Panama - Tocumen International Airport Project

RESTRICTED Report No. PTR-90a This report is for official use only by the Bank Group and specifically authorized orpnizations or persons. It nmy not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responubflity for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE TOCUMEN INTERNATIONAL AIRPORT PROJECT PANAMA July 13, 1971 Transportation Projects Department  Fiscal Year = Calendar Year Currency Equivalents Panamanian Balboa (B) 1.00 = USt1.00 Units Units are in the Metric System Length Kilometers (km) 1.0 = 0.6214 miles Meters (m) 1.0 = 3.281 feet Centimeters (cm) 1.0 = 0.3937 inches Area Hectare (ha) 1.0 = 2.471 acre Square Meter (n2) 1.0 = 1.196 sq yd Volume Liter (It) 1.0 = 0.21998 imperial gallons 1.0 = 0.26418 U.S. gallons Weight Kilogram (kg) 1.0 = 2.2046 pounds Abbreviations DAC - Direccion de Aeronautica Civil ICAO - International Civil Aviation Organization IATA - International Air Transport Association FAA - Federal Aviation Administration (U.S.) ILS - Instrument Landing System VOR - Very High Frequency Omni Directional Radio Range DME - Distance Measuring Equipment  PAVAMA APPRAISAL OF TOCUMEN INTERNATIONAL AIRPORT PROJECT Table of Contents Pg MNo. STIJ21RY AND C01ICLUSICiTS i-ii 1. INTRODUCTION 1 2. BACKGROUiD 3 A. General 3 B. The Transportation Sector 3 C. Aviation 3 D. Tocumen International Airport 4 3. THE PROJECT AMD THE INVESTMENT PROGRAM 6 A. The Investment Program of DAC 6 B. Description of the Project 6 C. Design and Engineering 7 D. Zoning 8 E. Procurement 8 F. Cont Estimates 8 G. Land Acquisition 9 H. Disbursement 9 4. TRAFFIC 10 5. ECONOMIC EVALUATION 12 A. General 12 B. Estimates of Benefits 13 C. Total Project Return and Incidence of Benefits 16 This report has been prepared by Messrs. A. Douglas (Aviation Engineer), P.O. Cheryan (Financial Analyst) and S.Y. Park 'Economist).  - ii - 6. TEIE BORRYJfER 17 A. Introduction 17 B. Organization and Management 17 C. Present Financial Position 19 D. User Charges and Level of Earnings 20 E. Financing Plan 21 F. Future Earnings and Financial Position 22 7- AGREE,ENTS REACHED AfND RECOIMENDATION 25 ANNEXES 1, Definitions and Descriptions of' Navigation Aids. 2. Considerations in Comparing the Reconstruction of the Existing Runway Tith the Construction of a New Runway. 3. Economic Benefits of Air Terminal Construction. 4. Monetary Value of Time Saved, 5. Schedule of User Charges Rates at Tocumen. 6. Assumptions Used in Financial Projections. TABLES 1. DAC Investment Program - 1971 through 1975. 2. Estimated Schedule of Disbursements. 3. Projection of Traffic. 4. Projected Income Statement 5. Projected Cash Flow 6. Financial Ratios 7. Proforma Balance Sheet CHARTS 1. DAC Organization, 1970. 2. Projected DAC Organization, 1975. FIGURE 1. Total Process Time of Arriving Passengers at Old and New Terminals. MAPS 1. Location of Airports. 2. Tocumen International Airport Facilities Layout.  PAN,AIA APPRAISAL OF TOCUMIEN INTERBATIODUAL AIRPORT PROJECT SUc aPY AND CONCLUSIONS i. The Government of Panama proposes to modernize and expand the facilities at Tocumen International Airport, the country's principal air- port, to assure its continued use for international transit traffic, provide for future traffic growth and facilitate tourism development. ii. The proposed Bank loan of U&S2o.0 million equivalent wouldcover the estimated foreign exchange costs of an airport improvement project estimated to cost US$34.8 million equivalent. It would be the Bank's first airport project. The loan would be made to a recently created auton- ormous agency, the Direccion de Aeronautica Civil (DAC), which owns and operates Tocumen and other airports in Panama. The Government would guar- antee the Bank loan and provide 731 3.8 million of the local cnrrency cost aS a loan to DACG, with DAC providing the balance of US$1.0 million. iii. The introduction of heavy large capacity jets into Tocumen Inter- national Airport has resulted in the overloading of the runway, and in con- gestion in the terminal building. In addition, the buildings are not suit- able for the present scale of operations and are becoming increasingly more difficult to maintain. iv. The proposed project will provide improved facilities by the construction of a new 3,350 m (11,000 ft) runway complete with lighting and an instrument landing system and a rnte paaongoet teimrinal build4ing. The project will make it possible to handle the expected increases