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: 11/15/2019
Panama serves as the crossroads of trade for the Americas.  Its strategic location as a bridge between two oceans and the meeting of two continents have made Panama not only a maritime and air transport hub, but an international trading, banking, and services center.  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 May 2019, Panama held presidential elections won by center-left Democratic Revolutionary Party (PRD) candidate Laurentino Cortizo, who pledged to strengthen ties with the United States, fight corruption, tackle inequality, and strengthen Panama’s ability to combat money-laundering.  The United States is Panama's largest foreign investor, trade partner, and user of the Panama Canal.

Due to the country's historic evolution and premium strategic geographic location, 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.  The national poverty rate hovered at 19 percent.  These pockets of poverty, mostly in indigenous areas, suffer from significant underemployment and limited education and other social benefits.
Panama's economy is based primarily on a well-developed services sector, accounting for about 80 percent of GDP – with the Panama Canal as the largest economic contributor.  Services include the Canal, banking, activities in the Colón Free Trade Zone (CFZ), insurance, container ports, and flagship registry.  In June 2016, the country completed a $5.25 billion expansion of the Panama Canal, which allows for larger ships (Neo-Panamax ships) carrying 12,000 containers (compared to the 5,000 container limit under the old infrastrucure).  The expanded locks are crucial for U.S. liquid natural gas (LNG) exports, as the Canal is the main artery for U.S. LNG exports to Asian markets.  According to the Panama Canal Authority (ACP), the net tonnage for fiscal year 2018 was 442.1 million tons, a 9.5 percent increase from the previous year.  Tolls revenue amounted to $2.969 billion, an 11 percent increase from the previous fiscal year.  There was also a 1.8 percent increase in transits from 13,548 in fiscal year 2017 to 13,795 in fiscal year 2018.  The Panama Canal serves more than 144 maritime routes connecting 160 countries and reaching some 1,700 ports in the world.

This logistical platform has aided the success of the Colón Free Trade Zone, 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.  That said, the CFZ’s activity has waned in recent years due to more small suppliers procuring directly with China, competition from other regional transshipment hubs, and decreasing demand from the economic deterioration in Venezuela and a trade dispute with Colombia. 

The United States is Panama's most important trading partner and U.S. products enjoy a high degree of popularity in Panama.  In 2018, U.S. exports to Panama reached $6.8 billion, while in 2017, total exports reached $6.3 billion.  International competition for sales is strong across many sectors including telecommunications equipment, automobiles, heavy construction equipment, consumer electronics, computers, apparel, gifts, and novelty products.  China and Japan are the United States’ biggest export competitors, with both of their share of exports to Panama trending up as the U.S.’s share trends downwards. 

The U.S.-Panama Trade Promotion Agreement (TPA) went into effect in October 2012 and will continue to offer U.S. goods a competitive advantage.  For 87 percent of U.S.-made goods, tariffs dropped to zero percent immediately, with remaining tariffs phasing out by 2022.

Panama has full Free Trade Agreements which cover goods and services in force with the following countries or economies:  El Salvador, Singapore, Chile, Costa Rica, Honduras, Guatemala, Nicaragua, Peru, the United States, Canada, Iceland, Norway, Liechtenstein, Switzerland, Israel, South Koreaand Mexico.  Panama has partial trade agreements with the Dominican Republic and Cuba.  It is engaged in active negotiations with Colombia and is part of the Central America-EU Association Agreement that entered into force in 2013.  Panama established diplomatic relations with the People’s Republic of China in June of 2017.  
 

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