Update on the Panama Canal Expansion

Rodolfo Sabonge Vicepresident, Market Research and Analysis Autoridad del Canal de Panamá January 19, 2012 + 7

2 FY 2011 Canal Traffic Indicators

Update on the Expansion Program (Video Clip)

Potential Impact/Importance of the Expansion

3 Transits vs. Panama Canal/UMS Tonnage FY 1915 – FY 2011 35,000 350 Average PC/UMS Tonnage for 322 Commercial Transits 30,000 300

25,000 250

20,000 200

14,769

15,000 150 Transits

10,000 100 Total Tonnage(PCUMS) Total 5,000 50

0 0

1925 1960 1995 1915 1920 1930 1935 1940 1945 1950 1955 1965 1970 1975 1980 1985 1990 2000 2005

Fiscal Year (E) 2011 Main Routes - FY 2011

Total (long tons) 222.4 M

East Coast US -- Asia 87.3M West Coast South America – East Coast US 26.2M West Coast South America -- Europe 15.2M West Coast US – Europe 9.9M West Coast Central America – East Coast US 11.7M Tonnage by Market Segments FY 2010 – FY 2011

113.59 Container 104.59

79.94 Dry Bulk 72.59

34.68 Vehicle Carrier 33.05

48.99 Tanker 46.56

12.83 Refrigerated 14.59

10.77 Passenger 10.34 FY2011 (e)

9.19 FY2010 General Cargo 7.78

11.71 Others 11.30

0 20 40 60 80 100 120 PCUMS (in millions) Liner Services Through The Panama Canal

Vancouver Seattle Hamburg Tilbury Rotterdam Antwerp Dunkirk Oakland Le Marin HavreBilbao La Spezia New York Naples Tokyo Norfolk Gioia Qingdao Los Angeles Charleston Valencia Pyongtaek Yokoham Tauro Busan Ensenad Mobile Savannah a Jacksonvill Tangier Shanghai a Houston Taipe e Ningbo Miami Dubai Yantian i Manzanillo Hong Kong Kaohsiung Lázaro Kingston San Juan Chiwan Cardenas P.PR Pto. Quetzal P.Caucedo Cabello Cartagena CristobalManzanillo Port of Spain Balboa

Manta Guayaqu il Calla Papeete o Ilo Number of Yearly Number of Average Trade Route Iquique Services Capacity Vessels Vessel Size Mejillones Asia - USEC 13 3,008,960 120 4,440 Lautoka Antofagast a Pendulum 3 747,626 41 4,784 Noumea San Antonio WCSA - Europe 8 1,097,730 56 2,900 Asia - Caribbean 1 239,232 11 4,588 WCSA - Caribbean 1 97,537 3 2,405 Sidney WCSA - USEC 3 378,975 18 2,423 Melbourne Tauranga Oceania - USEC – Europe 2 209,276 16 2,654 Auckland USWC - Europe 2 283,155 14 3,255 Napier USWC - ECSA 1 100,010 5 1,918 Timaru Port Chalmers

Source: Compair Data, January 2011 Port Development in Panama

1996: 235K TEUs 2010: 5.59M TEUs 2011: 6.58M TEUs 2015: 8.4M TEUs(P)

Panama Ports Company – Colon Container Terminal Manzanillo International Terminal Panama Ports Cristobal (MIT) Company - Balboa Tonnage by Market Segments FY 2010 – FY 2011

113.59 Container 104.59

79.94 Dry Bulk 72.59

34.68 Vehicle Carrier 33.05

48.99 Tanker 46.56

12.83 Refrigerated 14.59

10.77 Passenger 10.34 FY2011 (e)

9.19 FY2010 General Cargo 7.78

11.71 Others 11.30

0 20 40 60 80 100 120 PCUMS (in millions) Mississippi River Watershed

BUILDING STRONG® Grain Cargo Tonnage

BUILDING STRONG® Source: ACP Data Warehouse Years are fiscal: October through September Soybean and corn (Metric Tons)

BUILDING STRONG® Source:ACP Data Warehouse FY 2011 Canal Traffic Indicators

Update on the Expansion Program (Clip)

