Panama's economy, strong and healthy
(laestrella.com.pa) The latest number of the renowned American magazine Forbes says that the free trade spirit permeates Panama, because it operates the world’s second-largest free trade zone after Hong Kong and its overall economic growth rate matches that of China.
According to Forbes, Panama has posted 23 consecutive quarters of economic growth, growing gross domestic product by 11.5 per cent in 2007, which is double the pace of the rest of Latin America and well ahead of the United States.
The magazine thinks that three things explain the continuous positive outlook for Panama. First, the Panamanian construction sector is in hyper-growth mode. U.S. retirees are attracted by the lower cost of living, a dollarized economy, English-speaking people and proximity to the U.S.
Second, the canal widening construction project is boosting the Panamanian economy, because it is the largest infrastructure project in Latin America with a tag price of $5.2 billion.
The project is already pumping money into the local service-based economy, which should easily reach the 7-8 percent growth according to the International Monetary Fund growth projections for next year.
Third, income generated by the Colon Free Zone representing almost 8 percent of the entire economy is another potential contributor for growth. Another interesting fact that could be part of the equation is that if the U.S. ratifies the U.S.-Panama Free Trade Agreement, tariffs on 80 percent of the industrial and consumer goods imported from the U.S. should be eliminated and will make it easier for U.S.companies like Caterpillar to compete for much-needed earth moving equipment sales. Forbes advises land-lock investors in U.S.-exchange stocks to invest in companies such as the cement manufacturer and distributor Cemex that has a market stock value of $5.9 billion and the appetite for cement in Latin America has been growing and financial institutions such as Bladex, that does not have toxic debt problems.
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PANAMA AND ITS ECONOMY
The privileged geographical situation of Panama has contributed a great deal to its success. Multinational companies are opening their regional headquarters here lured by the tax incentives offered by the government.
However, the high levels of insecurity are making investors nervous, especially with rumors of FARC guerrillas crossing the border with Colombia to attack the inhabitants of the Darien province.
The current global financial crisis will affect Panama sooner or later, but experts have not agreed yet how badly the internal economy will be affected.
The construction sector went down by 30 percent in September and the real estate bubble appears to be bursting, but all in all Panama is doing brilliantly.