in traffic volume until the early 1980's with a minimum of delay to aircraft, passengers and cargo. V. The cost estimates for the project are based on preliminary engineering studies carried out by consultants as part of a feasibility study. The cost estimates contain adequate contingency allowances, spe- cifically for revisions expected to occur during the developnent of the detailed design of the terminal building complex. vi. The execution of the project will be the responsibility of DAC, assisted by consultants who will carxy out the detailed design and super- vision of construction. Contracts will be awarded on the basis of inter- national competitive bidding. The project will be executed in five con- tracts - clearing, earthworks, paving, navaids and buildinge. Mzst of the work is likely to be awarded to foreign bidders. A number of local subcontractors are expected to participate in the construction work. It is recommendod that the foreign oxchange costs of engineering incurred before the signing of the loan, estimated at $,!800,000,bo financed retro- actively.  - ii - vii. DAC was established in 1969 as an autonomous state agency to handle all civil aviation matters in Panama. DAC has made a good start but is severely handicapped by the general lack of experience of its staff in civil aviation matters. Technical and financial management is weak and to correct this situation a program of technical and management assis- tance will be undertaken as part of the project. viii. DAC's income is derived from user charges which, at their existing level, would not be sufficient to cover future costs. The Government and DAC have agreed to implement the consultantsr recommendation to raise charges to ensure the financial viability of the agency. The financial forecasts indicate that with these increases DAC will, after meeting its operating requirements and servicing its debts be able to finance the further expansion of aviation infrastracture facilities in Panama in the foreseeable future. After completion of the project, the rate of return on net fixed assets will rise from the rather low level of 1.8% in 1976 to 6.8% in 1980 and 16.7% in 198h. ix. The project will produce benefits in the form of savings in user time and other economic resources, which are expected to result in an econ- omic return ranging from 18% to 20%. In the economic evaluation separate consideration is given to the terminal building and the runway. The benefits of the construction of the terminal building consist of the time savings by aircraft and passengers, resulting in an estimated economic return ranging between 13.5% and 17%. The construction of the new runway sill produce benefits in the form of lower aircraft operating and runway maintenance costs and the freeing of land at another airport for commercial use, resulting in an estimated economic return ranging from 22% to 27%. x. The project is suitable for a loan to DAC of $20.0 million equivalent. A term of 20 years, including a grace period of 4 years corresponding to the construction period, is appropriate.  PANAMA. APPRAISAL OF THE TOCUMEN INTEBMATIONAL AIRWORT PROJECT 1. INTRODUCTION 1.01 The Government of Panama has requested the Bank to assist in financing the development of Tocumen International Airport. The total cost of the project is estimated at US$3h.8 million, of which the Bank is re- quested to finance the foreign exchange component amounting to U1S,20. 0 million. 1.02 The proposed borrower is Direccion de Aeronautica Civil (DAC), an autonomous agency of the Government of Panama, which came into existence in January 1969. The proposed loan would be guaranteed by the Government. It would be the first Bank airpaot project, 1.03 In 1969 DAC retained the US consulting firm Parsons Corporation to prepare a feasibility study for the expansion of the airport. After discussions with the Bank, two addenda were prepared to explore technical alternatives more thoroughly and to present the detailed economic justifi- cation of the project. 1.04 The project consists of the construction of a new runway and a modern terminal building at Tocumen International Airport to provide im- proved service to a large and growing volume of passenger and cargo traffic. The Government attaches a high priority to this project as a means of main- taining and improving Tocumen's position as a major international airport, stimulating tourism as part of its policy of economic diversification, capturing an increasing share of north-south and east-west air passenger and cargo traffic and improving aviation services to meet the requirements of Panama's developing economy. 