UPDATE 2-Panama's economic growth accelerates in second quarter

Fri Sep 13, 2013 8:28pm EDT

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By Lomi Kriel

PANAMA CITY, Sept 13 (Reuters) - Panama's economy grew by 7.6 percent in the second quarter, led by stronger activity in transport and communications and brisk business in the construction and mining sectors, the government statistics agency said on Friday.

Growth picked up from the first quarter, when the economy expanded by an upwardly revised 7.3 percent.

Still, the pace of growth has eased from 2012, when the economy grew by 10.8 percent.

The global economic slowdown has dampened trade through Panama's canal and ports, partly because of a delay in the opening of an expansion to the country's waterway.

The expansion to the canal is not expected to be operational until mid-2015. The delay has persuaded shippers such as Maersk Line to use alternative routes from Asia such as the Suez Canal, which can accommodate bigger ships.

Panama's economy has also been affected by a dispute with two of its biggest trading partners, Colombia and Venezuela, which has disrupted Panama's Colon Free Trade Zone, the world's largest duty-free area after Hong Kong.

Venezuelan traders owe the free-trade zone about $1.2 billion because of difficulties exchanging the Venezuelan bolivar for dollars. Colombia has imposed additional surcharges on imported items such as clothes and shoes.

Canal activity declined by 2.9 percent in the quarter, the statistics agency said.

Mining and construction both increased by more than 25 percent during the April-June period, while growth in the transport and communications industry accelerated to nearly 9 percent from 5.6 percent in the previous quarter.

The mining boost was due largely to large-scale public and private construction projects, including the canal expansion and the development of a $6.2 billion copper mine on the Atlantic.

Expected to become one of the world's most important open-pit copper developments and Panama's biggest exporter, its first shipments are due in 2016, according to Minera Panama, a subsidiary of Canada's First Quantum Minerals Ltd.

INFRASTRUCTURE

Panama's Economy Ministry expects overall growth of 8.5 percent in 2013, while the U.N. Economic Commission for Latin America predicts growth of 7.5 percent.

Panama has managed to evade much of the global recession, with its economy growing at double digits for four of the past six years. Much of the growth is thanks to significant infrastructure spending, including the building of the canal's third lane, begun in 2007, and the $1.8 billion construction of Central America's first metro.

Logistical and transportation services linked to the canal have expanded over the past six years as Panama has tried to pitch itself as a regional hub.

"Compared to global and regional growth, Panama has been growing almost three times as much," Finance Minister Frank De Lima told a recent conference call with investors.

"We see a soft landing expected in the near future, but still higher than average growth in the next couple of years."

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