13 Panama Canal Expansion Program Objectives Maintain Canal competitiveness as well as the value of the route

Increase capacity and allow the transit of larger ships

Reduce water consumption

Improve safety and efficiency

Sustain tonnage and profitability growth

Canal Expansion Program Components

• Deepening of Pacific and Atlantic entrance channels • Deepening and widening of the Gatun Lake navigation channel • Construction of new access channel for Pacific Locks • Construction of new Post Panamax Locks and water saving basins in the Atlantic and the Pacific • Increase the maximum operating level of Gatun Lake 25ONE comingVisionary 30OFOne Speakers A KIND Ideasoon… Leaders EVENT FY 2011 Canal Traffic Indicators

Update on the Expansion Program (Clip)

Potential Impact/Importance of the Expansion

17 The Panama Canal - 2014

GAME CHANGER? Locks Chamber and Vessel Size 33.5 m (110’) Existing locks' maximum vessel size: 4,400 TEU

32.3 m (106’)

12.4 m (39.5’) 55 m (180’)

12.8 m (42’) 49 m (160’)

15.2 m 18.3 m (60’) (50’)

New locks' maximum vessel size: 12,600 20 21 MAERSK Line looks set to limit its fleet of 18,000 teu containerships to 20 units, but has more than a month to decide whether to exercise its option to order 10 more. The deadline on the option for the final tranche expires at the end of February, but Maersk has already said it does not expect to convert the option into an order. The decision is likely to be confirmed when AP Moller-Maersk publishes its full-year results on February 27. Speculation about Maersk’s intentions was fuelled by comments in the German media that appeared to suggest that it had cancelled the order for the second series of 10, placed last summer. However, Maersk says it will take delivery of all 20 Triple-E ships ordered last year at a cost of $190m each. Maersk announced its $1.9bn order for 10 ships to be built by Daewoo Shipbuilding and Marine Engineering almost a year ago, along with options for two more series of 10. At 400 m long and with a beam of 59 m, they will be the largest ships in service. Deliveries will start in 2013.

22 Main Global Container Transportation Flows Southeast Asia South Asia

East Asia

Equa tor POSTPANAMAX Westbound Route Eastbound Route

Landbridge

Panama PANAMAX 23 Route Main Global Container Transportation Flows Southeast Asia South Asia

East Asia

Equa tor POSTPANAMAX Westbound Route Eastbound Route

Landbridge

Panama POSTPANAMAX 24 Route 2010 World Container Flow

TRANS-ATLANTIC ASIA-EUROPE TRANS-PACIFIC 6 million TEU 17 million TEU 21 million TEU

OTHER TRADES INTRA-ASIA

North-South : 56 million TEU 24 million TEU (including Australia, Indian Subcontinent and Worldwide: Intra-Regional: Middle East) 16 million TEU 140m TEU in 2010

$ vs TT: Key is Time Sensitivity Incremental Cost [($Xw+$Yw) - ($Xe+$Ye)] Value Trade Off ≈ ≈ Transit Time Diff. [(TTow+TTi) - (TToe+Tti)]

days 7 days 2 days 2 $YYY $YYY $YYY 5 days Columbus $YYY Chicago

3 days Norfolk 12 days, $YYY

$XXX Memphis South Long Beach 6 days 2 days China $YYY Atlanta $YYY 5 days $YYY

28 Days,$XXX

Route Cost Elements

Unit Route Cost Elements

Local drayage 11 regions in US Rail 11 centroids Truck Route port to centroid

US Inland transportation costs An expanded generalized cost concept

Maritime cost Port cost Generalized cost = Inland cost

Direct cost of transportationPipeline inventory Safety stock Supply variations + Cost of time Demand variations + Frequency cost + Cost of reliability Market share computation

Método: Nested Logit (Mc Fadden, Nobel 2000) Conventional Direct

North Atlantic Central Atlantic

South Atlantic / Gulf

Transshipment Circum-Equatorial

North North Atlantic Atlantic Central Central Atlantic Atlantic

South South Atlantic / Gulf Atlantic / Gulf

Caribbean Transshipment Triangle 32 Emerging Global Maritime Freight Transport System

Port Traffic, TEU (2010) 2010 Piracy at Sea Container Fleet Capacity and Vessel Size Composition

2000 2011 2016 (4.79 millionTEU) (14.9 million TEU) (19.4 million TEU)

