Analyzing Panama

Junior (College 3rd year) ・Business ・MLA ・2 Sources

On the isthmus separating Central America from South America is the country of Panama. This advantageous shipping route is made possible by the nation's reputation as a wonderful link between the Atlantic and Pacific oceans. The capital city of Panama is home to modern buildings, shopping centers, bars, and casinos. Rainforest and a few waterfalls are features of Panama's countryside that draw some local and foreign visitors. One of the world's economies with the quickest growth rates over the previous ten years has been claimed to be Panama. In the years between 2001 and 2013, the average annual growth rate was 7.2%, more than twice the regional average. In 2014, the Panama economy grew by 6.1% coming down to 5.8% and 4.8% in 2015 and 2016 respectively (International, Monetary F. W. H. D). In the forecast for 2017 and 2017 averages at 5.4%, which is considered the highest in the Latin America. Due to the favorable forecasts, it is World Bank is recommending the private investors to consider investing in Panama. There are opportunities that can lead to rapid economy rate in the region; for example the emerging opportunities for the private sectors in key sectors such as tourism, financial services, mining and transport and logistics (Focus Economics).

The History of the Panama Economy

Panama has similarities to other countries in the region specifically from the historical perspective despite the fact that it is currently moving towards developing the service-based and sophisticated economy. In the 1980s, Panama was defined by the sluggish economic growth and the political instabilities as well as the soaring economic, public debts and the fiscal deficit (Focus Economics). Panama had to seek assistance from the international institutions to boost the financial stability, increase the competitiveness and diversification. In the 1990s, further structural reforms including, privatization of the state-owned-enterprises, the liberation of the trade and market and the reform of the fiscal policies were implemented. The reforms which were made in the 1990s helped Panama to secure new sources of financing, and international investments thus helped the nation to recover the economy gradually. Therefore, the reforms made the average economic growth rate during the 1990s was more than 5% (Focus Economics).

Poverty Level

Panama was once known as the nation with highest level of poverty since made of the inhabitants were less-skilled, and the rate of unemployment was high. The people who are in the urban areas are advantageous because they can access more economic opportunities as compared to the people in the rural areas where access to important facilities and information low due to lack of advanced infrastructures such as the schools, health care centers, recreational areas, and less developed businesses. Over 3.5 million people in Panama live in poverty. The statistics show that poverty is concentrated in the rural areas. Almost half of the people who are living in the rural areas in Panama are poor with the quarter of them are under the extreme poverty line (International, Monetary F. W. H. D). Due to the continuous growth rate in the economy of Panama, the poverty is forecasted to reduce considering that the government and the private sectors are working serious to create more opportunities and eventually improve and stabilize the Panama national economy. Currently, Panama has made significant progress in cutting poverty in the recent years. According to the $4 a day approach for measuring the level of poverty, it is evident that Panama is seriously reducing the level of poverty because it shows that the general poverty level has reduced from 21% to 17% in between 2011 and 2015. Furthermore, the government and the private sectors have generated over 280, 000 new jobs from within the country.

The Political and Social Situation in Panama

The political and economic situation in Panama is expected to remain stable in the next years. The general elections in Panama have has not been attributed to Violence thus it is expected that the better stability will be experienced in the future elections. The end of the two-party became the source of political stability because it was a great sign of democracy in the nation. Democracy helped Panama maintain a strong political stability because the citizens are given a chance to choose the leaders of their interest without any intervention or threats from any powerful politician in the nation. Constitution gives rights to the citizens to express their democracies during the elections periods considering that citizens are given a public chance to make desired changes regarding political leadership in the entire nation (International, Monetary F. W. H. D).

Panama constitution protects the freedom of speech and the press thus everyone in the nation has a chance to express any issue, and the government has an obligation to listen to the voice of the citizens. The political participation has become better since the abolition of the monopoly forces which was used by the leaders in late 20th century. Currently, the constitution requires that the president, vice-president, national legislators and the local representative are elected by the majority and direct votes after every five years. People in Panama are integrated due to their patriotism (unity and love towards their country). Despite the numerous cultures and religions in the country, people are united because they all believe in the love. According to the research which was done by the United Nation Research Institute of Social Development (UNRISD) “Social Integration” in Panama a positive meaning in that it embraces harmonious interaction among diverse communities in the society and giving the equal rights and opportunities for every individual in the society (International, Monetary F. W. H. D).

The foreigners in Panama are treated well because the natives always adapt easily to the presence of the foreigners in the nation. Every year people migrate from various parts of the world to Panama to seek for better quality life. A big percentage comes from the nations like Venezuela, where there is an economic and political situation. The data from National Migration Services, in 2015 there were 29.83% more permits approved than 2014. Therefore, if a person is planning to move to Panama, he/she should understand that Panama has established a permanent residence that benefits the citizens from various countries, giving them a famous “Panama friendly nations visa” (International, Monetary F. W. H. D).

