Economy of Panama

The economy of Panama is strong, prosperous, and advanced in comparison with those of other Central and South American countries. It is home to the world's second largest international distribution and trade center (free trade zone), next to Hong Kong.

Colon Free Trade Zone, Panama
Colon Free Zone has over 1500 international import/export businesses operating within it; it receives more than 250,000 visitors annually and generates exports and re-exports that are valued at more than $11 billion annually.  

Panama is a genuine international trade and banking center that is well known and respected throughout the world.  The banking and commercial trade industry is alive in Panama with the US Dollar as its circulating currency. There are over 150 international banks in Panama.

Minimal inflation - Panama's inflation rate in 1998, 1999, and 2000 was under 1.5%.

Panama's GDP is over $7 billion. In recent years, the service sector in Panama has accounted for over 80% of the country's GNP. The Panama Canal is also a large contributor to Panama's overall economic success.

In addition, the country tops the list of the World's freest economies, according to Canada's Fraser Institute (Economic Freedom of the World: 1998/9 Interim Report, Nov. 1998). Ranked eighth with Australia, Ireland, the Netherlands and Luxembourg, Panama represents an environment conducive for the creation of companies, jobs and prosperity.

Panama is a member of the World Trade Organization (WTO) and is a beneficiary of the Caribbean Basin Initiative (CBI). Panama is negotiating the Free Trade Agreement of the Americas (FTAA) and will become the headquarters for the administrative offices between the years 2001 and 2003. Panama has initiated formal negotiations pertaining to free trade agreements with numerous countries and regional groups.

Panama has been ranked first in Central/South America for low cost of living, operational cost and index of labor by the Tripartite Committee, which consists of the Economic Commission for Latin America and the Caribbean (ECLAC), the Organization of American States (OAS) and the Inter-American Development Bank (IDB).

In a survey conducted by Political Risk Services (PRS), Panama figured in the top three countries of the hemisphere with the best risk-investment qualifications.  The Wall Street Journal/Heritage Foundation's annual Index of Economic Freedom rated Panama second in the region.

Panama's open economy offers the lowest tariffs in the region, which has helped increase foreign investment in both the public and private sectors. There are more than 40 laws and decrees that offer investors special import, tax, and operational incentives. Sectors enjoying these incentives include tourism, export processing zones, mining, reforestation, insurance and re-insurance, agro-industry, petroleum free zones, infrastructure and construction.

The Investments Stability Law (Law No. 54 of July 22, 1998) guarantees all foreign and national investors equal rights, continuing Panama's long-standing policy of providing a foreign-investment environment that requires no special authorizations, permits or prior registration.

Major companies in Panama include Federal Express, DHL, Sears, Price Costco, Bell South, Kansas City Southern Railways, Continental and American Airlines, ICA (construction), Cable & Wireless, Evergreen and Hutchinson Whampoa, and many others.