Why Panama is far more than just a famous canal

The planned expansion of the great waterway's capacity is part of a wider transformation as the country emerges from its shady past and looks to attract foreign investors

We are watching a determined hunchbacked man limping down a busy street in Panama City in broad daylight when he stops in the doorway of a rundown shop, and openly buys cocaine from a huge guy.

Both of them are clearly unaware they have an audience.

This vivid vignette is just one of dozens being relayed on to monitors, via a new citywide CCTV network, into the control room in the police station of Casa Viejo. This is situated amid the crumbling colonial grandeur in the historical district of the city.

The "audience" today comprises 20-odd policeman and several sharp-suited Cable & Wireless Panama executives. They established this system and are pioneering a business model that C&W sees as crucial to future growth.

This social telecoms project provides video surveillance over broadband, allowing Panama's police force to monitor permanently the country's streets. Seven hundred cameras beam pictures to six centres.

The project is part of C&W's managed services division, which specialises in setting up major infrastructures and managing them on a short-term basis before handing them over to the customer to run. It is what they call a turnkey operation.

Panama is in some ways a live laboratory and a working shop window for schemes such as this, which have so far included establishing the country's first 911 emergency service, a teleradiography national network for X-ray remote diagnosis and this police CCTV network.

Thanks to their success CWP is in talks with governments in Uruguay, Ecuador, Argentina and Honduras about selling them similar systems on the same business basis.

The 911 system has already been sold to the El Salvador government. Security and criminal justice solutions – including digital courtrooms – are all on the agenda for the company.

With 18,000 murders committed in Latin America every year, the United Nations declaring this the most dangerous region in the world in which to live, and governments increasing security spending to $4bn (£2.4bn) a year, it's a tempting market.

Panama City today is a beguiling mix of the old and new – downtown skyscrapers, old town dilapidated mansions surrounding dappled sunny plazas, glitzy yacht marinas and, of course, the canal.

This is the famous shortcut between North and South America, the capacity of which will double with the completion of the current £5.25bn expansion, which is scheduled for 2014. This at a time when the connection between the the Atlantic and the Pacific has never been so important nor potentially profitable.

Since the five deep sea cables running through the canal are mostly owned by CWC, the foundation for a strategically dominant telecoms network are already in place. CWP already has two and a half million mobile customers through its +Movil network, with BlackBerry as their biggest data customers. (That might not be for long as the guys from Apple are in town discussing their new requirements.)

It is the market leader in mobile, fixed line and broadband. Mobile revenue grew last year, as did data revenue. The conditions in Panama's overall economy have been central to the company's performance.

The population is just under three and a half million but, because of a lack of qualified labour, they admit to having a "flexible" immigration policy. The lack of good English speakers mean they haven't raised their call centre targets as fast as they would have liked. Education remains a problem and a priority of the government.

However, the latest economic growth figures show a very healthy 10.3 per increase. Construction grew by 59 per cent in 2011 and tourism is up by 12 per cent. The country has recently been removed from the OECD grey list, and it is negotiating new tax agreements with the UK, and talking to the IMF about establishing a sovereign wealth fund.

"But we are more than a canal," said Frank de Lima, the Harvard-educated acting finance minister, addressing a breakfast meeting. "Money is now being moved into our banks. Money that used to go to American banks."

Cable & Wireless Communications owns 29 per cent of Cable & Wireless Panama. The Panama government owns 49 per cent and the remaining 2 per cent is shared by the employees, although Cable & Wireless has both management and board control through a shareholder agreement. CWP is the largest single business in CWC's portfolio and accounted for 26 per cent of group revenue in 2010/2011 year.

The CEO of the Panama unit is a larger-than-life Latin American showman, Jorge Nicolau, who is frank about Panama's slightly dodgy past reputation. He believes CWC has played an important part in its rehabilitation of the country's reputation.

"Panama has had some hectic moments," he says. "The image was obviously tainted from the time of Noriega but that's all changed now. No bank here had to be bailed out. Our bankers are more conservative and our banks are better capitalised."

There is no doubt that Panama is "more than a canal", but the country is still defined by that vast and awesome construction. It is simply overwhelming to visit one of the locks and watch those giant containers vessel slip through the slim channels.

It has been an engineering icon since it was built by the United States in 1914 on land awarded to them for assistance in helping Panama to gain its independence. It was handed back to Panama in 1999 and is now managed by the Panama Canal Authority. It has a workforce of about 9,000 people and operates 24 hours a day, 365 days a year. A job with the canal makes you local royalty.

Up to 14,000 ships a year pass through the canal and the commercial transportation activities represent approximately 5 per cent of world trade. The expansion will mean access for vessels carrying 12,000 containers (the current limit is 5,000 containers) and the opening will mark its 100th anniversary.

CWC is one of a number of British companies investing in this exotic hot spot. HSBC, GlazoSmithKline and Aggreko are among the other big hitters and there are rumoured to be more on the way, all betting that a city with a shady past will have glittering future.

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