By regional standards, Panama’s economy is very much open. Still, gross debt is rising due to COVID-19, and public spending remains under pressure as a result.
Compared to other Latam countries, Panama has a high GDP, though it showed a sharp decline due to the impact of the pandemic and the downturn in world trade. Logistics, transport, and banking services account for three-quarters of GDP. These sectors slowed down as the pandemic spread.
The agriculture, mining, and logging industries are also crucial. One-third of the country’s land is for farming. Panama has set aside even more land for forestry. It also has huge copper ore reserves, some of the largest in the world. In addition, it has extensive reserves of manganese, iron, and gold.
Hydropower is another of Panama’s primary natural resources. This source supplies more than half of all the country’s power.
Service is the largest industry in the country. It accounts for about two-thirds of Panama’s GDP. It also employs a large part of the workforce.
Panama City is the country’s capital and largest city. The city’s location is at the Pacific entrance of the Panama Canal, and it is home to close to a million people. It has many shopping centers, restaurants, and robust nightlife.
San Miguelito, a port city, is the second-largest, with about 315,000 people. Tocumen is the third largest, with 100,000 people.
The fourth-largest city is David, a major tourist center located in Chiriqui Province near the border with Costa Rica. This city hosts popular annual events such as the Children’s Festival and trade fairs.
Colon, with 78,000 people, is the largest port city on the Caribbean coast. It is also the biggest city by area and is a haven for snorkelers, sports fishers, and scuba divers.
Panama came under scrutiny when the Financial Action Task Force (FATF) added it to its “grey list.” It means that the FATF finds it lax in the fight against money laundering. While being on the grey list does not trigger sanctions, it can harm Panama’s business scene.
The IMF has forecast growth for Panama following a drop in GDP due to the pandemic. It expects copper production to be a driver of that growth, along with private investment.
Still, the global outlook remains uncertain. New COVID-19 strains can also affect the recovery effort.
Benefits and Strengths in the Market
Panama has several strengths:
- The Colon Free Trade Zone and the Panama Canal have helped to make it a trade hub
- It’s also a global banking center and a financial hub for the region
- The use of US dollars as a local currency
- Strong tourism potential
- Youthful population
- Stable political system
Despite Panama’s high per capita GDP, poverty is widespread. Consumers fall into two segments:
- The high-income group. This group prefers well-known brands and pays more attention to quality than price. US and European trends influence the members of this group, and they like to go shopping in malls.
- The lower-middle-income group. For this group, price is the critical factor when deciding to buy. Members often look for discounts and tend to shop in department stores and outlets.
Reasons to Grow Your Business in Panama
Panama’s government has announced its “Vision 2030 Panama” scheme. This plan aims to build a smart city and encourage foreign direct investment. Panama also has low barriers to entry, so it’s easy to start a business there. Another reason to grow a business in Panama is, there’s no income tax on overseas profits.
Panama has a thriving startup scene, and investors can consider several industries. Its tourism sector is growing, and it has many real estate projects. Plus, agricultural exports are expanding. Investors may also want to consider the banking and finance sector. Besides, the Panama Canal puts the country in a unique position as a global trade hub.
About Market Research in Panama
SIS International offers Quantitative, Qualitative, and Strategy Research for the Panamanian market. We also do Interviews and Surveys. Plus, we can put together Focus Groups to help you gain more insights into your investment. Contact us now for more info on how we can help your business grow in Panama.