1.05 The project is part of a master plan of airport development which provides for future expansion of terminal building and runway capacity when required. It is expected that the proposed new runway and air terminal building will be completed and in service in the middle of 1974 and 1975 re- spectively. The air terminal building is being designed to handle traffic projected for 1980 with provision for expansion. The consultants' detailed evaluation of various alternative designs indicated that it is more economical to construct tho terminal building initially for the design year 1980, and add satellites as required, to meet the traffic requirements for 1985 and beyond, than to construct immediately for a later design year. The new runway will expand the capacity of the airport to handle traffic un1il at least 1985. The existing runway will become available for use by general aviation, which now uses a small airport (Paitilla) nearer the urban center of Panama City.  -2- l.O6 Previous Bank lending in the transportation sector has been lim-it- ed to two loans (123-PAN and 264-PAN) totalling US$13.1 million to help fi- nance road construction. These lending operations brought to light major institutional problems in the Highway Department which was, at the time, also responsible for airports. These problems were caused by Government interference with staffing and execution of work and prevented the nego- tiations of a proposed Third Highway Loan. DAC, as an autonomous agency is not expected to be affected by this type of problem. 1.07 This report is based on the findings of an appraisal mission which visited Panama in September/October 1970 and a number of subsequent discussions with DAC. Mr. A. Douglas, aviation engineer ol' the Bank, assisted by Bank retained consultants, Messrs. P.O. Cheryan (financial analyst), D. Riemens (economist) and J. Roelofs (economist and management expert) participated in the appraisal mission. The report was written by Messrs. Douglas, Cheryan and Park.  - 3 - 2. BACKGROITD A. General 2.01 The Republic of' Panama, an isthmus state of 29,000 sq miles between the Atlantic and Pacific Oceans, is bounded on the east by Colombia and on the west by Costa Rica (see Map 1). The population is estimated at 1.5 million in 1970 and is growing at 3.3% per annmm. The country is rcuthly bisected by the Canal Zone in which is located the Panama Canal which is owned and operated by the Panama Canal Company. East of the Canal Zone the country is relatively unexplored and is without highways, railways or regula.~ air services. The bulk of the population is concentrated adjacent to the Canal Zone and in the Pacific plains to the west. 2.02 Panama's gross domestic product (GDP) in 1969 was US$880 million with a per capita GDP of US$630. The average annual growth rate has been about 8% over the period 1964-1968. The tertiary sector of the economy accounts for more than one half of GDP, with agriculture (22%) and manufac- turing (18%) coming second and third respectively. The Canal Zone is the main source of Panama s foreign exchange earnings which have been rising annually at 13%. The principal exports are bananas, refined oil, shrimp and sugar. 2.03 The Government is attempting to diversify the economy through emphasis on such activities as tourism, fishing and agricutu_re. The promot or. of tourism will require investments in facilities and infr a-3racture of which the expanded Tocumen Airport will be a component. B. The Transportation Sector 2.04 The Panama Railroad runs through the Canal Zone between Panama City and Colon. Some of the towns of Western Panama are also connected by short rail links. There are about 1,400 miles of public roads including about 340 miles of Pan American Highway and a 50 mile long highway connecting Panama City and Colon. Large parts of the country are, however, not accessible by road. The chief ports are Cristobal at the Caribbean end of the canal and Balboa at the Pacific end. There are two small domestic airlines and the country is served by numerous international airlines through Tocumnen Airport. C. Aviation 2.05 In January 1969, a comprehensive reorganization and realignment of civil aviation responsibilities in Panama was effected and a new autonomous organization - Direccion de Aeronautica Civil (DAC) was created. DAC has prepared a five-year plan for aviation development. The plan includes airportQ navigation aids and communications, improved safety services and persornel training.  - 4 - 2.06 Airports are managed by the Airports Department of DAC. The over- all management and routine operation and administration of airports in Panamaare performed by DAC staff. The detailed planning, design and construction of small scale airport improvements are done by DAC whereas that required for larger projects is done by consultants. 2.07 The US Federal Aviation Administration (FAA) provides Air Traffic Control Services (ATC) in the region through the use of a modern facility located at Balboa in the Canal Zone. 2.08 International airline operations to Panama by 20 carriers are growing and new air carrier services are being encouraged and solicited by DAC as part of the Government's policy to foster tourism. Panama is actively seeking more favorable bilateral air agreements to improve its air trade opportunities. 2.09 A total of 25 foreign cities are linked directly with Panama by air. The five largest of these in terms of air traffic are Miami, San Jose, Lima, Guayaquil and Quito. The heaviest travelled routes are Miami- Panama-Guayaquil-Lima-Santiago and Mexico City-Guatemala-Panama. 2.10 Domestic aviation is also growing in significance by providing improved access to major centers in western Panama and to communities not served by other modes. Writh the growth of domestic aviation activity, greater emphasis is being placed on the need for an improved airways structure with better navaids for enroute and terminal use and for improved cammunications. Very High Frequency Omni Directional Radio Range (VOR) installations are planned at David, Bocas del Toro, Santiago and La Palma together with Distance Measuring Equipment (DME) at David and Bocas del Toro. (Refer to Annex 1 for definitions and descriptions). D. Tocumen International Airport 2.11 Tocumen Airport is one of the principal airports in South America. In 1969, it handled some 420,000 international arriving and departing passengers compared with 549,000 at Rio de Janeiro, 574,000 at Caracas and 429,000 at Barbados. The number of scheduled aircraft movements in the same year was 19,000 at Tocumen compared with 15,000 at Rio de Janeiro, 19,0CO at Caracas and 18,000 at Barbados. A total of 20 international air- lines serves the airport.  - 5 - 2.12 Tocumen is the main center for the flow of international air cargo into and out of the country and processes about 40% of the domestic air cargo; growth of air cargo, however, has been slow compared with air cargo growth trends worldwide. 2.13 The existing airport facilities were built in stages beginning in 1946. The concrete runway was subsequently extended in 1960 to 2,700 m. It hasrmw reached the end of its physical life and cracking, deflection and progressive failure is occuring. Major strengthening is required to pro- vide adequately for current jet operations as well as for the requirements of future aircraft. 2.14 The terminal building was built in 1953 and has been extended several times by a variety of additions to meet the immediate demands. This has resulted in a functionally obsolete and inefficient operation.  - 6 - 3 THE PROJECT AND THE DrV.slTMJi BT-MlGA1v A. The Investment Program of DAC 3.01 The investment program of Aeronautica Civil consists of runway, navaid and terminal building improvements at seven airports: Tocumen, David, Bocas del Toro, Chaniguinola, Puerto Armuelles, Santiago and La Palma. The details of the proposed investment during 1971-1975 for improvements at these sites are induded in Table 1. 3.02 The main purposes of this program are to ensure safety and to pro- vide reasaiable accommodation for air passengers and airport operations. 3.03 The main part of the program will be carried out at Tocumen and ccnsists of the project for which the Govem ment has requested Bank financing. The proposed project is 93% of the total 1971-75 investment program of $36.7 million. B. Description of the Project 3.04 The project consists of the construction at Tocumen Intermational Airport of (a) a new concrete runway 3,350 m x 45 m (11,000 ft x 150 ft) with parallel asphaltic concrete taxiway, complete with lighting, (b) runway approach lighting, (c) an Instrument Landing System (ILS), (d) aircraft parking apron, (e) new air passenger terminal building, (f) control tower, (g) crash-rescue building and (h) other related works. Also included are management consultant services. 