Panama - Executive SummaryPanama - Executive Summary
As the home of the Panama Canal, the world’s second largest free trade zone, and sophisticated logistics and finance operations, Panama attracts relatively high levels of foreign direct investment from the region and around the world. Panama boasts one of the Western Hemisphere’s fastest growing economies, good credit, a strategic location, and a stable, democratically elected government.
Panama’s Ministry of Economy and Finance predicts the economy will grow by 6.2 percent in 2016, following expansion of 5.8 percent in 2015 and 6.1 percent in 2014. Panama’s sovereign debt rating is investment grade, with ratings of Baa2 (Moody’s), and BBB (Fitch and Standard and Poor’s). The Panama Canal Authority will inaugurate the $5.25 billion expansion project of the Panama Canal in June of 2016, which in turn is expected to increase investment in port systems operations, storage facilities and logistics. Panama’s President, Juan Carlos Varela, has sought to improve Panama’s image and investment climate profile. Overall foreign investment was up 17 percent in 2015, and Panama retains one of the highest “FDI to GDP” ratios in Latin America. The Varela administration has also presided over a series of anti-money laundering reforms that resulted in Panama’s removal from the Financial Action Task Force “Grey List” in 2016.
Panama has implemented free trade agreements with Canada, Chile, Costa Rica, the European Union, Guatemala, Honduras, Nicaragua, Peru the European Free Trade Association, Mexico, and the United States, as well as one partial scope agreement with Cuba. Panama is exploring entry into the Pacific Alliance, negotiating a trade agreement with South Korea, and arranging the entry into force of trade agreements with Colombia and Trinidad and Tobago. This pro-trade posture has further increased Panama’s openness to foreign investment and has provided new protections and privileges for foreign investors.
Panama has challenges, including a poor educational system, high labor costs, a lack of skilled workers, and reports of corruption, fraud, and a perceived lack of judicial transparency. Foreign investors in Panama have also complained about a lack of transparency in government procurements. Some U.S. Firms have reported inconsistent, unfair, and biased treatment from Panamanian courts.
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Panama’s Ministry of Economy and Finance predicts the economy will grow by 6.2 percent in 2016, following expansion of 5.8 percent in 2015 and 6.1 percent in 2014. Panama’s sovereign debt rating is investment grade, with ratings of Baa2 (Moody’s), and BBB (Fitch and Standard and Poor’s). The Panama Canal Authority will inaugurate the $5.25 billion expansion project of the Panama Canal in June of 2016, which in turn is expected to increase investment in port systems operations, storage facilities and logistics. Panama’s President, Juan Carlos Varela, has sought to improve Panama’s image and investment climate profile. Overall foreign investment was up 17 percent in 2015, and Panama retains one of the highest “FDI to GDP” ratios in Latin America. The Varela administration has also presided over a series of anti-money laundering reforms that resulted in Panama’s removal from the Financial Action Task Force “Grey List” in 2016.
Panama has implemented free trade agreements with Canada, Chile, Costa Rica, the European Union, Guatemala, Honduras, Nicaragua, Peru the European Free Trade Association, Mexico, and the United States, as well as one partial scope agreement with Cuba. Panama is exploring entry into the Pacific Alliance, negotiating a trade agreement with South Korea, and arranging the entry into force of trade agreements with Colombia and Trinidad and Tobago. This pro-trade posture has further increased Panama’s openness to foreign investment and has provided new protections and privileges for foreign investors.
Panama has challenges, including a poor educational system, high labor costs, a lack of skilled workers, and reports of corruption, fraud, and a perceived lack of judicial transparency. Foreign investors in Panama have also complained about a lack of transparency in government procurements. Some U.S. Firms have reported inconsistent, unfair, and biased treatment from Panamanian courts.
Table 1
| Measure | Year | Index or Rank | Website Address |
| TI Corruption Perceptions index | 2015 | 72 of 168 | transparency.org/cpi2014/results |
| World Bank’s Doing Business Report “Ease of Doing Business” | 2015 | 69 of 189 | doingbusiness.org/rankings |
| Global Innovation Index | 2015 | 56 of 131 | globalinnovationindex.org/content/page/data-analysis |
| U.S. FDI in partner country ($M USD, stock positions) | 2015 | $4687 | BEA data available 4/14/16 at bea.gov/international/factsheet/factsheet.cfm |
| World Bank GNI per capita | 2014 | 11,130 | data.worldbank.org/indicator/NY.GNP.PCAP.CD |