Panama
is located at the very south of Central America and discovered by Rodrigo de
Bastidas in 1501. Bordered by Costa Rica (West), Colombia (Southeast),
Caribbean Sea (North) and Pacific Ocean (South); Panama is connecting the globe
cardinal points. Through its Interoceanic Canal, millions of Dollars are
traveling daily, back and forth, between the Atlantic and the Pacific Ocean,
cutting the travel time for ships from all around the world and saving cost in
transportation.
Panama
was part of Colombia until 1903 when USA encouraged its secession and paid U$25
million Dollars to Colombia as compensation.1 USA built the
Interoceanic Canal from 1904 to 1914, which managed until transfer it back to
the Panamanian Government at the end of the 20th Century.
Political and Economic Environment
Panama
is a Presidential Country using three branches of power (Executive, Legislative
and Judicial) to offset power to each other. Executive and Legislative branches
are elected by direct vote for a 5 year period. The Judicial branch, including
a 9 member Supreme Court, is appointed for a term of 10 years. The minimum age
to vote is 18 years old.2
The
Government of Panama strives in treating equally foreign and domestic companies,
while offers a stable and clear frame for investors. Panama is considered to
have a strong economic growth among Latin American countries based upon,
consistent economic and governmental policies, and support to trade and open
markets.2
“In
2012, Moody’s raised Panama’s sovereign debt rating to Baa2 and improved their
outlook for Panama from “Stable to Positive””2.
Panama is showing an impressive growth 10.8% in 2011, 10.7% in 2012 and is expected
to growth at 7.5% for 2013.
Panama GDP Growth Indicators 2003-2013
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Year
|
Exchange Rate
|
GDP Growth (%)
|
GDP Billion USD
|
2003
|
1
|
4.2
|
12.93
|
2004
|
1
|
7.5
|
14.18
|
2005
|
1
|
7.2
|
15.46
|
2006
|
1
|
8.5
|
17.14
|
2007
|
1
|
12.1
|
19.79
|
2008
|
1
|
10.1
|
23
|
2009
|
1
|
3.9
|
24.16
|
2010
|
1
|
7.5
|
27.05
|
2011
|
1
|
10.8
|
31.32
|
2012
|
1
|
10.7
|
36.25
|
2013/Est.
|
1
|
7.5
|
|
Source: World Development
Indicators. http://databank.worldbank.org/data/views/reports/tableview.aspx
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The
trade promotion Agreement between US and Panama is opening a wide range of
opportunities for US business that may want to export to the Isthmus or invest
over there.
Despite
all the above mentioned advantages, lack of skilled workers, high level of
corruption, lax-law and lack of independence of the judicial apparatus may
jeopardize foreign interest placed in Panama.
Upcoming
national elections scheduled for 2014 and complaints presented from investors and
exporters about lack of transparency and inconsistent treatment may add
uncertainty to the business environment.2
With
a well-developed services sector, Panama relays nearly 80% of its GDP to the
above mentioned sector and exports mainly to USA, Canada, Costa Rica,
Netherlands and Sweden.3
Panama
service most notable sectors are: Panama Canal, banking, the Colon Free Trade
Zone, insurance, container ports and flagship registry, followed by medical and
health, and other services, tourism is another “growing to watch” sector. The
Isthmus has a growing industrial sector also and exports bananas, shrimp, sugar
coffee and clothing. While is wide open to foreign investment.
Panama
foreign investment was U$6,764.4 million by 2012 and U$8,690 million by 2011
with FDI for U$3,019.8 million and U$2,755 million respectively.3
Taxation
Taxation
is governed by Fiscal Code in a territorial basis, meaning that only income and
gains obtained inside the Panamanian territory is subject of taxation.3
President
Ricardo Martinelly increased sales taxes from 5% to 7%3 in order to
finance several infrastructure projects going on across the country (See
Appendix 2). While accused for fiscal indiscipline and for implementing
populist initiatives facing the 2014 elections.5
Government Investment
·
Expansion of the Panama Canal - $5.2 billion.
·
Panama Metro Line - $2.2 billion.
·
Road Projects - $1.1 billion.
·
Airport Expansion - $200 million.
·
Cold Chain distribution network - $65 million.
·
Government City - $360 million.
·
Financial Tower - $200 million.
·
Mining Projects (copper and gold) - $665 million in revenues
projected.
·
Colombia – Panama Electrical Interconnection - $415 million.
·
Water Supply & Sanitation - $ 540 million.
·
Public Hospitals - $358 million.
·
Curundu Housing Project - $100 million. DONE Delivered Feb. 2012
·
Bridge of the Americas reconstruction - $80 million.
·
Air-Sea Stations - $37 million.
·
New Prisons - $156 million.
