Economy of Panama

Panama's economy is one of the most stable in the Americas. Among the main activities are financial, tourism and logistics services, which represent 75% of GDP.^{[citation required]}

The Panamanian economy is the thirteenth economy in Latin America in terms of nominal GDP, (after Costa Rica and before Bolivia) and the eleventh in terms of GDP at purchasing power parity (PPP) prices (after Guatemala and before Costa Rica). Panama has a per capita income of USD 11,849 nominal and USD 20,512 PPP.

From 2003 to 2009, the GDP doubled, fostered by high foreign and domestic investment, tourism and the logistics industry. According to the World Bank, the IMF and the UN, the country has the highest per capita income in Central America, which is about $13,090. GDP has grown steadily for more than twenty years in a row (1989). The country is classified in the "investment grade" category by risk rating companies: Standard and poors, Moody's and Fitch Ratings.

In 2016, Panama is the tenth most unequal country in the world and the second in Latin America.

Agricultural sector

About 9% of Panama's soil is cultivated. Most of its agricultural production is obtained on commercial farms and is destined for export. The main crops and groups of crops —2006 production in tons— are: sugar cane (1.77 million); fruit (659,283), mainly bananas, bananas, and oranges; rice (280,000); corn (70,000); coffee (13,153) and tomato. In 2006, livestock had 1.56 million head of cattle, 286,200 head of pigs, and approximately 14.9 million poultry. A wide variety of woods are present in Panama's forest products, including mahogany stands out. The country has considerable forest reserves, almost 57% of its land, sometimes difficult to exploit due to poor transport infrastructure. In 2006 the annual production of wood was 1.35 million m³.

In 2018, Panama produced 2.9 million tons of sugar cane, 400 thousand tons of bananas, 314 thousand tons of rice, 112 thousand tons of corn, 109 thousand tons of pineapple, 46 thousand tons of palm oil, 40 thousand tons of orange, in addition to smaller productions of other agricultural products such as watermelon, cassava, coconut, onion, potato, tomato, yam, etc.

Fishing has experienced strong development in recent decades and today is one of the most important industries in the country; in 2005, a total of 222,756 tons were caught, mainly shrimp, oily fish, and prawns.

Tertiary sector

Panama depends above all on its conglomerate of transport and logistics services oriented towards world trade, whose epicenter is the Panama Canal. Around the Panama Canal there are container transshipment ports, free trade zones, railways and the largest air passenger hub in Latin America. It also has the largest financial center in Latin America. The services it offers are very well connected to the world market and interconnected with each other. These services account for around three quarters of its GDP. In recent years, the construction of skyscrapers in Panama City has grown vertiginously as a result of the American baby boomer. Tourism has also been booming as a result of the emergence and expansion of the region's air hub, which has been able to move passengers from any Latin American origin to Panama and from Panama to any destination in the region. The Panama Canal, the free trade zone, the container transshipment ports and the financial center have lowered the costs of importing merchandise from anywhere in the world, which when combined with the capacity of the air hub to move passengers from any place in Latin America, have given rise to an extraordinary growth of tourists, whose main reasons for travel are shopping, which has fueled the growth of huge shopping centers where merchandise is sold at retail.

Panama enjoys a comparative advantage as a provider of international services, particularly transportation through the Canal. The orientation of the Panamanian economy towards services makes the country an international center for activities such as maritime transport, distribution services and banking.

The process of liberalizing Foreign Trade in Panama, since its entry into the WTO in 1997, allows it to offer the following advantages:

• Liberal regime for trade in goods and services
• Deep integration into the world economy
• Grants NMF treatment to its trading partners
• Simplified tariff regimen (Ad Valorem)
• A forum to resolve disputes by alternative means (ADR)

Expansion of the Panama Canal

In 2006, during the presidency of Martín Torrijos, the canal expansion project was approved in a referendum, in order to build other sets of locks in the Pacific and Atlantic oceans. The work included the removal of about 150,000 km³ of material, the elevation of Gatun Lake, the dredging of navigable channels and entrances to the Pacific and Atlantic oceans. The total cost of the work would amount to more than 5,000 million balboas. The expansion will allow the passage of post-Panamax vessels (the current canal's limit capacity) that will have a capacity of up to 12,000 TEU's.

A greater capacity for the canal means less waiting time for ships when crossing the route. It is worth mentioning that transit through the canal is contingent on global demand and not on the size of the locks. However, the waiting time in the unexpanded channel, and even in the current one, is an impediment to the continuous flow, given the increase in the volume of trade experienced in the globe. This project was also driving a port expansion in the region (in order to receive larger ships) and opportunities in the logistics sector. The logistics and transportation services conglomerate expanded further and greatly increased its competitive advantages in the region due to the economies of scale that this implies. The expansion of the Canal was completed in 2016 and more than 5.25 billion dollars had been spent in total. Another 2 billion dollars were invested in port expansion before the expansion of the Canal was completed.

