According to The Office of the US Trade Representative, Panama is one of the fastest growing economies in Latin America expanding 6.2 percent in 2010, with similar annual growth forecast through 2015.  Other estimates place the Panamanian economy as one of the fastest growing in the world with an average growth of 7.3 percent over the past 10 years, the highest rate in Latin America and one of the highest in the world.    The Panamanian economy is buoyed by a well-developed service sector that accounts for more than three-quarters or eighty percent of the Gross Domestic Product.  Panama is one of the few serviced based economies in Latin America with services including the operation of the Panama Canal, logistics, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism.  The current nominal GDP totals $36.2 billion with total per capita GDP at $57 billion.

The landscape of the Panamanian economy is characterized by an overwhelming friendly attitude toward foreign investment.  This has been evidenced by the passing of the 1998 Investment Stability Law in which The Government of Panama (GOP) guarantees that foreign investors who invest at least $2 million in Panama will receive equal treatment under the law to their domestic competition.   The 2007 Law 41 provides further evidence of Panama’s amicable attitude toward foreign investment.  With Law 41 multinational companies are encouraged to open regional headquarters in Panama by offering various tax incentives and as of November 30, 2012, 82 international companies have been established under this law.  “The Panama Trade Promotion Agreement (TPA) was enacted on October 31, 2012 and it significantly liberalized trade in goods and services, including financial services.  The TPA includes sections on customs administration and trade facilitation, sanitary and phyto-sanitary measures, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protection.  Under this agreement, Panama has provided improved access in sectors like express delivery, and granted new access in certain areas that had previously been reserved for Panamanian nationals.  In addition, Panama agreed to become a full participant in the WTO information Technology Agreement.”  Furthermore, the TPA may protect investors to a limited degree in investment and commercial disputes.

The GOP makes no distinction between domestic and foreign companies for investment purposes.  Strong support of trade and open markets in addition to stable and consistent economic policies all account for Panama’s consistent economic vigor.  In 2012, Moody’s raised Panama’s sovereign debt rating to Baa2 due to continuing improvement in debt metrics.  According to a Moody’s 2012 Credit Research Analysis of the Panamanian economy, “Panama continued to show remarkable economic dynamism in the first half of 2012 when GDP increased at an annualized rate of 10.6%, roughly the same pace it registered during 2011.  Though recent growth rates are not sustainable, medium-term growth prospects remain strong thanks to the expansion of the Panama Canal, the Martinelli administration’s ambitious infrastructure investment plans, and the recent ratification of the free trade agreement by the U.S. Congress.  Together, these developments should improve Panama’s position as a global logistics hub.  Panama’s economy will also benefit from a massive new copper and gold mining project.”  As of October 2012, Moody’s improved their outlook for Panama’s bond rating from “stable” to “positive”.

Key Factors In A Sustained Panamanian Economy

-One of the fastest growing in the world with an average growth of 7.3 per cent over the past ten years.

-One of the few service based economies in the region with the service sector accounting for over 80% of GNP.  A GDP valued at $36 billion and a GPP at $57 billion.

-An economic landscape of friendliness toward foreign investment with healthy and rigorous trade agreements i.e. The Investment Stability Law, the Panama Trade Promotion Agreement (TPA), and the Bilateral Investment Agreement (BIT).

-Moody’s raised score of Panama’s sovereign debt rating to Baa2 and its improved outlook for Panama from “stable” to “positive.”

-The GOP’s rigorous infrastructure overhaul that includes a $15 billion investment plan slated for completion in 2014, the effort includes a $2 billion metro line and other advancements to Panama’s transport infrastructure.