·
Energy Generation Projects – various, hydro/wind/LNG – over $1
billion.
·
Panama Pacifico – conversion of Howard Air Force Base to mixed
use - $750 million.
|
Private Investment
·
Colon Free Trade Zone and transshipment ports expansion.
·
20 new Hotel construction projects - $700 million.
·
Westland
Mall - Grupo Los Pueblos - $200 million.
·
First Quantum in Minera Panama copper mine - $7.0 billion
|
Source: Major Projects in Panama (2013), Export.gov
US – Panama Free Trade Agreement (FTA)4
The
FTA is in effect since October 31, 2012 and is scheduled to drop tariffs to 0%
for exports coming from US. That is an important advantage to US, not only for
the Panama market, which is already at 30% participation, but to export to
Latin America, at large, using Panama as a bridge.
Technology and Innovation
Based
on the Economy and Finance Ministry inform3 for 2012 is durable
infer that informatics and communication technology is a growing matter in
Panama (TIC’s, in Spanish). Land lines, cellular, Internet and paid television
usage have been steadily growing throughout the last decade.
Land
lines grew 14.3% (Residential and commercial) last year, while commercial lines
grew an outstanding 50.5%; ending with a telephonic density of 16.9 per 100
people compared to 15% last year.
Cellphones
grew 0.5% since last year to 6,769,107 subscribers concentrated mostly in the
pre-paid service market (93% share) and only 7% for contracted service,
post-paid.
The
National Authority of Public Services estimated 1,590,806 internet users for
2012, which 87% are residential customers and 13% commercial; an increment of
4.5% comparing to last year, 302,666 more internet users than 2011. Internet
subscribers are showing a concentration of 42 users per 100 people.
The
Direction of Information Technology and Communications (DITIC for its Spanish
acronym) of Panama’s Technological University reported that registered domains
increased in 19.2% for 2012 to 8,274 respect 2011. DITIC highlighted the
increment of first level domains “.pa” (ccLTD – Country Code Top Level Domain)
to a 4.5% of the total, compared to last year market participation of 0.2%.
Paid
television increased an 8.6% in 2012 as said by the Economy and Finance
Ministry – Income’s General Direction.3
Socio-cultural Environment
Panama
is also showing advances in the sociocultural environment, unemployment fell
to 4% in 2012, the lowest rate for the last 5 years, while 40,000 more people
were trained for better skilled jobs at no cost, for the same year.
However,
the country is in great need for skilled workers mainly in areas like,
commerce, informatics and communications, hotel, gastronomy and fishing,
navigation and maritime services, civil construction, vehicles mechanics and
metal-mechanics.3 In a country of contrast, like Panama, disparities
are easily found; World Bank, development Research Group is giving a GINI rate
of 52 for 2010 to Panama.6 Fertility and mortality rates are falling,
and population is growing, while wealth distribution gaps based on geography and
ethnicity persist. Despite ambitious government funding social programs,
poverty is persistent, and there is so much to do in education and health
coverage. From 2008 to 2012, 140,683 people went out from poverty, 95,745 of
them from extreme poverty. Today, population over the poverty line has
increased by 525,103 people. 3
Panama
may be considered a young country, with less than 15% of its population over 55
years old.
Age Structure
(Estimate 2013)
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Age
|
Total %
|
Male
|
Female
|
0-14
|
27.70%
|
503,633
|
483,145
|
15-24
|
17.40%
|
315,918
|
304,056
|
24-54
|
40%
|
721,225
|
703,459
|
55-64
|
7.30%
|
127,743
|
130,899
|
65+
|
7.60%
|
124,409
|
144,921
|
Source: CIA the World Fact Book.
And many Panamanians are considered bilingual
–English/Spanish -
DEMOGRAPHICS
|
|
Race
|
Mixed Ameridian and White (Mestizo) 70%
|
Ameridian and mixed (West Indian) 14%
|
|
White 10%
|
|
Ameridian 6%
|
|
Language
|
Spanish - Official
|
English 14% - Many Panamanians are bilingual
|
|
Religion
|
Roman Chatolic 85%
|
Protestant 15%
|
|
Population
|
3,559,408 estimate at July 2013
|
Source: CIA the World Fact Book.
Conclusion: Panama
is a fully dollarized, free market economy, with a low inflation history and a
growing energy supply. The country growth is, today, multidimensional but boosted
initially by the canal expansion project. The Canal is, still today, the biggest
line of country’s income. Due to the above said and the Panama privileged
geographical location, linking Caribbean Sea and the Pacific Ocean, the
international interest in the isthmus is growing. As data indicates, Panama is
improving and growing with no doubt; but, some turmoil, lack of skilled work
force, and some tendency to populism of the present government, may be a
subject matter to look into, in more detail, before joining.
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