Investment

Investment in Panama has become in recent years the main drivers of GDP growth, since 2004 FDI exceeded 1 billion dollars, a record for the country; Since then, it has been leading the Central American region in terms of the amount of investment and ranks second in foreign investment per capita in Latin America, after Chile. In 2009, FDI suffered a contraction of 26%, which contrasted strongly with those seen in previous years, such as during 2006 when it grew 149%.

Exports

According to Cepal, Panama exported 17,209 million dollars in 2009, which puts the country in the tenth position in exports in Latin America. The main products exported are: Varied Food (Bananas, coffee, etc.), as well as solid waste.

Percentages of Solid Waste Exports.

Exports from Panama fell 9.6% in September 2009, according to the preliminary report that the Office of Statistics and Census of the Comptroller's Office released on November 13.

The Agricultural Export Promotion Certificate (Cefa) will be the new incentive that will replace the Tax Credit Certificate (CAT). The Vice Minister of Agricultural Development, Luis Víctor Viallarreal, pointed out that the project created by Cefa will be presented to the Assembly in the coming weeks.

Bananas

Panama faces the possibility of a contraction of close to 20% in exports of bananas, as a consequence of lack of financing, pests and adverse weather conditions Among the adverse weather conditions is the constant flooding in Panama City due to poor sewerage. According to industry figures released by local media, from January to November 2008, foreign sales of the fruit reached 17,689,000 boxes. That amount equates to a decrease of 2.7 million boxes in comparison with equal and 2008 cover

Historical evolution of Gross Domestic Product (nominal)

1960s

At the beginning of the 1960s, Panama had a Gross Domestic Product (nominal) of USD 416 million. For the year 1969, the country's GDP reached USD 954 million. The Panamanian economy had a growth of 129.3% during this decade with respect to the GDP of 1960.

Gross domestic product growth in Panama 1960-1969
Source: International Monetary Fund
Graphics produced by: Wikipedia

1970s

At the beginning of the 70s, Panama had a Gross Domestic Product (nominal) of USD 1,016 million. For the year 1979, the country's GDP reached USD 2,819 million. The Panamanian economy grew 177.4% during this decade compared to the GDP of 1970.

Gross domestic product growth in Panama 1970-1979
Source: International Monetary Fund
Graphics produced by: Wikipedia

1980s

At the beginning of the 80s, Panama had a (nominal) gross domestic product of USD 4,039 million. For the year 1989, the country's GDP reached USD 5,181 million. The Panamanian economy grew 28.2% during this decade compared to the GDP of 1980.

Gross domestic product growth in Panama 1980-1989
Source: International Monetary Fund
Graphics produced by: Wikipedia

1990s

At the beginning of the 90s, Panama had a (nominal) gross domestic product of USD 5,632 million. For the year 1999, the country's GDP reached USD 12,130 million. The Panamanian economy grew 115.3% during this decade compared to the GDP of 1990.

Gross domestic product growth in Panama 1990-1999
Source: International Monetary Fund
Graphics produced by: Wikipedia

2000s

At the beginning of the 2000s, Panama had a (nominal) gross domestic product of USD 12,304 million. For the year 2009, the country's GDP reached USD 26,594 million. The Panamanian economy had a growth of 116.1% during this decade with respect to the GDP of the year 2000.

GDP growth in Panama 2000-2009
Source: International Monetary Fund
Graphics produced by: Wikipedia

2010s

At the beginning of the 10's, Panama had a (nominal) gross domestic product of USD 28.917 million. For the year 2015, the country's GDP reached USD 52,132 million. Up to the present (2015) the Panamanian economy had a growth of 80.2% during this decade with respect to the GDP of 2010.

Panama Gross Domestic Product Growth Graphic 2010-2019
Source: International Monetary Fund
Graphics produced by: Wikipedia

