Panama

Economic Overview of Panama

GDP and Economic Growth
• GDP (2024 estimate): $79.4 billion USD.
• Growth Rate: Panama’s economy is expected to grow by 4% in 2024, driven by the services sector, particularly logistics, finance, and construction, alongside recovery in tourism. The country’s strategic location and its status as a global hub for trade and finance provide a solid foundation for sustained economic growth.

Key Economic Features
• Strategic Location: Panama’s position as a global logistics hub, with the Panama Canal as its centerpiece, provides significant opportunities in transport and logistics. It is also a major international banking and finance center.
• Services Sector Dominance: Services, particularly finance, logistics, and tourism, dominate Panama’s economy. The country has a highly developed banking sector and has attracted international financial institutions and investors.
• Diversified Economy: While services remain dominant, Panama’s economy is increasingly diversifying into areas such as construction, real estate, and manufacturing, offering new opportunities for foreign investment.

Key Sectors of the Panamanian Economy
1. Logistics and Transportation
• Panama’s central location and the Panama Canal make it one of the most important trade routes globally. The country has continued to invest in expanding its ports and logistics infrastructure, which presents opportunities for UK businesses in infrastructure development, transport services, and maritime technology.
• UK firms specializing in logistics, port management, and shipping can capitalize on Panama’s role as a global transit hub.
2. Financial Services
• Panama has a robust banking and financial services sector, with a growing demand for financial services in Central America and the Caribbean. UK financial firms, particularly in banking, investment, and insurance, can expand their presence in Panama.
• Panama’s favorable tax environment and stable currency (the US dollar) make it an attractive location for international finance.
3. Construction and Real Estate
• Construction, particularly in the residential and commercial real estate sectors, continues to be a significant part of Panama’s economy. The country’s growing middle class and increasing demand for housing present opportunities for UK construction companies.
• There are also opportunities in infrastructure development, including roads, ports, and energy facilities.
4. Tourism
• Panama is an increasingly popular tourist destination, known for its natural beauty, cultural heritage, and ecotourism offerings. As tourism continues to grow, there are opportunities for UK companies in hospitality management, travel services, and eco-tourism ventures.
• The government is also focusing on making Panama a center for international tourism, which creates further growth prospects in the sector.
5. Renewable Energy
• The Panamanian government has committed to transitioning to renewable energy sources, with plans to reduce reliance on fossil fuels and increase the use of wind, solar, and hydropower. There are significant opportunities for UK businesses in renewable energy technology and project development.

Trade Environment

Main Export Partners:
• United States, China, Netherlands, Switzerland, and Central American countries.

Main Import Partners:
• United States, China, Mexico, Japan, and Colombia.

Trade Policies:
• Panama is a member of the Central American Integration System (SICA) and the Panama Canal Expansion project, which allows it to benefit from enhanced trade relations with Central America and other regions.
• Panama has signed numerous free trade agreements (FTAs), including with the United States and the European Union, facilitating trade and investment flows.

Opportunities for UK Exporters to Panama
1. Logistics and Maritime Services
• Given Panama’s central location and the Panama Canal, UK companies specializing in logistics, shipping, and port management can benefit from Panama’s strategic importance.
• There is also potential in related areas such as maritime technology, shipping infrastructure, and port development.
2. Financial Services and Technology
• UK financial firms can expand in Panama’s growing banking and financial services sector, which has become a regional hub for international finance.
• There are opportunities in financial technology (fintech) and digital banking, with the country positioning itself as a leading destination for innovation in financial services.
3. Construction and Real Estate
• The demand for residential and commercial real estate, along with infrastructure development, offers opportunities for UK construction companies and property developers. There is also growing demand for construction technology, energy-efficient buildings, and sustainable urban planning.
4. Tourism and Hospitality
• Panama’s tourism sector is expanding, especially in eco-tourism, adventure tourism, and high-end resorts. UK firms can invest in hospitality, hotel management, and eco-friendly tourist services.
• The government’s focus on expanding international tourism offers additional opportunities for investment in tourism infrastructure.
5. Renewable Energy Solutions
• With a focus on reducing carbon emissions and increasing the share of renewable energy in its energy mix, Panama presents opportunities for UK businesses in renewable energy technologies, including wind, solar, and hydropower projects.
• Companies providing energy-efficient technologies, including smart grid solutions and energy storage systems, can find success in Panama’s growing green energy market.

