Success Stories infrastructure advisory This series provides an overview of successful public-private partnerships in various infrastructure sectors, where IFC was the lead advisor. Infrastructure Advisory Services 2121 Pennsylvania Avenue NW Washington DC 20433 Airports ifc.org/infrastructureadvisory 53173 Panama: Panama Pacifico SEZ The Panama Pacifico project is transforming the former Howard U.S. Air Force base outside Panama City into a hub for interna- tional trade, logistics, services, commerce, and industry. As prin- cipal advisor to the government, IFC recommended that a private investor develop the 2,500 hectare site through the establish- ment of a special economic zone (SEZ) with a modern regulatory framework and administration conducive to business and direct foreign investment. The land received SEZ status in 2005 and within two years a private master developer was selected and a master development agreement signed. One of the largest development projects in the world, Panama Pacifico capitalizes on its strategic location at the entrance to the Panama Canal and its close proximity to Panama City, the capital. London & Regional Properties (L&R), a global private real estate development firm, won the bid for the 40-year concession. L&R committed to invest a minimum of US$408 million over the first eight years of the project, of which US$20 million was paid up front, and a minimum of $100 million for each eight-year period afterward. Panama Pacifico is expected to attract US$3 billion in direct for- eign investment and create an estimated 20,000 new jobs. Background primarily serves the Singapore Technologies (ST) Maintenance- In accordance with the 1977 Torrijos-Carter Treaty, the Howard Repair-Overhauling facilities. ST took over the four hangars and U.S. Air Force base and its infrastructure reverted to the currently employees about 300 technicians who have been trained government of Panama in 1999. The government sought to use at the facility. Plans for additional facilities are underway. the assets, especially the runway, to bring economic activity to IFC proposed a highly innovative and complex transaction the country and create jobs. After a number of unsuccessful structure for the 40-year concession. The master development attempts to achieve these objectives, the government retained IFC agreement allocated the parties' obligations and risks. The in June 2001 to advise on structuring the project as a public- agreement also defined the pricing of land (fixed base price and private partnership aimed at generating sustainable employment contingent price, determined by a transaction value or deemed opportunities, strengthening and diversifying Panama's economic sale), the minimum land takedowns by category of use, the rules base, increasing the country's competitiveness, and improving the for land development to prevent land speculation, the penalties investment climate. for non compliance ( e.g. government buyback options), and the government's onsite infrastructure development obligations, IFc's role among others. Under the terms of the agreement, the master When IFC signed the mandate for the Panama Pacifico public- developer is granted exclusive development rights for 15 years and private partnership, the government was intent on turning the limited rights for the rest of the concession. former military base into an airport and port. IFC brought a more expansive vision to the project and helped the government BIddIng recognize the site's full development potential. L&R won the bid for the 40-year concession. The winning IFC's mandate included developing the project concept; proposal included commitments to invest a minimum of $408 designing a coherent development strategy; drafting laws creating million over the first eight years of the project, of which US$20 a special economic zone based on international best practices million was paid up front, and a minimum of $100 million for and associated regulations; developing a land use master plan, each eight year period afterward. baseline environmental and demand studies, and a financial model to define the land price; designing an innovative master expecTed posT-Tender resulTs development agreement; and managing an international selection process. During the six years of the mandate's tenure, IFC worked · US$20 million up front payment to the Government. with the government authorities, class associations, opinion · Developer will invest a minimum US$408 million in the makers, and political leaders to prepare the project and help first eight years of the project, and US$100 million in ensure congressional approval. each eight-year period afterward. A major national public relations campaign helped build consensus among the diverse stakeholders and gave the project · Project is expected to attract US$3 billion in direct for- credibility. This in turn helped ensure approval of the law creating eign investment. the Agency for the Panama Pacifico Special Economic Zone, · More than 20,000 jobs will be created over the life a dedicated agency structured to facilitate one-stop shopping. of the concession. IFC played a lead role in promoting the project to potential international bidders, ensuring a transparent and competitive · Abandoned military base has been transformed into a process, selecting the master developer, and advising on the hub for international trade, commerce, and industry, contract structure. and developed as a commercial, residential, logistics and service center. TransacTIon sTrucTure · Special economic zone based on international best The Panama Pacifico project is intended to transform a former practices is already attracting global corporations, such U.S. Air Force base into a special economic zone for international as Dell and Singapore Airlines. trade, commerce, and industry and to develop the site as a commercial, residential, logistics and business hub. Plans call · The U.S. Green Building Council and the Clinton Climate for the construction of more than one million square meters Initiative have named Panama Pacifico as one of 16 of commercial space as well as an urban center with 20,000 founding projects that demonstrate "climate positive" houses and apartments, hotels, shopping centers, and restaurants urban growth strategies. surrounded by gardens, green belts, parks, and water resources. The former military airstrip is being used as an alternate airport to Tocumen International Airport (and therefore financed by Tocumen Airport users). Today the former military airstrip 12/2009