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Panama pushes for end to U.S. restrictions on cruise ships
Travel Markets Insider / October 2003

By Larry Luxner

WASHINGTON Panamanian business and political leaders are lobbying Washington to exempt the Central American nation from an obscure law that discourage cruise-ship lines from adding Panama to their Caribbean itineraries.

Specifically, Panama is seeking a waiver of the Passenger Vessel Services Act, which currently requires vessels to stop in a "distant foreign port" as part of a voyage between East and West Coast ports.

Roberto Alfaro, Panama's ambassador to the United States, said the law dates back to 1886, and was originally enacted to protect U.S. labor unions from cheap foreign competition.

"We don't want to change the law," he told Travel Markets Insider during an Oct. 7 interview in Washington. "That was our mistake. We have tried and been rejected four times because they don't want to touch the law. Now we have found a way to do it without going through Congress, and that is to get a waiver."

Alfaro said the restriction is arbitrary and outdated, and is unfairly hurting his country's economy.

"Right now, we are only getting passengers to stop over," he explained. "They can take a trip through the Panama Canal, but a ship that calls on U.S. ports cannot leave passengers in nearby foreign ports."

Ironically, Cartagena a popular cruise-ship destination on Colombia's Caribbean coast enjoys the "distant foreign port" designation, even though Cartagena is closer to Miami than is Panama City.

The issue was discussed in a recent meeting between President Bush and Panamanian President Mireya Moscoso, who supports a free-trade agreement between the two countries. It has also been taken up by the U.S. cruise-ship industry, which is always on the lookout for new and interesting destinations.

Micky Arison, chairman and CEO of Carnival Corp., complained in a July 24 letter to Bush that "this requirement discourages passenger vessels from stopping and disembarking passengers for extended tours or overnight stays in Panama, a desirable destination for cruise passengers."

Modifying the law, Arison wrote, "will generate additional tourism revenues for Panama, thereby enhancing canal expansion projects and furthering the interests of the entire shipping community."

Alfaro speculates that if Panama is branded a "distant foreign port," it could attract at least 300,000 more tourists per year, "injecting about $50 million more into our economy." That's why the country's hotel, travel and duty-free industries are all pushing for the designation.

For the last three years, tourism revenues have increased by an average 10% annually, with Alfaro hinting that 2003 tourist arrivals may break the one-million mark for the first time ever.

Since Dec. 31, 1999, when the United States returned the Panama Canal to Panamanian sovereignty, the Panamanian government has invested more than $1 billion in canal improvements, including the widening of the Culebra cut. That allows two ships to pass through simultaneously, whereas before only one vessel could transit at a time.

In addition, a new lighting system allows container vessels and cruise ships to traverse the Panama Canal at night, allowing 24-hour-a-day operation for the first time.

These improvements have boosted the canal's annual revenues, which have helped offset losses at the Colon Free Zone triggered by economic difficulties in Argentina, Venezuela, Ecuador and Colombia. Last year, the canal recorded a record 14,000 transits including 350 cruise ships with the number expected to be even higher this year.

But the biggest expansion project is yet to come: a $5 billion, 10-year expansion project that will substantially widen the Panama Canal itself to accommodate supertankers, container vessels and enormous cruise ships.

"We have to expand the canal because almost 45% of the ships being built today are too wide to go through the canal," Alfaro said. "In the future, all the ships built will be post-Panamax. So if we don't enlarge the canal, we will begin to lose business."

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