44.4% Total 8.2% 54.6% P.Pmax Total 15% P.Pmax P.Pmax 17.6% 55.6% 45.4% 36.2 85% Pmax Pmax and less Pmax and and less 37% less

0-4,000+ teu 4,000-6,000+ teu 0-5,000 teu 5-10,000 teu 10,000+ teu 0-5,000 teu 5-10,000 teu 10,000+ teu

371 Panamax 961 Panamax 1,021 Panamax 134 Post Panamax 889 Post Panamax 1,325 Post Panamax

Fuente: Clarkson’s Research Studies-julio 2011 Carrier Operating Margins 1H/2011: Top-20 Ocean Carrier Operating Profit and Margins Z-score = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + Financial 1.0T5

T1 = (Cur Assets-CurZ -Liabilities)Score / Total Assets Health Check 3.5 T2 = Retained Earnings / Total Assets T3 = Annual Earnings B4 Int & Tax / Total Assets Healthy Zone 3 T4 = Book Value of Equity / Total Liabilities T5 = Annual Sales / Total Assets 2.5 Caution Zone 2

1.5 Distress Zone

1

0.5

0

Zim

NOL

CSCL

OOIL

CSAV

Lloyd

HMM

Cosco

-

Hanjin

Maersk

Horizon

Wan Hai Wan

NYK GrpNYK

MOL GrpMOL

Evergreen

K Line KGrp

CMA CMA CGM Yang Ming Yang Source: Drewry FSI, Sept 2011 Hapag Demand/Supply Forecast

38 Clean Fuel > High Price

2020: SOx-limits for fuel apply globally. MGO demands a premium > 50% of Heavy Fuel Oil

CO2 emission trading from 2013

Price of Heavy Fuel Oil {HFO} will continue to rise in the long run (2.5% pa) Why “Slow Steaming”?

Slow Steaming = more ships + boxes = $$$$$

U.S. Soybean Production and Exports 2001 – 2011 and Trend to 2021 U.S. Likely to be Producing 3.7 Billion Bushels in 2021, Exports Likely Reach 2.5 Billion Bushels (68%)

BUILDING STRONG® The Impact of Canal Expansion on Dry Bulks

1. The USG-Asia grain trade will become more competitive through the use of larger vessels.

2. Potential for increased trade of coal to Asia/China. Competitive Analysis for Dry Bulks GranosGrain Vessel: 55,000 dwt - 90% Utilization (for Panamá) Escenario Base $US Dollar per ton Indice de Charter Cargo Days Fuel Ports Canal Inland Total Competiti rate Handling vidad Grain Belt - Asia - Panama Canal 43 12.22 12.93 2.89 2.51 8.10 29.91 68.56 1.00 Grain Belt - Asia - Intermodal (PNW) 31 6.43 8.15 2.68 0.00 24.59 50.11 91.95 1.34 Grain Belt - Asia - Suez Canal 58 17.13 17.29 2.89 4.42 8.10 29.91 79.73 1.16 Grain Belt - Asia - C. G. H. 61 20.27 19.53 2.89 0.22 8.10 29.91 80.92 1.18 Grain Belt - Asia - C. H. 64 19.09 18.56 2.89 0.11 8.10 29.91 78.65 1.15