Economic Situation of Panama

Before the international economic crisis, Panama had the highest growth rate in the Latin America. After the international economic crisis, the country applied the fiscal, monetary and regulatory policies to help in recovering the economy. The government of Panama reduced the public expenditure in terms of investing in large infrastructures that have fewer returns and high initial costs. Since the nation has been experiencing continuous economic growth at around 6% and 11% pushed by the domestic demand. From 2013, the Panama's growth rate has been slower amounting to 5.8% and in the year 2015, 4.9% in 2016 which is adverse as per the forecasts which had been made by International Monetary Funds (IMF) (5.2%). The GDP forecasts are expected to be 5.4% for 2017, and a slight increase to 5.5% is anticipated in 2018 (International, Monetary F. W. H. D). Panama has the economic policies that were developed in 2010. The economic policies of Panama help in meeting the long-term plans in major investments in four sectors including Tourism, agriculture, financial services and logistics while keeping the fiscal expenditures within limits set by the Fiscal Responsibility Law. By 2014 the government had planned to invest $5.8 billion into the Tourism, agriculture, financial services and logistics sectors as a way of exploiting the opportunities given by the Panama Canal and invested heavily on the roads infrastructure and roads (International, Monetary F. W. H. D). By 2016, the Panama infrastructure was way developed as compared to 2014 due to the reason that the government has adhered to the Panama Fiscal Responsibility Law. From 2010, Panama has been meeting the deficit ceiling of 2% of the GDP thus it shows that the government fiscal policies have been followed well particularly when allocated funds to the large projects that require huge initial cost (International, Monetary F. W. H. D). However, Panama has been acing transparency issues that have subject the nation to the greylist where it cannot sign treaties with other nations. The Balance of payments had declined in 2014 but in 2016 Panama recorded account deficit on the balance of payment because of the large part of the negative trade balance. Due to the increase in the imports of the items used to establish the government infrastructure projects. The foreign direct investments have helped to offset the current account imbalance considering that in 2013, the direct foreign investment had reached its highest level in history with $4 billion in a total of the inflow (Focus Economics). In the recent fiscal years, Panama has become integrated into the global trade system. In 2012, Panama signed a trade agreement with the United States which boosted the trade and investments flows. In 2013, Panama signed a trade agreement with the European Union (EU) as a strategy of boosting the trade and general economy. In 2014, free trade was reached between Panama and Mexico as a first step to for the nation to join the Pacific Alliance which will make the trade tie strong with Asia (Focus Economics).

Imports and Exports

Exports of goods and services normally have represented the key portion of Panama Gross Domestic Products (GDP). Panama exports about $18 billion worth of goods and additional $10 billion in services making a total of $28 billion, which represent about 65% of the GDP (International, Monetary F. W. H. D). According to the national statistics about the exports from Panama, the major exported services are either directly indirectly connected to the Panama Canal and the CFZ. The major goods that Panama export are medicines, agricultural products, petroleum products and ships. Ecuador, the United States, and Venezuela are the key recipients of the products exported by Panama. The CFZ which make about 7% of the total national economy, serves as the major point of distribution for re-exported goods. A big amount of the merchandise coming from Asia, North America and Europe is then re-exported to other nations, majorly in the Western Hemisphere. The Goods either exported re-exported via the CFZ represent the rise of $10 billion yearly (Focus Economics). Panama is also a net importer of goods and services. The country is sufficient in some products produced in the country; for example, Panama is well-served with agricultural products such as bananas, rice, and sugarcane but it imports a large number of other foods. The growing domestic demand that has been experienced in the nation for the past few years has forced the government to make arrangements for importing more food and merchandise. The greatest cause of the importation is the Panama Canal expansion project. The project is the top consumer of energy thus it has made Panama import more than 80% of its energy to meet the needs of the project (International, Monetary F. W. H. D).


Panama is a nation that has been showing great progress in terms of economic development, political stabilization and the integration of people from diverse origins. The economic growth of Panama signifies the bright future of Panama’s people because the government has been engaging in great deals that will benefit all the inhabitants. The key strategies that will the nation growing are the fiscal policies, monetary policies and the regulatory policies. Concerning some weaknesses such as lack of transparency in the particularly in the financial sector, the government is supposed to embrace integrity and reduction of corruption in the government offices to win the trust from other nations and eventually engage in more signing of treaties with developed nations in Europe and Asia which can eventually boost economic development.

Works Cited

Focus Economics. Panama Economic Outlook. 2017. Accessed on November 27, 2017

International, Monetary F. W. H. D.Panama. Washington, D.C., UNITED STATES: INTERNATIONAL MONETARY FUND, 2016. Internet resource.

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