This page contains a Flash digital edition of a book.
THE ECONOMY


One of the strongest economies in South America


P


anama is living its best moment with a booming economy, likely to reach 8.5% in 2011 and 5.5% in 2012 according to the


Economist Intelligence Unit, which will make Panama the strongest performer in Central America and one of the strongest in the Latin American region. Economic growth enjoyed a healthy 7.5% in 2010, positioning Panama among the highest growth rates of Latin America, reaching a gross domestic product (GDP) of $26.8m (current prices). Production of goods and services in Panama saw an increase of 7.5% over the previous year. GDP at constant value of 1996 prices, according to the Comptroller-General’s Office estimates, registered $20.862m, showing an annual increase of $1.448m. In 2010, Panama received an investment grade status from the three main rating agencies Fitch, Moody’s and Standard & Poor’s. Although the upgrade was the result of past administrations’ tightened policies, it was a victory for Martinelli’s government and very welcome news, leading the country to attract $2.36bn in foreign direct investment in 2010, the equivalent of 8.8% of Panama’s $26.8bn economy and above the average $2bn per year since 2006. In addition to fiscal discipline and major tax collection ‘[Panama] policy has also been to strengthen our domestic market and diversify our debt ratio between external and internal debt and that is something that the ratings agencies have viewed positively,’ says Panama’s deputy minister of economy, Frank de Lima.


The US Congress appears to be moving closer to ratification of a free-trade agreement (FTA) with Panama signed in mid-2007 and although barriers to the deal still remain – including difficult timing, owing to the US election in November 2012 – the US is likely to ratify the FTA within the forecast period. This mainly reflects Panama's stronger commitment to the exchange of tax information with other jurisdictions, following Panama's


84


withdrawal of the OECD black list of non- cooperative countries.


The main focus of Panama’s economic policy has been to develop the country into a regional logistical hub, capitalising on its geographical advantage and the Panama Canal to provide a centre for commerce and services. Port activity had been on the rise with ports moving 5.6m teu in 2010, ranking as the leaders of Latin America and reflecting the growing value to shipping trade links. The $5.25bn expansion of the waterway whose revenues represent 8% of Panama’s GDP is on time and on budget, Panama Canal Authority officials say with the project being 28% complete [at end August 2011], with its major component, the design and construction of the third set of major locks which is 14% complete. An ambitious programme of


infrastructure improvements by upgrading and expanding roads and highways and the beginning of the construction of a $1.4bn metro has helped in reducing


unemployment. The recent surge in public investment contributed to GDP growth of 9.7% in January-March 2011, the most rapid pace since mid-2008. Improved trade and transport flows, a resurgent construction sector, and healthy commerce and financial sector performances all bolstered growth. ‘Positive economic growth should be sustainable although it seems unlikely that it will continue at current levels beyond the completion of the major infrastructure projects currently in progress,’ says gm for Moffatt & Nichol in Panama, David Taylor.


While transport and communications, accounting for almost one-quarter of GDP, remained the main driving force behind economic growth during the first quarter of 2011, responsible for close to 40% of the expansion in GDP, the sector’s rate of growth was almost matched by that of the construction sector. Construction, which accounts for around 7% of GDP, was responsible for around 11% of the increase


in GDP in that period. Civil construction growth is being driven by public investment in major projects such as the Canal expansion, the initial phase of the metro in the capital, Panama City, Panama Bay sanitation, new highways and existing road renovation, and expansion of Panama’s international airport, Tocumen. Private- sector investment has been boosted by investment in port expansion, as ports prepare for a wider Canal and investment in new hotels to meet growing demand. Mining was the third-fastest growing sector in January-March 2011 and reflected rising demand for building aggregates for the Canal expansion and civil engineering works. However, given that mining comprises less than 2% of GDP, it had a limited impact on overall GDP growth. ‘It is good to see Panama attracting attention for positive reasons. Apart from the normal factors influencing confidence from investors – political stability, market friendly policies, etc – the main obstacles for sustained growth are probably the need to develop the skills and expertise of the local workforce, and institutional strengthening that can handle the increased sophistication and size of the economy,’ comments Taylor. Foreign Direct Investment (FDI) in Panama grew by 33% in 2010 compared to year 2009. According to a report by the Comptroller-General’s Office, the country received $2.362m in foreign investment during 2010. Panama’s Minister of Trade and Industry Roberto Henriquez attributed the growth to real estate, hotels and investments at both the Colon Free Zone and the Special Economic Area Panama Pacifico. The Panama-Pacific (Panama Pacifico) Special Economic Area (the former US Howard Air Force base) being developed by UK’s London and Regional Properties Panama (L&R), has helped to boost investment and numerous foreign companies are taking advantage of the duty free facilities. ‘Panama Pacifico is an


PANAMA MARITIME HANDBOOK 2011/12


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112