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What’s Really Behind Panama’s Booming Economy?

22 Feb
behind panama economy

What’s Really Behind Panama’s Booming Economy?

What's Fueling This Boom? (And, No, It's Not Too Late For You To Get In)

The economy of the country where you decide to relocate is important… because a healthy economy means money flowing through the place.

It also helps to support a safe and stable climate generally.

Panama has the most robust economy in Latin America.

Panama is not very agricultural. Neither is it very industrial. This is a country of imports. Panama imports food from the United States, for example… even rice.

If you buy an Audi car in Panama, the parts will have been made in Morocco and shipped to Mexico, where the car is assembled. The car is then shipped to Panama. Toyota vehicles are assembled in Japan and then, again, shipped to Panama.

Among the few things made in Panama are airplane parts and cement. There are also several national breweries and a Coca-Cola plant.

This is a country of 4 million people, 2 million of whom live in the capital city.

So half the population is in the capital city… but they’re not making things… and the other half of the population lives in “the interior,” as Panamanians refer to the entire rest of the country beyond Panama City… but they’re not growing things in any real volume…

So... What Is This Economy All About?

Services… primarily shipping and finance.

Panama’s GDP has grown an average of 4.9% per year for the past decade. Some years during that time, the country has seen 7% and 8% growth rates.

Bottom line, you could say that this country has been cooking with gas for a nice long time. Today growth continues strong, stable, and solid.

To help put this into perspective and context, the GDP of Colombia has grown an average of 2% per year over the past decade… while the GDP of the United States has grown an average of 3.3% per year.

Again, most of this growth—80%—comes each year from the services sector… shipping, banking, and the financial industry.

At the heart of everything is the Panama Canal, the most important shipping route in the Americas. The Canal today makes an annual profit of approximately US$1 billion and boasts the best port structure in all Latin America.

The Panama Canal never closes. The average fare earned from each passaging ship is US$325,000.

That’s a lot of cash flowing through a country of 4 million people.

Meantime, Panama’s banking industry is also the most modern in the region.

Panama is a top jurisdiction for incorporation. It is easier and quicker to open and to dissolve a corporation in this country than anywhere else in the region.

Inflation is 0.7%… adding to the overall stability of the economy and allowing for reliable predictions and projections… one reason the country is attracting foreign investment in ever-increasing volumes.

Another factor contributing to the overall stability of this country’s economic scene is the unemployment rate… which is 5.5%. International businesses from Nike and Dell to Estée Lauder and Procter & Gamble can’t find all the staff they need, and the country therefore makes it easy to import labor.

Panama’s middle class is big and strong relative to any other country in this part of the world. It’s the middle class that moves an economy… and it’s definitely the middle class that is moving this economy.

It’s the middle class that is buying all those imported cars, televisions, and burgers that are being shipped into the country through the Panama Canal… at an average rate of US$325,000 per shipload.

Then that US$325,000 is being plowed back into the continuing development of the country’s infrastructure and amenities… making it easier and more interesting all the time for the middle class to spend their paychecks… further fueling the demand for all those imported products…

And so the cycle continues and expands.

Panama’s middle class is also buying homes… in exploding volumes. Certain areas on the fringes of Panama City are given over entirely to the construction of homes specifically for the local middle-class market. This is one of the best possible investments you could make in this country today.

Samantha Russell