In Spanish, we refer to Panama as the 3P´s “puente, paso, puerta” (bridge, passage, and door). Panama is the bridge between Central/North America and South America, the passage that links the Pacific Ocean and the Caribbean Sea and an open door for everyone. We are truly the crossroads of the world. From the moment Vasco Nuñez de Balboa discovered the South Sea (Pacific Ocean), we became a logistics hub. Our Pacific Coasts were used as embarkation ports for all exploratory missions to Central and South America, while our Caribbean Coasts were used as trading posts and departure spots for the Old Continent. Later on, the first inter-oceanic railroad was built, by the US, and proved to be the fastest link between the West and East Coast cities. Panama is also the place that the King of Spain, Charles V, originally recognized as a potential site for creating a water passage, and which was chosen by France in 1881 and later taken over by the US in 1904 for the construction of the Panama Canal. Officially opened on August 15, 1914, the Panama Canal greatly reduced the amount of time ships took to travel between the Atlantic and Pacific Oceans, enabling them to avoid the lengthy, hazardous Cape Horn route around the southernmost tip of South America. This route opened new markets and possibilities and helped integrate the nations in and around the Pacific Ocean into the world economy. Recently, the Panama Canal inaugurated the third Set of Locks, which allows the passage of larger sized ships which can carry over twice as much cargo as the previous maximum allowed ships.

Gross Domestic Product

According to official statistics from the National Institute of Statistics and Census (INEC) - Comptroller General of the Republic of Panama, by the end of 2018, the real Gross Domestic Product (GDP) or constant prices  accumulated were B /. 41,693.4 million, B / .1,478.7 million or 3.7%, more than the same period of the previous year. Panama continues to be one of the most dynamic economies in Central and Latin America with an estimated gross national income per capita of $ 15,679 (INEC - 2018). The most effective economic activities were: Other non-market production (mostly, General Government), transport, storage and communications and social services and private health.

Growth Rate of Real Gross Domestic Product - Years 2014 - 2018 (percentage)

                                2014               2015                2016                 2017                 2018

                                                                     Source: National Institute of Statistics and Census

 

Inflation Rate

For the last four years, the price level has remained below 1.0%. According to the INEC, in 2018, the urban domestic inflation rate was 0.76%, lower than the one registered in 2017 (0.88%).

Urban Domestic Inflation Rate - Years 2010 - 2018 (percentage)

              2010        2011          2012        2013            2014        2015          2106       2017        2018

                                                         Source: National Institute of Statistics and Census

                                                                                  FOREIGN DIRECT INVESTMENT

Foreign Direct Investment (FDI) in Panama totalled B / .5,548.5 million in 2018, this amount represented 8.5% of total nominal GDP, maintaining the country's regional leadership in this indicator despite the size of its economy (the average of Latin America and the Caribbean reaches 3.3% from 2014 to 2017). FDI flows increased B / .979.7 million or 21.4%. These good results reflect the confidence that the Panamanian economy provides to generate profitability in investments. The increase in FDI, according to the INEC, was attributed in a special way to projects related to mining, commerce and communications.

Foreign Direct Investment in Panama (reporting economy 1/) - Years 2016 - 2018

(U$ million)

                                                                                                    

                                                                                                                                         1/ Direct investments made by companies in Panama

                                                                                                                                    Source: Nartional Institute of Statistics and Census

                                                                                                                                                                                           INVESTMENT CLIMATE

Over the past decade, Panama has been one of the fastest growing economies worldwide. Average annual growth was 7.2 percent between 2001 and 2013, more than double the regional average. The Panamanian economy grew by 6.1 percent in 2014, coming down to 6.0 percent in 2016. For 2017 there was a rebound to 5.3, and for 2018 it stood at 3.7% regarding the report of the Comptroller General of the Republic. Panama is ranked 79 among 190 economies in the ease of doing business ratings.

By the end of 2018, the rating agency Fitch Ratings maintained the investment grade of Panama in 'BBB' with a stable outlook, the report stood out this rating supported by a "solid" and "stable" macroeconomic performance, this good performance has driven also the sustained increase in per capita income. In addition, it reflects the policies, the strategic and active position (Panama Canal) of the country, which support a high investment rate. For its part, Moody's has rated Panama's sovereign debt as Baa1 with a stable outlook. Standard & Poor's Ratings Services confirmed its long and short-term sovereign debt ratings with "BBB" for the Republic of Panama. The outlook for this rating is positive. 

 

 

 

Investment Incentive Laws

In Panama, you will find a great variety of investment incentives. The following are the main Foreign Direct Investment Incentive Laws.

   

Click on each subtitle to access the different laws.

Export & Strategic Sectors

For the year 2018, the value of exports, excluding those from the Colon Free Zone, totalled B / .672.3 million, increasing by B / .12.3 million or 1.9%. They grew in weight by 2.4%, so that the average income decreased 0.5%. For the amount of sales, featured products to the tariff chapters stood out: fruits (19.3% of the total), fish and crustaceans (16.6%), wood and its manufactures (7.9%), iron and steel smelting (7.2%), waste of the food industry (6.0%), fats and oils of animal and vegetable origin (4.8%), sugars (4.5%), and meat and edible offal (4.1%).


The main destinations of national exports were: The Netherlands (17.0% of the total, especially for bananas, watermelons, pineapples and melons), United States (16.8% of the total, mainly by fish, crustaceans, sugar cane, metallic waste and coffee), China (7.3%, primarily for fishmeal, wood, metal waste and coffee), India (6.2%, for wood and metal waste) and Costa Rica (5.4%, highlighting aluminum packaging for beverages, eggs, milk , cheeses, palm oil, fish meal, paper and preparations of meat and fish).


Exports increased mainly to: India (B / .8.5 million, for wood and metal waste), China (B / .6.7 million, for fishmeal, coffee and wood), Thailand (B / .5.2 million, for metal waste) ) and the Netherlands (B / .5.1 million, for bananas). On the other hand, those sent to: Vietnam (B / .17.4 million, for metal waste, shrimp and wood), the United States (B / .7.7 million, for fish and shrimp), Taiwan (B / .5.6 million, for shrimp, fish and coffee), and Colombia (B / .4.1 million, for rum and spirits and fish)..

Export Incentive Laws

The Trade Promotion Agreement between The United States of America and Panama has set a new commercial phase, increasing the ease of doing business between these countries.

As for Panama, the government has enacted “Free Zones” governed pursuant to Law N° 32, April 5th, 2011, “Through which a Special, Integral and Simplified Regime for the Creation and Operation of Free Zones is Established and Dictate Other Provisions”.

The Free Zones law establishes several Fiscal, Migratory and Labor incentives.

The permitted activities, previous to the export procedure, within these Zones are:

  • Manufacturing
  • Assembly
  • Processing
  • Sale of goods and services
  • Telecommunications (Call Centers)

Click on the link below to download the complete law:

Export Processing Zones: Law N° 32, April 5th, 2011 (in Spanish)