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 global and regional prominence is being enhanced by recent 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.
Panama and the U.S. recently implemented a Trade Promotion Agreement (TPA) that has had the effect of eliminating some 90% of tariffs and duties on U.S. exports to Panama. But even before the implementation of the TPA, the U.S. was Panama's most important trading partner, with about 30% of the import market, and U.S. products have enjoyed a high degree of acceptance in Panama. In 2013, U.S. exports to Panama increased 10% to $10.8 billion – in no small part due to the fact that Panama’s economy grew 7.5%. U.S. exports to Panama have increased every year since 2009, growing by more than two and half times over that period. However, international competition for sales is strong across sectors including telecommunications equipment, automobiles, heavy construction equipment, consumer electronics, computers, apparel, gifts, and novelty products.
Panama now enjoys investment grade rating status, granting the Government of Panama international recognition for recent tax reforms and its record of steady GDP growth while keeping its deficits under control (even in 2009, a dismal year for the world economy, Panama’s economy grew 2.9% and the Government of Panama’s deficit was only 1% of GDP). Not only does the investment-grade rating lower the cost of borrowing for the Government of Panama, but it sends a strong market signal that Panama, even while carrying a debt ratio that is relatively high, is one of only five Latin American countries to achieve this distinction.
Panama's economy is based primarily on a well-developed services sector, accounting for about 75% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, and flagship registry. Panama is currently engaged in the Panama Canal expansion project. This project, in conjunction with the expansion of the capacities of its ports on both the Atlantic and Pacific coasts, will solidify Panama’s global logistical advantage in the Western Hemisphere.
This logistical platform has aided the success of the Colon Free Zone (CFZ), the second largest in the world after Hong Kong, 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.
Safety and Security Industry
The outlook for the Panamanian safety and security market is positive, with total market size in 2013 estimated to grow to $74 million. Local production of safety and security equipment is minimal and there is a marked preference for U.S. products due to their reliability, innovation, and diversity, as well as the close geographic proximity and favorable conditions for air and sea freight from the United States. The demand for safety and security products and systems is driven by ever-increasing concerns over personal safety, more stringent work-related regulations and growth in the tourism, construction, real estate, banking, gambling, maritime, and duty free zone. While the crime rate is still relatively low, particularly by Latin American standards, it has risen in the last few years and there is increasing public awareness of the need to respond. Commercial institutions and households are usual targets for armed assaults. There is also an increasing need for security equipment in residential areas and public places. Because of raising labor costs, many businesses and households are automating security. Additionally, the boom in the construction sector and the expansion of the Panama Canal is generating strong demand for safety equipment. Port expansion, new airports, new mall development, the Metro transportation system, and the Panama Canal expansion will provide excellent opportunities for U.S. safety and security equipment exporters.