EscenarioCarbónCoal Mercado de buques en alza y aumento en peajes Vessel: 60,000 dwt - 75% Utilization (for Panama) AumentoEscenario en Base peajes de 50% $US Dollar per ton Indice de Grain Belt - Asia - Panama Canal 43 12.22 19.40Charter2.89 3.77 8.10 Cargo29.91 76.28 1.00 Days Fuel Ports Canal Total Competiti Grain Belt - Asia - Intermodal (PNW) 31 6.43 12.22rate 2.68 0.00 24.59 Handling50.11 96.03 1.26 vidad GrainNorfolk Belt to Nagoya- Asia - Suez- C. G. Canal H. 5847 17.1318.76 25.9311.57 2.89 2.274.42 0.008.10 29.918.36 40.9788.37 1.161.09 GrainNorfolk Belt to Nagoya- Asia - C.- C. G. H. H. 6150 20.2720.28 29.3012.42 2.89 2.270.22 0.338.10 29.918.36 43.6690.68 1.191.16 GrainNorfolk Belt to Nagoya- Asia - C.- Panama H. 6432 19.0914.33 27.859.24 2.89 2.730.11 2.998.10 29.918.36 37.6587.94 1.151.00 Norfolk to Nagoya - Suez 42 16.39 10.51 2.27 4.20 8.36 41.73 1.11 Escenario Mercado de buques en baja y aumento en peajes Aumento en peajes de 50% GrainSanta BeltMarta - Asia / Tocopilla - Panama - C. Canal H. 4331 12.2211.12 6.477.70 2.89 1.793.77 0.338.10 29.918.36 29.3163.35 1.001.37 Santa Marta / Tocopilla - Panamá 14 3.96 3.92 2.15 2.99 8.36 21.38 1.00 Grain Belt - Asia - Intermodal (PNW) 31 6.43 4.07 2.68 0.00 24.59 50.11 87.88 1.39 Grain Belt - Asia - Suez Canal 58 17.13 8.64 2.89 4.42 8.10 29.91 71.09 1.12 Vancouver to Rotterdam - C. H. 44 18.83 11.00 5.10 0.33 10.26 45.52 1.10 GrainVancouver Belt -to Asia Rotterdam - C. G. H.- Panama 6129 20.2713.66 9.778.36 2.89 6.120.22 2.998.10 10.2629.91 41.3971.15 1.121.00 Grain Belt - Asia - C. H. 64 19.09 9.28 2.89 0.11 8.10 29.91 69.37 1.10 Escenario Mercado de buques en alza y aumento en peajes Aumento en peajes de 50% Norfolk to Nagoya - C. G. H. 47 18.76 17.36 2.27 0.00 8.36 46.75 1.07 Norfolk to Nagoya - C. H. 50 20.28 18.62 2.27 0.33 8.36 49.87 1.14 Norfolk to Nagoya - Panama 32 14.33 13.86 2.73 4.49 8.36 43.77 1.00 Norfolk to Nagoya - Suez 42 16.39 15.76 2.27 4.20 8.36 46.98 1.07

Santa Marta / Tocopilla - C. H. 31 11.12 11.56 1.79 0.33 8.36 33.16 1.34 Santa Marta / Tocopilla - Panamá 14 3.96 5.88 2.15 4.49 8.36 24.84 1.00

Vancouver to Rotterdam - C. H. 44 18.83 16.50 5.10 0.33 10.26 51.02 1.08 Vancouver to Rotterdam - Panama 29 13.66 12.53 6.12 4.49 10.26 47.06 1.00

Escenario Mercado de buques en baja y aumento en peajes Aumento en peajes de 50% Norfolk to Nagoya - C. G. H. 47 18.76 5.79 2.27 0.00 8.36 35.18 1.02 Norfolk to Nagoya - C. H. 50 20.28 6.21 2.27 0.33 8.36 37.45 1.08 Norfolk to Nagoya - Panama 32 14.33 4.62 2.73 4.49 8.36 34.53 1.00 Norfolk to Nagoya - Suez 42 16.39 5.25 2.27 4.20 8.36 36.48 1.06

Santa Marta / Tocopilla - C. H. 31 11.12 3.85 1.79 0.33 8.36 25.46 1.22 Santa Marta / Tocopilla - Panamá 14 3.96 1.96 2.15 4.49 8.36 20.92 1.00

Vancouver to Rotterdam - C. H. 44 18.83 5.50 5.10 0.33 10.26 40.02 1.03 Vancouver to Rotterdam - Panama 29 13.66 4.18 6.12 4.49 10.26 38.71 1.00

Dry Bulk Fleet Capacity (Millions DWT) Capacity 2011 New Orders Capacity 2013

Capesize Up to Capesize Up to (>106) Capesize Panamax (>106) Panamax Up to 22.3, (<106) (>106) (>106) 39% 111.2 333.5 Panamax 341.8 138.2 (<106) 61% 45% 41% 55% 480.0 59%

Orders 2011 2015 E* (2011-13) Size Range

Capacity in Millions of DWT

Up to Panamax (10-90K DWT) 326.6 125.0 451.6 Capesize (>90K DWT) 237.5 124.4 361.9 Total 564.1 249.4 813.5 46 * Total 2015 estimated ,not including scrapping Source: Clarksons Research Studies, June 2011

