Agroforestry / October 23, 2017

Macroeconomics and Trade in Panama

Panama is one of the fastest-growing economies in Latin America, as indicated by the strong expansion in June’s report indicator for economic activity. Likewise, the annual average for the monthly economic activity index (IMAE) recently hit its highest level in over two years. Transport and trade remain two of the sectors expanding most quickly within the national economy, which has stimulated demand in the Colon Free Trade Zone (FTZ). Simultaneously, this has generated a pick-up in construction as public and private investment projects in the FTZ gain momentum. In addition, cargo volume and movement along the Canal, which expanded last year, increased by double digits from January to July, indicating higher activity along the Panama route. The Canal Authority recently announced initiatives that will improve transit efficiency in order to capture a greater share of world trade in 2018 and 2019, which would generate positive spillover effects for the country as a whole. Similarly, the export of goods and services always have represented a major portion of Panama’s GDP. The majority of Panama’s exported services are related either directly or indirectly to the Panama Canal and the Colon FTZ.

Macroeconomics and Trade in Panama

In terms of trade, in 2016, Panama imported US$9.1 billion worth of goods and exported US$9.9 billion, resulting in a trade surplus of US$800 million. Furthermore, that same year, Panama’s main export, representing 15% or US$1.5 billion of the country’s total, were packaged medicaments. Likewise, the country’s main import, representing 14% or US$1.3 billion of all international purchases, were also packaged medicaments. Furthermore, Panama has had a standing Free Trade Agreement (FTA) with the United States since 2012 and the country’s main trade partners are the United States, China, Colombia, Singapore, and Costa Rica, amongst others. The Colon FTZ, which accounts for more than 7.0% of the national economy in Panama, also serves as a major distribution point for re-exported goods from North America, Asia and Europe. Goods either exported or re-exported through the Colon FTZ represent approximately US$7 billion annually. Within the agricultural industry, the high demand for tropical fruits and the rise in production and marketing have made pineapples the second most exported exotic fruit out of Panama, after bananas.

Since the creation of the Panamanian Balboa currency in 1904, it has been pegged to the US dollar at an exchange rate of one-to-one. Furthermore, in recent decades, the US dollar has been circulating freely in Panama alongside a small amount of Balboa currency, given their par value. The vast majority of transactions in Panama are executed in US dollars. The ease of currency boosted Panama’s reputation as a well-respected international business center which offers all kinds of services and opportunities to major corporations, banks, and legal offices, both North American and European. Since its national independence in 1903, the economy of Panama has been stable and has grown steadily. Today, one of the business and industrial zones that used to be a part of the US presence in the Panama Canal Zone, known as Panama Pacífico, hosts the headquarters of over 140 multinational companies.

(Read more about Economics and Agribusiness in the Balkans)

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