Region Looks Forward to Some Major Investment Activity
By Simon West
In a feature story from Issue 4 of Breakbulk Magazine, we look at some exciting upcoming opportunities for project logistics in Central America, as governments in the region earmark billions of dollars of investments to strengthen their infrastructure and energy sectors.
Opportunities for project logistics in Central America are set to soar in the coming years, with investments worth billions of dollars earmarked for infrastructure, renewable energy and other sectors.
Across Central America, from Panama in the south up through Costa Rica, Nicaragua, Honduras, El Salvador, Belize and Guatemala on the border with Mexico, governments are attempting to write a new chapter of development, security and prosperity in what has often been a turbulent history for much of the region.
Panama, with its strategic location, stable government and investor-friendly policies, has emerged in recent years as a regional powerhouse for renewable energy and power projects.
In 2016, the government approved a new energy program that aims to boost the share of renewables – particularly wind and solar – in the country’s energy mix to 70 percent by 2050. Tax incentives and other financial support mechanisms were launched to lure more foreign investment and expertise, while permitting processes for projects were streamlined.
“Panama is a leading market in terms of activity, concentrating the majority of energy projects and capital expenditure in Central America. Renewable energy represents a key business opportunity for the country, with 1 gigawatt of solar PV, wind and hydro power developments being tracked by the EIC,” said Pietro Ferreira, senior regional analyst for the Americas at the Energy Industries Council, or EIC.
“Investment in grid infrastructure also plays a key role in the country, with 16 transmission and distribution projects under development representing a total investment of US$1.3 billion. Looking beyond renewables and transmission and distribution, U.S.-headquartered SGP BioEnergy has announced the US$7 billion Ciudad Dorada biofuels project in partnership with the government of Panama and other private investors,” he added.
Rosy Malave, co-owner and commercial director at Panama-based Nakama Worldwide Solutions, pointed to several world-scale projects that have required significant breakbulk support, such as the 270-megawatt, or MW, Penonome wind farm, one of the largest in Central America and Panama’s first. The project in central Cocle Province has been developed in phases, with a first phase launched in 2014.
Nakama, which began operations in 2021, has also been busy transporting components for the solar and hydroelectric sectors, as well as for fossil fuel-based projects such as the Costa Norte terminal, a liquefied natural gas, or LNG, regasification and storage terminal close to the Caribbean city of Colon, some 60 kilometers north of capital city Panama. The terminal, which came online in 2018, has a capacity of 1.5 million tons per year and operates alongside a combined cycle gas-fired power plant.
“Currently we are managing the logistics distribution of LNG in 40- foot ISO tanks. Starting in 2022, we have been delivering to Ecuador and Colombia, providing the complete logistics chain from Panama to those countries,” Malave said. “As a small country, which recently started to develop new infrastructure and business possibilities to generate income, Panama’s ports are at an early stage when handling heavy-lift cargoes. Additional to this, land transportation must be well calculated, as the allowed height varies a lot along the roads, for which a proper route survey must be done in advance.”
Santiago Vasquez, project cargo and network director at Mexico-headquartered Sea Cargo Logistics, said Panama’s project market had been strong even before the Covid pandemic, with solid opportunities in additional sectors such as mining, communications, mass transportation, construction and infrastructure.
Across the Continent
Sea Cargo Logistics, which has operations in Mexico, Peru, Colombia, Panama and Costa Rica, recently teamed up with an Italian partner to import machinery and equipment for the Panama Metro Line 3, a 34-kilometer monorail project being developed as part of the subway system in Panama City. The new line, slated to start full operations in mid-2025, is billed as the country’s largest infrastructure project since the expansion of the Panama Canal.
Between 2021 and 2023, Sea Cargo Logistics oversaw the transport of 23 shipments to Panama’s Port of Balboa and the project cargo-handling Manzanillo International Terminal close to the Atlantic entrance to the Panama Canal. The cargo, which included 80-ton piling machines, cranes, sedimentation tanks and auxiliary machinery, was carried to the construction site on lowboy trailers to enable transit through tunnels and under pedestrian bridges.
Costa Rica’s project sector is also booming, Vasquez said, with megaprojects focusing on highway overhauls, airport expansions and new rail lines. Most renewable energy buildout is happening in the sparsely populated northernmost province of Guanacaste, which in recent years has become the beating heart of the country’s green energy revolution. Last year was the eighth consecutive year that power generated from renewable resources represented more than 98 percent of total energy output. In 2017, the country ran on 100 percent renewable energy for 100 days in a row, setting a new world record.
Some 16 of Costa Rica’s 18 commercial-scale wind farms have been erected on the volcanic Cordillera de Guanacaste, with rotor blades, ring generators, steel towers and other components carried upcountry from Caldera, the country’s main port on the Pacific Coast.
Costa Rica’s hydroelectric dams have also been big business for breakbulk, while the installation of industrial-scale warehouses has also emerged as a surefire source of cargo-carrying contracts.
“The building of bigger and much bigger warehouses is now a common business in Costa Rica and as it is, the country needs to bring absolutely everything from abroad, for which we are participating and supporting local companies,” Vasquez said.
Challenges in Guatemala, Honduras
Opportunities for project logistics are also on the rise elsewhere in Central America.
