Economic overview
In 2014, Panama celebrated the 100th anniversary of its crowning economic achievement: the Panama Canal, an American-built waterway connecting the Atlantic and Pacific oceans to create a shipping shortcut. The 48-mile canal, which moved from U.S. to Panamanian control in 1999, remains at the center of the nation’s economy. Services—including operation of the canal, logistics, banking, insurance, shipping and tourism—make up three-quarters of Panama’s gross domestic product. A $5.25 billion canal expansion project that began in 2007 and is expected to end in 2016 has boosted economic expansion, despite regional challenges. Panama has been one of the fastest-growing Latin American countries in recent years. GDP expansion averaged over 8% from 2006 to 2012, according to the World Bank. Growth was 8.5% in 2013. But the final tally of 2014 growth is expected to show a lower growth rate of about 6%.
Business travel industry insight
Most international travelers fly into Panama City’s Albrook Airport, closest to the city’s business district, or Tocumen International Airport, 22 miles from downtown. The Panamanian government requires all international travelers to obtain a multiple-entry visa from a Panamanian consulate or embassy before departing from their home country or to buy a tourist card at the airport when they land in Panama. The country levies a US$40 departure tax for departing passengers on international flights; that cost generally is included in airfare. The Panamanian currency, the balboa, tracks the U.S. dollar, and the U.S. dollar is widely used. Travelers should carry small U.S. bills; it can be difficult to get change for anything larger than a US$20 note.
Opportunities
- The Panama Canal expansion will allow passage for ships carrying up to 15,000 containers, instead of the current 5,000-container maximum.
- Revenues from the canal’s increased capacity are expected to help fund other infrastructure projects, including port upgrades and increased power generation.
- Panama should get a boost from hosting the Organization of American States’ Summit of the Americas in April. The event is expected to attract special attention this year because it will be the first OAS hemispheric summit to which Cuba has formally been invited.
- Panama’s new president, Juan Carlos Varela, took office in June vowing to rein in corruption and curb poverty. His administration already has launched initiatives to improve sanitation, access to clean water, low-income housing, health care and education.
Challenges
- Competition is tightening for canal-based shipping. In recent years, the Suez Canal has won shipping traffic from Panama because it can accommodate large vessels and is situated nearer the parts of Southeast Asia where manufacturing is on the rise. In addition, Panama’s neighbor Nicaragua announced in December it had begun work on a US$50 billion shipping canal, a project backed by China that threatens to rival Panama’s waterway.
- Panama’s canal extension project has been hampered by equipment problems, delays, strikes and cost overruns. It originally was scheduled for completion in 2015 but will not be finished until the first quarter of 2016, at the earliest.
- About one-fourth of Panamanians live in poverty, and people in indigenous rural communities often lack access to basic services such as education, electricity and sanitation. The situation has improved in recent years. From 2006 to 2012 poverty shrank by 10 percentage points, and unemployment dropped from 12% to 4.5% of the labor force in 2013.
- The country’s rapid growth is expected to taper off as current public works projects wind down.
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