The economy of Panama is a mixed one, with both private and public sector involvement. It has experienced steady growth in recent years, with an average annual GDP growth rate of 4.3% between 2010 and 2019. The country’s economy is largely driven by services such as banking, tourism, logistics and professional services. Additionally, the country’s strategic location between North and South America makes it attractive to foreign investors who are looking to capitalize on Panama’s access to two major markets.
The Panamanian government has actively sought to create a business-friendly environment by reducing taxes and regulations for businesses operating in the country. This has been combined with investments in infrastructure such as roads, airports and ports which have improved access to markets both domestically and internationally. Additionally, the government has invested heavily in education which has improved the skills of the workforce and enabled them to take advantage of new opportunities created by globalization.
According to cheeroutdoor, tourism is an important industry for Panama with over 2 million visitors arriving each year from all over the world. The country offers a wide range of attractions from its vibrant cities such as Panama City to its beautiful beaches on islands like Bocas del Toro or San Blas Island. Additionally, its unique location between two continents makes it an attractive destination for both leisure travelers who are looking for a mix of cultures or business travelers looking for easy access to North and South American markets.
Agriculture is also an important part of the Panamanian economy with exports accounting for around 14% of total exports in 2018; however this sector only employs 5% of Panama’s labor force due to limited land availability and lack of investment into this sector. The main crops produced are bananas, sugarcane, rice, corn and coffee; however these crops face competition from cheaper imports from countries such as Colombia or Ecuador due to their preferential trade agreements with other countries in Latin America.
The Panamanian banking sector is one of the most developed in Latin America thanks to its well-established laws regarding banking secrecy which have made it attractive for foreign investors seeking financial stability outside their home countries since 1904 when the US Dollar became legal tender in Panama following independence from Colombia in 1903. This sector accounts for around 7% of total GDP but provides employment opportunities for over 20% of the workforce due to its large number of employees needed at banks throughout the country.
Overall, Panama’s economy is one that is growing steadily thanks largely due to investments into infrastructure combined with a business-friendly environment that encourages foreign investment into key sectors such as tourism, logistics and professional services; however there is still much work that needs doing such as improving agricultural productivity so that it can become more competitive internationally while also creating jobs domestically so that citizens can benefit from this growth too.
Panama’s business is largely based on service and trade, directly or indirectly linked to the Panama Canal. The country has by far the region’s largest foreign debt as a result of the modernization of the economy after 1968. The free zone in Colón, established in the early 1950s, is the world’s second largest after Hong Kong. Beneficial tax laws and minimal state control have attracted many banks and thousands of mailbox companies to Panama. In 2001, however, the country tightened the banking laws and since then this activity has decreased in scope. During the 00s, the country has had a good growth rate, mainly the expansion of the canal zone that has generated growth. The country has a very distorted income distribution.
Agriculture is of less importance to the economy of Panama than in other Central American countries. The most important barley crops are bananas, sugar, coffee, cocoa, rice, corn and beans. The best soil is found in the humid lowlands along the Caribbean coast.
Farmland is unevenly distributed: 1 percent of agriculture uses 33 percent of cultivated land, and more than 90 percent of agriculture is small; Sweat use dominates and the tools are simple. Only significant export products such as bananas, sugar and coffee are produced in more industrial form. After 1968, the government intended to modernize agriculture through new attempts at land reform, investment in state agriculture, roads, bridges and rural electrification. However, the measures had no major effect.
Nearly 45 percent of Panama is covered by tropical rainforests with more than 100 different tree species, including mahogany. However, forest deployment is increasing, and deforestation with consequent soil erosion is a growing problem; during the 1980s, forest cover decreased by up to 3 percent annually. In recent years, attempts have been made to save the rainforest, among other things through a time-limited ban on harvesting of primary and secondary forests older than five years. Exports of timber and timber products go primarily to the United States. In order to protect the environment, approximately 25 percent of the country’s area has been set aside as nature protected areas.
The industrial sector is small and mainly focuses on local consumption. The lack of domestic demand, Panama’s position outside the Central American common market and its role as an international service economy have hampered the development of the industry. The existing industry has its center in Panama City and Colón. The most important products are food, shoes, leather, wood products, oil and textile products and chemical products. Several Asian textile industries have established themselves in Panama to gain access to the US market. The country has large copper and gold assets. In recent years, the mining industry has grown rapidly in importance, primarily the extraction of gold that has generated large revenues.
Panama’s deficit in foreign trade is partly offset by revenue from the free zone, the Panama Canal, the banks, tourism and the 130 km long oil pipeline that runs between the Caribbean and the Pacific. Gold, bananas, seafood, raw sugar, coffee, melons, clothes and wooden products are the most important export products. Almost 40 percent of exports go to the United States, which is the most important trading partner. Other important exporting countries are the United States, the Netherlands and China. Imports are dominated by fuel, industrial goods, machinery and transport equipment, chemical products and foodstuffs. Imports come mainly from the US, China and Mexico. Most of what passes through the free zone in Colón comes from Japan, the United States, Taiwan and China and is made up of electronics, pharmaceuticals, cosmetics, clothing and jewelry.
- COUNTRYAAH: Find major trading partners of Panama, including major exports and major imports with latest trade value and market share as well as growth rate.
Tourism and gastronomy
In 2012, abbreviated as PAN by abbreviationfinder.org, Panama was visited by 1.6 million tourists. Many of Panama’s visitors are transit travelers, who stay only a short time in the country. Most come to the capital Panama City, where the canal and an excursion to the Mirafloress locks, as well as to Panamá Viejo, the original but 1671 plundered and destroyed city, are attractive destinations. East of Colón on the Caribbean coast lies Portobelo with fortification ruins from the time until the 1740s when the city was the major Spanish transhipment port for gold and other goods transported with mules over the nose.
Note: the capital city of Panama is Panama City with a population of 1,300,000 (with suburbs, estimate 2013). Other major cities include Colón with a population of 220,000, David with a population of 145,000 (estimate 2013).
A great potential for the tourism industry is the country’s many beaches, mainly on the islands and along the Pacific coast west of Panama City. Among the many tropical islands, Taboga (20 km from the capital) is one of the most visited. Further out in the Gulf of Panama lies the Las Perlas Archipelago, where the most famous island is the luxurious Contadora. Along the Caribbean coast is the Bocas del Toro Archipelago in the northwest and the San Blas Archipelago east of the canal. The Indian territory of San Blas, which also includes part of the mainland, also attracts through its different culture.
The roadless, rainforest-covered inland area in the far east, Darién, attracts adventurous tourists. Panama’s inner mountainous regions attract many nature-interested travelers. The well-visited areas include the 3 475 meter high volcano Barú in the west, which with its surroundings is one of the country’s national parks.
The country’s cuisine has been influenced mainly by the Colombian; Coconut, banana, corn, beans and seafood dominate. Corn flour dough which is filled with meat, olives or plums and deep-fried or fried as pancakes and filled with sweet or more moderate content is the most common small dish. Bananas, corn, potatoes, onions and chicken as well as coriander are the main ingredients in the sancocho stew. Ropa vie has a stronger taste: shredded beef is fried with onions and chili fruits and served with boiled bananas, rice or fried palm lily. Tuna and seafood abound, cevice is raw fish marinated in lemon juice and served cold with chili fruits and raw onions. Sea bass cooked in coconut milk (corvina al horna) is one of the specialties.