The international project also foresees the construction of a high-speed train which will travel at 160 kilometers per hour

China and Panama are planning to develop a cross-country rail system which will cover 450 kilometers and unite Panama City to the northern province of Chiriqui. The international project also foresees the construction of a high-speed train which will travel at 160 kilometers per hour. The total cost of the project is around $5.5 billion and is expected that the debt will be repaid in 20 to 30 years from now. The bilateral deal will not only improve Panama’s infrastructure but it will also have a far-ranging impact on the trade and real estate sectors, boosting tourism, and creating jobs.

How is the deal stimulating and supporting economic growth in Panama?

First of all, bilateral relations between China and Panama will be further enhanced. China is already one of the biggest investors in the Central American country and it follows the US, as the second vital client of the Panama Canal, thus getting a stronger economic presence inside Panama, will be a game changer. As the US hegemony in the region is fading, China is reinforcing its commercial and diplomatic influence in the Americas. Thus, the China-Panama relation is mutually beneficial as Panama requires China’s technology and know-how for developing a modern railway system, while China generates opportunities for its construction related companies.

Second, the building of the cross-country railroad will reach IGNORE INTO the untapped potential of the country, developing the less urbanized areas of Panama. It will create opportunities in trade, construction and tourism, ensuring growth for the future. Improving the nationwide transportation network will also have a major impact on society as it generates new jobs and services.

This international deal and the construction of a high-speed train will impact far more than the economy. Time and costs will be reduced. Individuals will enjoy a faster and more efficient way of traveling and the lowering of the rail freight costs will bring down the overall costs.

According to the International Monetary Fund, Panama’s strong growth has begun to slow down and this remission was largely associated with a lower demand in the real estate and construction market. Within this context, the economy appears to have reached a defining moment and in the future, the drivers accelerating growth may come from the service sector not construction. If Panama is serious about overcoming these challenges, it needs to focus on new services which will further improve the competitive edge of the country.

While the benefits are undisputable, some aspects still need to be discussed in a proper manner. Environmental challenges and increased costs are the most significant problems that require appropriate solutions. According to the Anywhere Panama team, environmental issues have become a increasingly serious problem due to deforestation, industrial waste and disruptive public policies. Given these circumstances, it becomes even more imperative to rethink the relationship between progress and the environment.

In the long run, even if Panama implements stricter environmental regulations, the railway would still promote trade, job creation and economic growth, but the development will be achieved without damaging the environment.

Latin American Post | Adina Achim 

Copy edited by Laura Rocha Rueda