3.05 The new runway will be parallel to the existing one but located 1 000 m (3,280 ft) to the south of it on the other side of the Panama-Tocumen highway. A connecting taxiway will join the two runways and cross the high- way via an overpass. The possibility of improving the existing runway rather than building a new one was considered but the new runway construction was found to be more advantageous. (See Annex 2 and Chapter 5 Economic Evalu- ation). 3.06 The new passenger terminal building consists of a central main building with two satellite buildings connected to it by corridors. This represents the first phase of development. Further development of the air- port at a later stage would provide additional satellites. 3.07 A drawing showing the location of various existing and proposed airport facilities is included as Map 2. The runway and the terminal build- ing will be constructed during the period 1971-1975. 3.08 The haidling of air cargo will require improvements in cargo handling facilities at the aizport. These will be financed and operated by the users. The Government is also planning to develop an air cargo free zone at Tocumen (not included in the project). The plans for this free zone are rather uncertain and its potential effect on traffic growth has therefore not been taken into account in the traffic forecasts. A duty free zone in the proposed air terminal building is planned to cater to the nieeds of the travelling public with particular emphasis on transit passen- gers.  - 7 - 3.09 DAC intends to arrange for a hydrant refueling system at the new terminal building. A regulation has been passed to ensure that the users will provide and operate such a system. 3.10 The introduction of new terminal approach aids such as the Instru- ment Landing System (ILS) will necessitate the revision of aircraft operating procedures in the vicinity of Tocumen International Airport. DAC will obtain technical assistance from an appropriate civil aviation agency to develop and implement such procedures. 3.11 In addition to this technical assistance, other consultant services will be needed to assist with the strengthening of DAC as an institution (see Chapter 6, para. 6.o5). Management consultants will be retained by DAC to review needs, make recommendations and implement them. Consultants for these services will be appointed before the loan becomes effective. Assis- tance will also be required in the development of a National Aviation Plan to help determine the needs and priorities of other domestic airports and aviation services and to help DAC to allocate its resources to future aviation investments and operations. Funds are provided under the loan to cover the foreign exchange element of fees and training costs involved. Agreement in principle has been reached with DAC on the scope of work anad it has been agreed that these services will commence before the end of 1972. C. Design and Engineering 3.12 DAC has retained the Parsons Corporation of Los Angeles, California, as consultant for the design work, including the preparation of plans and specifications. It is DAC's intention that the consultants will also be responsible for supervision of construction, but will perform their work in association with local consultants. Panamanian personnel will receive train- ing during the design and construction phases of the work to develop their capability in this type of work and aid them in the efficient operation of the facilities. DAC has agreed that arrangements for supervision by consultants will be made before the start of civil works and that such arrangements are subject to approval by the Bank. 3.13 Airport design standards will be in accordance with the standards and recommended practices of ICAO, particularly Annex 14 - Aerodromes, and the advisory circulars of the FAA particularly as they relate to the latest requirements for large aircraft. The space standards to be used in the terminal building are in accordance with the FAA standards for medium size air terminals. In addition, the work will be designed and constructed to comply with local building codes which follow North American practice. 3.14 These standards are satisfactory.  -8- D. Zoning 3.15 To permit the safe operation of aircraft in and out of the airport, it will be necessary to control the development of property adjacent to the airport and particularly on the runway approaches. The construction of buildings and other structures will have to be controlled to ensure that they do not becomeobstruction hazards. Land development should be similarly con- trolled to protect the long range potential use of the airport. 3.16 DAC has agreed to implement effective zoning regulations to control the development of obstructions in the vicinity of the airport. These regulations are to be effective prior to December 31, 1972. 3.17 The Government has agreed to develop and implenent by July 31, 1973 comprehensive land use zoning in the administrative districts in the environs of the airport, which will be compatible with the long range use of the airport property. E. Procurement 3.18 It is DAC's intention to award five separate construction contracts for clearing, earthworks, paving, navaids and the air terminal building complex. 3.19 It is foreseen that these contracts would attract the interest of foreign contractors. If such contractors are the successful bidders, it is expected that they would employ local subcontractors to a substantial degree. Imported material and supplies used on this project will be exempt from import duty. 3.20 Construction contracts will be awarded in accordance with the Bank's "Guidelines for Procurement"'. P. Ccot Ft.;Z6-LZt6Q 3.21 The project is estimated to cost the equivalent of US$34.8 million. The proposed loan of US$20.0 million would cover the estimated foreign ex- change costx which are 57% of the total costs. The various major elements of the project are shown in the table below. US$ or BaiT)has (Thousands) Local Foreign Total Percentage Runway and Taxiway Construct'on 3,731 3,732 7,463 21.45 Runway and Taxiway Lighting 110 215 325 .93 Approach Lighting and IIZ, 49 276 325 .93 Passenger Terminal Building including apron 6,344 7,755 314,99 40.-5 Control Tower 83 249 332 . 6 Crash-Rescue Building 63 72 135 .39 Access Road, Tunnel, Utilities 495 1,281 1,776 5.10  9 - 'JSS or 'alboas (Thousands) Cont I d Local Foreign 'otal ?ercntage Design 418 1 ,230 1,648 4.74 Supervision 450 750 1 200 3.45 Sub-total 14 15,560 27,303 Contingencies -Physical 1,562 2,495 4.,057 11.66 -Price 1,370 1,570 2,940 8.45 Other Consultants' Fees 125 375 500 144 Total Project Cost 124,800 2000 34800 100.00 3.22 The above figures are based on the cost estimates prepared by the consultants, dated May 3, 1971. They were developed from the consultants' preliminary field investigations and designs. Whereas a physical contingenc.; allowance of 10% has been used for runway, taxiway and field works, it was considered necessary to use 20% for the passenger tenLLnal building. Such a higher contingency allowance is necessary to provide for changes in user re- quirements and evolving technology during the design and construction period and is normal practice in the development of air terminal building projects. Escalation of constrution costs has been estimated at approximately 7% per annum for both the local and foreign components during the construction pericd With the above contingencies, the cost estimates are considered realistic. DAC has directed the consultants to exercise continuous control on the size and specifications of the terminal building throughout the deaiE:n period to maintain its cost iwithin the present estimates. G. Land Acouisition 3.23 A total of 350 ha of land valued at t750,000 will be required for the project. This land will be made available by the Government to DAC as a contribution to DAC's equity. It is so treated in the financial projections and has been taken into account as a cost in the economic evaluation of the project. H. Disbursement 3.24 Disbursement of loan funds will be made to finance the foreign e::- change elements of construction and consultants' services. These disburoementi, are expec'ted to t,ake place over a four year period frorm December 1971 tO Jule 1975. Diclburseents will be made on the folowing baE:-is: (a) ' of (umenditures for civil work3 c^cntracts rhich represent3 t.e estimatcd foreign exchange coSxie thereof; (b) 70% of expenditures for consult ift ser1rices which represents the estimated foreign exchange c(mpor:nt thereof. The estimated schedule of disbursements is shaow- in Table 2. It is recoraew3d- ed t'nat the fored,gn exchange costs of consulting services, incurred after August 1, 1970, should be financed retroactively. These costs are estimated to be less the,n. US$80 00O equiv.lInt.  - 10 - 4. TRAFFIC 4.o1 The consultants prepared two alternative traffic projections for Tocumen assuming that the proposed project would be carried out. Their high forecast is a simple extrapolation of the past growth trend. The low forecast also used the past trend as basis, but adjustments were made taking into account: (1) that the current rates of traffic growth would probably decelerate gradually and (2) that traffic growth experienced in other countries or geographical areas would provide an indication of the likely long term trzz,d of traffic development in Panama. The low forecast reflects also the follc-i ing specific factors: For passengers: a. The anticipated development of the tourist industry in Panama; and b. the relative slackening of activities in the Canal Zone. For cargo: a. the anticipated continuing growth of the duty free zone in Colon; and b. the favorable location of Panama as an air cargo transit point. 4.02 The Bank staff considers the consultants' low traffic forecast, which is about 40% lower than the high forecast, to be more realistic and, therefore, with some minor modifications, it has been used as basis for determining project design and economic and financial analyses. 4.03 Details of the forecast traffic for passengers and cargo for the 20 year period, 1971-10994 are shown in Table 3. In summary, the forecast shows that the total number of international passengers whiich numbered 815,80c in 1 969 -.rould Cro, to over 2 raillion in 1 980 and to nearly 5 million in 1 990. The donestic passenger volbie uTould increase frcm 91,500 in 1969 to 320,CC0 in 1980 and to 825,ooo in 1990. Intermational cargo is expected to increase frcm 23,159 tons in 1968 to 89,000 tons in 1980 and to 220,000 tons in 1990; domestic cargo from 2,164 tons to 6,200 tons in 12380 and to 14,600 tons in 1990. These projected passenger and cargo movements 7xill require an increasc in the number of aircraft opcrations at Tocurien from 25,o000 Vndings and take- offs in 1969 to about 55,000 in 1980, about 32,500 in 1985 and about 120,000 in 1990. The assumptions on which these forecasts are based are explained bPlc Passenger Traffic 4rO4 For projection purposes, the international passengers are divided into four categories whiich have different characteristics of growth: Foreign  - 11 - visitors, Panama residents, Canal Zone residents and Direct Transit passengars, 4.05 Forei Visitors are further subdivided into tourists and non- tourists. about 70 of foreign visitors are tourists. The non-tourist traffic will probably grow at a declining rate of 3% to 2.5% during the 1970's and no further growth is assumed for the period thereafter. The rate of growth in tourist traffic, which averaged about 11.5% during the past five years, will continue to grow at the same rate. This assumption is supported by the various tourism promotion programs being carried out by the Bureau of Tourism of Panama. On this basis the total volume of foreign visitor traffic is projected to increase by 9.5% p.a. to 1980 and 10.5% p.a. during 1980-'w:. 4.06 Panama Residents; traffic has grown at 14.5% p.a. during the past five years, which is a very high increase relative to the annual rate of 8.4% for the previous quinquennial period. It is unlikely that this high rate of growth can be sustained continuously and some slackening in the rate of grcwth is expected. The annual growth rates used in the projection are 11.5% to 1980 and 10% for 1980-1990. 4.07 Canal Zone traffic growth, which has slowed down in recent years due to the decline of both the civilian and military activities in the United States administered zone, is projected to decline fr^; the 4.2% rate during the past five years to 3.5% and stabilize at that level during the projecticr, period. 4.o8 Direct Transit traffic which accounts for about one half of the international traffic today, is projected to decrease in relative importance to just over 40% by 1990. The main reasons for this decrease is that, as traffic between North and South America develops further, there is a tendency for an increasing number of direct flights between the two continents to by- pass Panama. The projected change in the proportion of direct transit traffi) implies an annual growth rate for this traffic of 8.5% for the projection period. 4.09 Domestic Passenger traffic is expected to maintain the past trer, at about 12% to 1980, thereafter slowing down to about 10% p.a. 4.10 Cargo Traffic. The past growth rates of international cargo tre