Competitive Analysis Tankers

Oil Tankers Vessel 40,000 DWT - 90% Utilization (for Panamá) US$ Dólares por Tonelada Charter Cargo Competitive Route Days Fuel Ports Canal Inland Total Rate Handling Index Houston / Quintero - C.H. 31 15.40 11.91 2.39 0.00 1.19 0.00 30.90 1.58 Houston / Quintero - Panama 16 7.09 6.10 2.39 2.76 1.19 0.00 19.53 1.00 Houston / Quintero - Panama Pipeline 20 7.32 7.40 2.89 0.00 1.19 4.00 22.80 1.17 Tanker Fleet Capacity (Millions DWT) Orderbook Capacity 2011 Capacity 2015 2012-2014

Up to Up to Panamax Up to VLCC Panamax VLCC VLCC 24.5 Panamax 172.1 145.8 53.2 225.3 22% 170.4 36% 30% 47% 38% Aframax 29% 13.6 Aframax Aframax Suezmax 12% Suezmax 95.7 109.3 22.0 Suezmax 67.2 20% 18% 19% 89.2 14% 15%

Orderbook 2011 (2012-14) 2015 E * Vessel Size Range Capacity in Million DWT Up to Panamax (<106') 145.8 24.5 170.4 Aframax (106' - 140') 95.7 13.6 109.3 Suezmax (140' - 160') 67.2 22.0 89.2 VLCC (> 160') 172.1 53.2 225.3 Total 480.8 113.3 594.2 * Total 2015 estimate does not include demolitions Source: Clarkson Research Ltd, 2011 50 The Impact of Canal Expansion on Liquid Bulks

1. Canal expansion will make Ecuador – USG crude shipments more competitive vs alternative sources (e.g., ex Nigeria)..

2. The expanded Canal will be the first route choice for LNG trades between Trinidad-Chile and Peru-USG and for Shale Gas exports coming out of the U.S. destined to Asia.

53 54 Tonnage by Market Segments FY 2010 – FY 2011

113.59 Container 104.59

79.94 Dry Bulk 72.59

34.68 Vehicle Carrier 33.05

48.99 Tanker 46.56

12.83 Refrigerated 14.59

10.77 Passenger 10.34 FY2011 (e)

9.19 FY2010 General Cargo 7.78

11.71 Oasis of the Seas Others 11.30

0 20 40 60 80 100 120 PCUMS (in millions) The Future of Market Segments – Panama Canal Container Container Break Bulk Dry Bulk Vehicle Carriers Ro-Ro´s Tankers Chemical Carriers LPG LNG Refrigerated Vessels Cruise General Cargo Others

Value-Added Components of Panama’s Transportation and Logistics Cluster 57 58

Continuing negotiations between GUPC and Labor Unions, Average Annual GDP Growth Rates for Latin America 2000-2010 (%chg) -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

Panama Surinam Trinidad & Tobago Peru R. Dominicana Costa Rica Ecuador Argentina Honduras Colombia Belice Bolivia Chile Brazil Paraguay Uruguay Guatemala Venezuela Nicaragua El Salvador Mexico Jamaica Haiti

Source: IMF, INDESA Panama’s Real GDP Growth 2006-2011

12.1% 10.3% 10.1%

8.5% 7.5%

3.2%

2006 2007 2008 2009 2010 2011E

Source: Contraloría General de la República, INDESA Foreign investment has also been strong Foreign Direct Investment: 2006-2010 (millions of US$ and % of GDP) 3,000 20.00%

$2,560 18.00% 2,500 $2,363 16.00% $2,196 15% 14.00% 2,000 $1,777 $1,773 12.00%

1,500 10.00% 9% 10% 9% 8.00%

FDI FDI (millions $US) 7% 1,000 6.00%

4.00% 500 2.00%

- 0.00% 2006 2007 2008 2009 2010

Source: Contraloría General de la República, INDESA GOVERNMENT INVESTMENT PROGRAM (2010-2014) (in millions)

3,500

3,000

2,500

2,000

3,205 1,500 2,991 2,679 2,403 2,318 1,000

500

- 2010 2011 2012 2013 2014

Source: ACP, MEF