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Economy

Always a strong economy in Latin America, with low inflation (thanks to a currency pegged to the US dollar), a stable democracy and key geographical position, Panama is now poised to become a powerhouse player in the region.

Panama's economy grew an astounding 9.5% in 2007, the fasting growing economy in all of Latin America and the Caribbean. Economic growth was 6.3% in 2006, continuing a strong five-year upward trend, and the International Monetary Fund (IMF) predicts Panama's economy is set to grow more than any other Latin American country this year.

Panama has for some time now been in a privileged position, not just in Central America, but in the western hemisphere. The Panama Canal, built at the start of the 20th century, turned this tiny tropical haven into a major shipping hub for the world's ocean trade. With the Canal came foreign business and residents, infusing the sleepy paradise with a new energy and bringing the momentum of modernization to Latin America.

Tourism now stands as the country's top source of income, receiving more than 700,000 visitors annually to its pristine beaches, vibrant rainforests and cosmopolitan capital city. The influx of visitors has also brought with it a boom in construction--- hotels, condominiums, resort complexes and peripheral services such as restaurants and shops, are springing up along the country's famous coasts and in Panama City.

The Panama Canal itself will receive a $5 billion upgrade in the coming years, promising to create up to 50,000 new jobs in the region, as well as ensuring the Canal's competitiveness in world shipping for decades to come. In fact, analysts predict the expanded canal will directly account for doubling the country's gross domestic product (GDP) by 2025, and increase business investment in the Canal Zone by 40 per cent.

New projects to further stimulate the economy include a free trade agreement with the United States, currently in negotiation, the recent announcement by Occidental of a $6 billion regional refinery, and 14 new thermal and hydroelectric plants.

These factors and more, have given Panama a unique position in the Latin American world --- as a leader of economic growth with a stable and thriving market for business and investment.

Economic Facts 2006

    • Population: 3.2 million
    • GDP: $25.29 billion - 6.3% growth from 2005
    • Unemployment: 8.8%
    • Inflation (CPI): 2.6%
    • External Debt: $9.99 billion
    • Economic Aid: $197 million
    • Exports: $8 billion - Primarily bananas, shrimp, sugar, coffee, clothing
    • Imports: $9.36 billion - Primarily capital goods, food, consumer goods, chemicals

Panama's economy is largely service oriented, accounting for about 70% of the GDP and 50% of jobs. Inflation is low, as the national currency (the balboa) is pegged to the US dollar.

The US is Panama's main trade partner, receiving 50% of Panama's merchandise exports, followed by the European Union. The main goods exports are agricultural products (81%), fuels and mining products, and manufactures. The main services exports are transportation and travel, largely related to the Canal, the Colon Free Zone, and the tourism industry.

Panama ranked 47th in the world on the Index for Economic Freedom, and 10th in the Americas, scoring top marks for business freedom, fiscal freedom, freedom from government, financial freedom, investment freedom and monetary freedom.

Weaknesses were identified in a backlogged court system and bureaucratic inefficiency, although the report pointed out starting a business in Panama takes an average of just 19 days, well ahead of the world average of 48.

Useful Links

World Trade Organization: Key information on Panama's participation in the WTO
International Monetary Fund: Reports and information on Panama