In Panama Business is Good

The many high rise buildings of downtown Panama City are the first thing that sets this country apart from its Central American neighbors. Another is its rapid pace of economic growth. In recent years Panama has had the fastest growing economy in Latin America.

Panama’s open economy, long lines of container ships at its ports, and a financial district that is home to dozens of International banks have contributed greatly to its enviable growth. Between 2005 and 2010 Panama’s economy grew at over 8% a year. The IMF projects Panama’s economy to grow by over 6% a year during the next five years. According to projections, Panama will soon overtake Costa Rica and Venezuela in GDP per head.

A large contributor to Panama’s success has been the Panama Canal, which in 2010 generated revenues of $2 billion. Last year Panama, home to the world’s largest merchant navy, also became home to Latin America’s two busiest ports.

Big insurance, finance and legal industries have prospered in Panama because of the Canal and Panama’s business-friendly environment. In recent years, Panama’s Free Trade Zones, and other business friendly laws, have lured large corporations like Procter & Gamble to establish regional operations in the country. Panama also boasts import tariffs that are among the lowest in Latin America.

In terms of investment, in recent years Panama has received foreign direct investment worth nearly 9% of GDP (the largest share on the continent). The Panamanian government is also investing, including a $5.4 billion expansion of the Panama canal (underway and scheduled to be completed in 2014), and separately, a five-year, $13.6 billion investment plan focused on schools, hospitals, sewerage, roads and a metro for the congested capital.