UK-Panama Trade Relations

Trade Agreement:
• The UK and Panama signed a trade agreement in 2019, which ensures that trade relations between the two countries continue after Brexit. The agreement facilitates trade in goods, services, and investments.
• Panama also benefits from preferential trade access to the EU market, and the UK trade deal mirrors aspects of the EU-Panama Association Agreement.

UK Exports to Panama (2023):
• Machinery and mechanical appliances: £25 million.
• Pharmaceuticals and healthcare products: £15 million.
• Transport equipment (including vehicles): £12 million.
• Electrical machinery and equipment: £8 million.
• Food and beverages (including spirits): £7 million.

Investment Climate:
• Panama’s economy is open to foreign investment, and the country ranks among the best in Latin America for ease of doing business. The stable financial and political environment, alongside an open economy, makes Panama an attractive destination for UK foreign direct investment (FDI).
• The government offers tax incentives to foreign investors in key sectors such as tourism, logistics, and renewable energy.

Market Entry Considerations

Challenges to Entry:
1. Regulatory Environment: While Panama offers a business-friendly environment, navigating local regulations and laws can still pose challenges. Foreign companies are advised to work with local partners and advisors to ensure compliance with local legal requirements.
2. Competition: Panama is a competitive market, particularly in sectors such as logistics, banking, and construction. UK businesses will need to differentiate themselves through quality, innovation, and partnerships.
3. Cultural and Language Barriers: Spanish is the official language, and building strong business relationships based on trust and personal rapport is crucial. Having Spanish-speaking partners and advisors will help facilitate smoother business operations.

Cultural and Language Barriers:
• A good understanding of Panamanian culture and business etiquette is important. While many professionals speak English, Spanish is the primary business language. It’s also helpful to have local connections to build trust and long-term partnerships.

Recommendations for UK Exporters
1. Leverage the Trade Agreement: The UK-Panama trade agreement provides a solid foundation for trade, particularly in goods and services. UK companies should ensure they take full advantage of the tariff reductions and market access benefits.
2. Focus on Infrastructure and Logistics: With Panama’s strategic location and the expansion of the Panama Canal, opportunities abound in logistics, shipping, and infrastructure development.
3. Explore Financial and Technology Sectors: Panama is a growing hub for finance and fintech. UK financial firms and technology companies can benefit from expanding into this sector, providing innovative services and solutions.
4. Invest in Sustainable Tourism: Eco-tourism and sustainability are key growth areas in Panama. UK firms can invest in tourism infrastructure, eco-friendly accommodations, and unique travel experiences to tap into this expanding market.

Contact Information

British Embassy in Panama City
• Address: Calle 50, Marbella, Panamá.
• Phone: +507 317 2900.
• Email: consular.panama@fcdo.gov.uk.

British Chamber of Commerce in Panama
• Address: Edificio Soho, Piso 3, Calle 50, Panamá.
• Phone: +507 264 6661.
• Email: info@britcham.com.pa.

Panama Canal Authority
• Address: Avenida Manuel José Hurtado, Ciudad de Panamá, Panamá.
• Phone: +507 272 7477.
• Email: info@pancanal.com.

Recent Political Developments
1. Government and Economic Policy:
• Panama’s government continues to prioritize free market policies, infrastructure development, and foreign investment. Efforts are being made to diversify the economy and reduce the country’s dependence on the canal.
• Political stability remains a significant strength of Panama, and the government has committed to maintaining a favorable environment for foreign investment.
2. Geopolitical Relations:
• Panama continues to play a strategic role in global trade and has maintained strong relations with key international partners, including the United States, China, and Latin American countries.
• The UK-Panama trade agreement, post-Brexit, is expected to enhance economic cooperation between the two nations.
3. Domestic Challenges:
• Panama’s growing urbanization presents challenges related to infrastructure, housing, and inequality. The government is focusing on social programs to address these issues.
• External challenges, such as global economic fluctuations, may impact Panama’s export-driven economy.

Conclusion

Panama offers a wealth of opportunities for UK exporters, particularly in sectors such as logistics, finance, construction, tourism, and renewable energy. The country’s strategic position as a global trade hub, coupled with a stable economic and political environment, make it an attractive destination for investment and trade.

By leveraging the trade agreement between the UK and Panama, UK companies can capitalize on these growth areas, particularly in infrastructure development and green technologies.