbrella organisation is obviously US Chamber of Commerce, but then beneath that is AACCLA, the Association of American Chambers of Commerce in Latin America, what we’re doing is we are actually serving, leveraging ACCLA, we are building a network throughout the region, throughout Latin America, helping these various chambers from Bolivia, chambers from Brazil, Chile, we’re helping connect these chambers, so the US companies not only are looking to do business in Panama but they can also leverage in the network, in the AACCLA network here in Panama, to go do business elsewhere throughout Latin America. So I think that’s something else that is absolutely key and important looking into the future.
As you said before, it is very important to understand what the TPA is. There are many voices that say that the agreement is benefitting more the US than Panama, because of course of the size of the US economy. Now, Mr Thomas Donohue was saying back in 2010 that TPAs with Colombia, Panama, Korea were crucial to maintain around 400 thousand jobs in the US. From your point of view, is the TPA also benefitting Panamanian jobs?
Absolutely, clearly as I mentioned earlier in the agro industry, and it’s key in this particular industry. But again it goes back to my point about capacity building, and one of the reasons why we as an organization are here is to help improve that. Let’s be honest, the TPA has been in force for a little over a year now. So it’s just starting. In the world of free trade agreements it takes a while to start to see benefits across the board. That’s one of the reasons why Pananmcham is here, to help with capacity building for some of these various sectors. I think we’ve got opportunities for growth in the energy sector, we’ve got opportunities for growth in the commodities sector with Minera Panamá and some of the expanding mining operations here. So it will grow, I agree with you, if you look at the numbers today, we are exporting more out of the US to Panama than vice versa, that’s one of the reasons we are here.
Another of the reasons you’re here, as you were saying, is to project a business image of Panama. When you were back with Proinvex in the US, if I am not mistaken in New York and San Francisco, what was the feeling you got from the US investors on these issues we were just speaking about? The delays of the canal, the grey list, etc. How were they coping with that and what were their main questions?
Everybody’s different, and depending on who you talk to, you get a different story and a different feeling, but overall what I saw in the financial sector specifically, I saw a lot of optimism about what was going on in Panama, and we see increased optimism, again, going back to the free trade agreement, we see that increased optimism because along with the free trade agreement both countries have to increase transparency and ensure that they are very rigid from a rule-of-law perspective, and that does nothing but help foster business. So I think we are very optimistic.
Having said that, you did talk about corruption before and that is an issue on people’s minds. American companies looking to go do business elsewhere in the developing world are concerned about that. And that’s another one of the reasons we’re here, is to help work with the political system to foster transparency and rule-of-law, because without that nobody will come here and do business. But again, I see optimism, but I see caution; cautious optimism on the part of many, because we’re still worried about the transparency and rule-of-law piece.
Your in charge of Caterpillar here. How is the state of mind of construction companies coming back to Panama? Construction companies in the US have sort of focused on their own market other than the global market. How is this going to change in the next years and what should Panama do in order to attract them?
If you look at the construction market right now, and if you look at the various contractors that are here in Panama doing business, if you just look at the numbers, there are by far more European contractors or Brazilian contractors doing business here in Panama than there are American contractors. That in itself says something. It’s a statement. So, again, it goes back to transparency and rule-of-law.
And I think our local members—we’re always looking to facilitate that relationship between local contractors, like Constructora Urbana, our local contractors and international contractors, and we’d love to see more American contractors come down here, not because I am American, but competition breathes, increases efficiency from a cost perspective, it’s better for the consumer because you have more competitors here doing business. So it’s better for the local Panamanian. The more the increasing competition, the more cost competitive it is, and the more efficient the solution is for the local Panamanians. So we want increased competition, and we want American contractors to come down here and do business.
I’ve seen that you have a lot of activities in the CSR role. PanamCham is a well-known institution here and all over the world. How do you focus your CSR approach in Panama?
For a variety of reasons we focus on CSR. Number one, when you start doing business you need to make sure that you do business sustainably, and in order to build a sustainable business you have to be a part of the community, you have to help the community, you need to ensure that there is an educated community as well. We talked about it before, about the lack of qualified education, that is an issue, so how can we work with local communities to ensure that we help provide them with jobs. And so that’s something that is always on our mind, and education, as I would say, a very key one. But CSR is critical. It’s not just about green, CSR is not just about the green side of the business.