Panamanian economy at the continental level

Latin American countries according to the size of their economy GDP (gross domestic product) by 2020
N.o	Country	nominal GDP (millions of dollars)	Inhabitants	Nominal GDP per capita	Main Article
1	BrazilBrazil	USD 1 893 010 million	211 million	USD 8 955	Brazilian economy
2°	Mexico Mexico	USD 1 322 489 million	127 million	USD 10 405	Mexican Economy
3°	Argentina	USD 443 249 million	45 million	USD 9 730	Argentina
4°	ColombiaColombia	USD 343 177 million	50 million	USD 6 744	Colombian Economy
5°	ChileChile	USD 308 505 million	19 million	USD 15 854	Chilean economy
6°	Peru Peru	USD 240 175 million	32 million	USD 7 316	Peruvian economy
7°	EcuadorEcuador	USD 109 444 million	17 million	USD 6 250	Ecuadorian economy
8°	Dominican RepublicDominican Republic	USD 96 291 million	10 million	USD 9 194	Dominican economy
9°	GuatemalaGuatemala	USD 86 397 million	17 million	USD 4 807	Guatemalan economy
10°	Panama Panama	USD 73 369 million	4 million	USD 17 148	Panamanian Economy
11°	Costa RicaCosta Rica	USD 65 179 million	5 million	USD 12 690	Costa Rican economy
12°	Uruguay Uruguay	USD 62 921 million	3 million	USD 17 818	Uruguayan economy
13°	Venezuela Venezuela	USD 62 917 million	27 million	USD 2 457	Venezuelan economy
14th	BoliviaBolivia	USD 45 253 million	11 million	USD 4 090	Bolivian economy
15°	Paraguay Paraguay	USD 42 826 million	7 million	USD 5 904	Paraguayan economy
16°	El SalvadorEl Salvador	USD 27 918 million	6 million	USD 4 126	Salvadoran economy
17°	HondurasHonduras	USD 25 314 million	9 million	USD 2 593	Honduran economy
18°	Trinidad and TobagoTrinidad and Tobago	USD 23 251 million	1 million	USD 16 757	Trinitense economy
19°	Jamaica	USD 16 474 million	2 million	USD 5 698	Jamaiquina economy
20°	BahamasBahamas	USD 12 815 million	380 thousand	USD 33 286	Bahamian economy
21°	NicaraguaNicaragua	USD 12 331 million	6 million	USD 1 869	Nicaraguan Economy
22nd	HaitiHaiti	USD 8 709 million	11 million	USD 765	Haitian economy
23°	GuyanaGuyana	USD 8 065 million	780 thousand	USD 10 249	Guyanese economy
24°	BarbadosBarbados	USD 5 322 million	280.	USD 18 486	Barbadian Economy
25°	SurinameSuriname	USD 4 162 million	600 thousand	USD 6 875	Surinamese economy
26°	Saint LuciaSaint Lucia	USD 2 103 million	180.	USD 11 619	Economy Santalucense
27°	BelizeBelize	USD 2 076 million	410 thousand	USD 4 978	Belizean economy
28°	Antigua and BarbudaAntigua and Barbuda	USD 1 779 million	90 thousand	USD 18 887	Ancient Economy
29°	GrenadaGrenada	USD 1 295 million	100 thousand	USD 11 848	Granadina economy
30°	San Cristóbal y NievesSan Cristóbal y Nieves	USD 1 087 million	50 thousand	USD 19,023	Sancristobal Economy
31°	Saint Vincent and the GrenadinesSaint Vincent and the Grenadines	USD 893 million	110.	USD 8 080	Sanvicent economy
32°	DominicaDominica	USD 633 million	70 thousand	USD 8 948	Dominique economy
Note: La Economy of Brazil reach 1 Billion$800 billion La Economy of Mexico reach 1 Billion$300 billion.

Panama Tax System

Minimum wage

Monthly minimum wage

Economic growth

GDP growth

The evolution of the Panamanian economy in the current decade showed a much more marked dynamism than that experienced in the nineties. Economic growth was 7.5%, 8.2%, 8.5%, 12.1% and 10.7% during the years 2004, 2005, 2006, 2007 and 2008 respectively. Converging in GDP pc in the period 2000-2006, with the average GDP pc of 8 Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela, from 88% to 97%, with USA from 20% to 22% and falling slightly compared to Spain from 36.2% to 35.9%. (Sources of convergence data: MADDISON, A. (2008), The World Economy year 0-2006, Paris: OECD Development Center Studies). The sectors with the highest growth were those that have traditionally been the engines of economic growth, due to taking advantage of the advantages derived from Panama's geographical position: transportation, ports, and trade in free zones. As a result of the reversal of the Panama Canal and its surrounding areas, the dynamics and structure of these sectors changed radically to give rise to the consolidation of a cluster of transport logistics activities around the Canal (container transshipment ports, railways, free zones, regional distribution logistics centers, financial services, etc.), strengthened by its eventual expansion. The unemployment rate has dropped considerably to 6.4% and 5.2% in 2007 and 2008 respectively, after having reached more than 13% at the beginning of this decade. As a result of extraordinary economic growth, public debt as a percentage of GDP could be significantly reduced. The fact that they went from a situation of recurring fiscal deficits to surpluses also contributed. However, as a result of the exorbitant increases in the price of oil in the second half of the current decade, inflation shot up to 8.7% in 2008, a level not seen since the 1970s during the oil crises. In 2009, inflation has dropped substantially; however, it continues to be a latent threat given the probable rise in international oil prices in the future.

Panama in the international context

Panama's economy has been based on the logistics industry, developed around the main maritime communication route that exists in America, the Panama Canal. In addition to this, the relevant sectors for the Panamanian economy are tourism, agriculture and more recently telecommunications. The political stability of Panama has accompanied a clear growth in its gross domestic product in recent years, and it is noteworthy that the world economic crisis of 2008 did not affect the evolution of this value. To reinforce the previous argument we can observe the rate of economic growth which, although in 2009 it fell to 3.9, in 2011 managed to establish itself again at 10.6% and in the interval 2000-2011 it has managed to grow by 289.7%. The most relevant macroeconomic values are shown below.