Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Last Published: 4/17/2016
Panama has historically served as the crossroads of trade for the Americas.  Its strategic location as a bridge between two oceans and the meeting of two continents has made Panama not only a maritime and air transport hub, but also an international trading, banking, and services center.  Panama’s is enhancing its global and regional prominence though trade liberalization and privatization and it is participating actively in the hemispheric movement toward free trade agreements.  Panama's dollar-based economy offers low inflation in comparison with neighboring countries and zero foreign exchange risk.  Its government is stable and democratic and actively seeks foreign investment in all sectors, especially services, tourism and retirement properties.

Due to the country's historic evolution, which focused resources overwhelmingly on services and transactions, the assembly and manufacturing sectors – largely comprised of  production of items such as processed foods, chemical products, construction materials and a small and declining clothing sector - remain severely underdeveloped.  Great income disparities characterize Panama’s economy, with social and economic inequalities marked by a high percentage of the population living at or near the poverty level with significant underemployment and limited education and other social benefits.
In 2010 the three major credit rating agencies – Standard & Poor’s, Moody’s, and Fitch - all raised their credit ratings for Panama to investment grade, granting the Government of Panama international recognition for recent tax reforms and its record of steady GDP growth while keeping its deficits under control.  The investment-grade rating both lowers the cost of borrowing for the Government of Panama and sends a positive signal to foreign investors.
Panama's economy is based primarily on a well-developed services sector, accounting for about 75% of GDP.  Services include the Panama Canal, banking, activities in the Colón Free Trade Zone, insurance, container ports, and flagship registry.  The country is close to completing a $5.25+ billion expansion of the Panama Canal which, when finished, will allow significantly larger vessels to transit, and which has the potential to alter shipping routes to and from multiple U.S. ports.  This project, in conjunction with the expansion of the capacities of its ports on both the Atlantic and Pacific coasts and ongoing investment in regional fueling operations, will solidify Panama’s global logistical advantage in the Western Hemisphere. 

This logistical platform has aided the success of the Colón Free Zone (CFZ), the second largest in the world, which has become a vital trading and transshipment center serving the region and the world.  CFZ imports – a broad array of luxury goods, electronic products, clothing, and other consumer products - arrive from all over the world to be resold, repackaged, and reshipped, primarily to regional markets.  Because of this product mix, U.S. brand market share is significant, even if most of those products are made in Asia.
The U.S. is Panama's most important trading partner, with about 30% of the import market, and U.S. products enjoy a high degree of acceptance in Panama.  In 2014, U.S. exports to Panama reached $10.4 billion – in no small part because Panama’s economy grew 6.2% that year.  However, international competition for sales is strong across many sectors including telecommunications equipment, automobiles, heavy construction equipment, consumer electronics, computers, apparel, gifts, and novelty products. 
The Trade Promotion Agreement (TPA) between the U.S. and Panama that went into effect in October 2012 will continue to offer U.S.-made goods a competitive advantage.  For 87% of U.S.-made goods, tariffs dropped to 0% immediately.  However, Panama’s average tariff on goods is only 7% and in several key sectors – sales of consumables to the Government for the Canal expansion and other infrastructure projects, automobiles, and goods for use in hotels – duties are either 0% or are waived.

Panama has full FTAs in force with the following countries or economies: El Salvador, Taiwan, Singapore, Chile, Costa Rica, Honduras, Guatemala, Nicaragua, Peru, U.S., Canada, and Mexico.  Panama has partial trade agreements with the Dominican Republic and Cuba.  It signed an agreement with Colombia, which has not yet entered into force.  It is also part of the Central America-EU FTA that entered into force in 2013.  Panama is an observer to the Pacific Alliance, and has expressed an interest in joining the group.  It continues to negotiate FTAs with Korea and Israel.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.

Panama Trade Development and Promotion