It’s about economic sustainability, community sustainability, educational sustainability; that’s what CSR is all about. It’s not just about recycling. And so, I think, from that perspective, we have the CSR award, we’ve had the CSR award every year for four years now, this is the fifth year, and that’s one of the ways we help recognize some of the various companies that are doing well within their communities. Most of the major companies have CSR initiatives, and so the idea is to look at those CSR initiatives, figure out what they’re doing, and also not just awarding with the reward because they did great, but also helping replicate those types of initiatives for other member companies who are looking into doing something similar. So we are very proud of our CSR reputation. And again I go back to it; if you don’t have economic and community type sustainability along with education, no business will thrive in the country, so it’s extremely important for us.
We’ve been speaking about some main issues about transparency, clear rules of engagement, education… of course these are all areas in which the government has to improve. What is the role of the private sector in all of this? What does the Panamanian private sector have to do in order to make a more competitive country?
Foreign Direct Investment is key. As you mentioned earlier, you talked about it going from 2.5 to 4 billion dollars from between 2012 and 2013, and this year is estimated to come in in a 4.5 billion. So again, that creates an increase in competition, but it also increases the presence of companies here looking for transparency and rule-of-law, and with organizations like AmCham, with organizations like the Panamanian Chamber of Commerce, we are all shooting for the same thing, we are all pushing for an open and transparent government. So I think the more individuals, the more companies and the more people that are here doing business you start to see that noise level increase, and starting to push together in different directions. But I think ultimately, one of the things that we’re very optimistic about is that our current administration seems very focused on this. And obviously it remains yet to be seen, but we’re optimistic from that perspective. But the role of private sector in this, I guess again, is speaking with one voice about transparency and rule-of-law. We need to speak with one voice.
It goes well beyond just speaking with one voice about that. We have a responsibility, as various private organizations, to help our employees, and to work with our employees to ensure that their lives tomorrow are better of than their lives today. Because that’s all of our goals. And I think that’s one of the things that private companies, one of the reasons it’s so important for their lobbying with the government for various initiatives is because it helps do that. It helps improve in employees lives from one day to the next. So I think it’s absolutely critical that we play our role. Having said that, you know we can talk about it and we can push for it, but the government needs to provide the transparency and rule-of-law.
In a more personal way, you are a perfect interviewee, because you’re an American citizen working and living in Panama. How is Panama treating you? How do you feel here?
I love it. I’ve been here for 7 or 8 years and I wouldn’t have been here if I didn’t love it. It’s phenomenal; it’s a great country. For my kids it’s their home, and for me it’s my home. Having said that, from a security perspective, it’s good relative to the rest of the region, but we need to keep an eye on that, because that can very quickly turn, and over the past couple of years we’ve seen some things happening more recently that concern individuals that are coming here to do business. So I think we need to keep an eye on that.
We need to keep an eye on transparency and rule-of-law, but I think, for the number of reasons I said earlier, for my family and I, we get on just fine… very good school system. We’ve got a health care system here, we’ve got a hospital that associated with Johns Hopkins up in the US. So there are a number of reasons. We just need to keep our eye on the ball, and make sure that the reasons why people are coming here now are the reasons they’re coming here tomorrow. And that goes back to the security things and many other things we’ve talked about in the interview.
As a last question, you’re managing regionally Caterpillar, you’re the head of the AmCham here in Panama and if I am not mistaken you’re only 35 years old. How did you accomplish that?
Well, I manage Caterpillar’s global construction business for the region and I’ve been doing that for a while now I guess, but all I can tell you is that it’s all because you’ve got good people in your team. For example, here in the American Chamber of Comerce; Pilar, Susie. We’re able to succeed because we’ve got great people. Caterpillar were able to succeed because we have great people. I just happen to be one of the people that’s involve, but I’m just a piece of an overall team. Age in my mind is but a number. It doesn’t mean anything; it’s just a number. It all has to do with the people you have around that help you succeed or not.