Guatemala City-based KTC Logistics, a specialist in the transport of breakbulk and out-of-gauge cargo, recently managed the door-to-door transport of a 63-ton power generator from Finland to El Salvador. The nearly-five-meter-wide component was shipped on a roll-on, roll-off vessel from Finland’s Port of Rauma to the Port of Antwerp before its onward journey across the Atlantic to Guatemala’s Caribbean breakbulk-handling Port of Barrios.
From there, KTC Logistics carried the cargo by road from Barrios southwards along the Honduran border, then crossed into El Salvador for the short trip down to the construction site in the port city of Acajutla. According to Marc Mahle, CEO at KTC Logistics, the unit was successfully delivered ahead of schedule.
Still, the 490-kilometer drive from Guatemala to El Salvador exposed many of the challenges that typically confront breakbulk movers in the region, with Mahle pointing to the laborious task of calculating and checking the strength of “dozens” of bridges along the route, as well as grappling with low height restrictions in Guatemala of less than five meters.
Project logistics in Guatemala’s next door neighbor Honduras can be an equally exacting business, with an infrastructure network often proving a big headache for project professionals tasked with carrying heavy breakbulk cargo through the country’s mountainous, rugged terrain.
“For just one project, you can estimate a cost for civil works to bore through mountains or build new bridges of maybe US$7-8 million,” Mahle said. “Compare that to Costa Rica: for a similar size project, you’re talking maybe US$800,000- 900,000. It’s a big difference, but there’s so much more work needed in Honduras. Everything is a little bit more open in Costa Rica as well. The country is helping foreign investors and companies more in terms of taxes and free zone regimes to incentivize investment, so it’s more interesting to do business there.”
Politics at Play
The region’s often volatile politics with its endless lurching back and forth between right and left can also impact project planning and execution.
Christopher Knuth, general manager of KTC Logistics’ sister company in Honduras, KTC Heavy Lift, recalled an incident when the company had shipped 19 diesel generators weighing 50 tons apiece by barge from Panama to Honduras during the Honduran presidential elections in 2021. Towards the end of the move, close to the construction site in Honduras, Knuth and his team were told by the client that a change in government had forced the construction project to be abandoned. The motors ended up surplus to requirements and were eventually sold to private investors in other countries.
“This instability is very common in the region when the government is involved in projects,” Knuth said.
Despite these challenges, breakbulk movers are gearing up for some major project activity in both countries. Business intelligence platform BNamericas has reported that in Guatemala, the government has earmarked US$680 million for spending on infrastructure projects, including US$220 million for the Belize II bridge in Guatemala City.
The project, slated for completion in 2026, would connect different zones in the city, reorganize road networks, and reduce congestion. Guatemalan contractor Grupo Muratori was awarded a contract last year to design and build the bridge.
Honduran ports company ENP, meanwhile, has inked a US$269 million agreement with China Harbor Engineering Company to overhaul the Pacific port of San Lorenzo, a project that would include the construction of a new 300-meter pier and some major dredging work. The deal, struck after Honduras established diplomatic ties with China earlier this year, also calls for the installation of two bridges at the Caribbean port of Cortés – the region’s sole deepwater port.
As rising population numbers exert pressure on national grids, both countries are also looking to exploit their abundant natural resources and expand their renewable energy capacities.
Honduras’s first wind farm – Cerro de Hula, about 20 kilometers south of capital city Tegucigalpa – came online a decade ago and is the largest in Central America. The 126-turbine farm has a capacity of 102 MW, providing power to some 50,000 homes.
Other projects in the making include the 99-MW Yuayupe wind farm in Paraiso department, and France-based developer Total Eren’s 112-MW San Marcos wind farm in southernmost Choluteca department. The project, billed as one of the largest foreign investments in a renewable energy project in Central America, also calls for grid reinforcements, including the construction of 95 kilometers of transmission lines and a new 230-kV substation, as well as the overhaul of two existing substations.
Meanwhile, El Salvador’s first commercial-scale wind farm, the 54-MW Ventus project in northwest Santa Ana department, began operations in 2021; the project’s Guatemalan developer Tracia Network is also active in Nicaragua’s renewable energy sector.
The EIC’s project database is currently tracking 16 large-scale solar PV, wind, hydro and geothermal projects in Guatemala, Honduras, Costa Rica, El Salvador and Nicaragua with a combined capex topping US$4 billion. In addition to renewable energy, the transmission and distribution sector provides opportunities in Guatemala, Honduras and Nicaragua, with close to US$500 million of capex tracked across the three countries, EIC’s Ferreira said.
Central America’s economies, meanwhile, remain buoyant, with the International Monetary Fund forecasting growth in the region of 3.8 percent this year and next versus 1.6 percent and 2.2 percent, respectively, for the whole of Latin America and the Caribbean. Panama’s economy this year is tipped to expand 5.0 percent, outpacing every other nation in the Americas barring the Caribbean.
If logistical challenges can be overcome and investments continue to flow, Central America stands every chance of emerging as an exciting project market in the coming years.
TOP PHOTO: KTC Logistics transports generator to El Salvador. CREDIT: KTC Logistics
SECOND: KTC Logistics reinforces bridge for generator move. CREDIT: KTC Logistics
