Panama is a small country in Latin America that is famous for the Panama Canal and the financial services that the country provides. It is a rapidly developing country and it ranks high for its GDP among other countries in the region. What are the top 3 industries in Panama? We discuss this question below.
A short review of the Panamanian economy
There are no data for the whole of 2022 but the economic growth rate in the third quarter of that year is quite impressive — 9.5%. Few countries in the world demonstrated such rapid growth last year.
The economy of Panama is not large but it is open, diversified, US dollar-oriented, and highly competitive by the regional standards.
According to the IMF data for 2021, Panama ranks 8th for the GDP per capita in Latin America (around US$ 14,640). At the same time, income inequality is still among the highest in the region notwithstanding the recent progress that Panama has made.
Another significant problem that Panama faces is unemployment. The unemployment rate was growing between 2012 and 2021 but then its level began to drop. We must note that around 40% of the workforce is employed in the ‘informal’ sector, that is, the people are not registered as workers. The level of unemployment was 10.2% in 2021, it was 9.2% in 2022, and it is expected to drop to 8.2% in 2023.
As a whole, the Panamanian economy is stable and the leading international organizations expect that it will grow by 4-5% per year.
Key export industries in Panama
Copper and bananas were the leading exported items in the first half of 2022: 76.5% and 3.4% of the total amount of exported goods, correspondingly. Panamanian companies also export teakwood (1.7%), palm oil (1.4%), and iron and steel production wastes (1.2%).
The exported goods mostly go to the following countries: China, Japan, South Korea, Germany, India, Bulgaria, Canada, USA, the Netherlands, and Spain.
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Three main sectors of the Panamanian economy
The Panamanian economy is not large but it is growing rapidly in a number of areas. The three most profitable sectors of economy in Panama are listed below:
- The service sector. This sector of the economy brings the largest portion of the overall income to the national budget. It brings 74.43% of the country’s GDP and 67.9% of the working-age population is employed there. The service sector includes the following subsectors: financial services, banking services, insurance services, tourism, logistics, transport, and telecommunications.
- Panama has large deposits of copper ore as well as gold, Manganese, and iron deposits. Thanks to this fact, the mining industry is growing fast in Panama. It currently brings 22.8% of the overall GDP.
- The agricultural sector also plays an important role in the economy of Panama. 30% of the land is arable in the country. Even though the portion of the GDP that agricultural companies bring to the national budget is comparatively small (2.77%), around 14.41% of the working-age population is employed in agriculture.
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The service sector: the largest profit-generating sector of the Panamanian economy
Companies providing various kinds of services make the largest contributions to the national budget of Panama. We briefly discuss the main service areas below.
Tourism
The tourist industry is an important component of the Panamanian economy. Millions of people from other countries visit Panama every year. Around 1.8 million foreign tourists visited the country in 2022. The most popular tourist attractions include the Panama Canal, the San Blas Islands, and the Bocas Del Toro archipelago.
Transport
The strategic geographical location of Panama has turned it into an international trade and commerce center. The shipping, aviation, and logistics industries are extremely well developed there. The Panama Canal is the most important part of the transportation industry in the country as it connects the Atlantic and the Pacific Oceans. In 2021, the Canal made US$ 4 billion and the figure is expected to increase to US$ 4.2 billion in 2022 (no factual data are available yet). Economists forecast that the income will increase to US$ 5 billion by 2030. La Autoridad del Canal de Panamá (the Canal management company) alone brings 3% of the country’s GDP.
Financial services
Panama is widely known all around the world for the financial services that it provides. These include banking, insurance, and investment services. As of 2022, there are 56 banking institutions in Panama and a huge number of investment companies providing financial services to customers. The largest banks in the country are Banco General and Banistmo.
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Telecommunications
Panama has an advanced telecommunication industry: several large service providers work in the country. They offer Internet and mobile communication services to customers. The competition is tough in the industry and the service providers implement innovations and offer new services on a regular basis.
Logistics
The position of Panama as a transportation hub has brought about rapid progress in the local logistics industry that includes transportation services and warehouse facilities. Besides, there are a few Free Trade Zones in Panama, which further contributes to the development of this business sphere because international companies find a fantastic business environment in the Zones.
The industrial sector
The industrial sector is quite diverse in Panama. It is made up of production, construction, and mining industries. Below please find the names of some large Panamanian industrial companies:
- MECO — a construction and engineering company that has been operating in Panama for more than 50 years. MECO has carried out several gigantic projects that include the extension of the Panama Canal and construction of several large autobahns.
- AES Panama — a leading energy production company supplying electricity to all parts of the country. The company puts a heavy emphasis on developing renewable energy sources.
- Minera Panama — a mining company that develops the Cobre Panama copper mine. This is one of the largest mining projects in Central America.
The agricultural sector
The agricultural sector is not the largest part of the Panamanian economy but the country is self-sufficient in terms of food production. Local agricultural firms specialize in growing various fruits and vegetables and breeding cattle. Shrimp breeding is also popular.
Three largest agricultural companies in Panama:
- Cooperativa de Servicios Agropecuarios de Panamá (COSAP) — a cooperative of small farmers and food producers that specialize in growing crops such as coffee, bananas, vegetables, and so on. The cooperative provides training and technical assistance to its members.
- Grupo Calesa — a large agro holding that owns 8 agricultural companies in Panama. It is a leader in growing rice and sugarcane. Besides, it is the largest exporter of shrimps. Grupo Calesa also has interests in forage production and agricultural machinery manufacturing.
- Chiriqui Land Company — an American company working under the trademark of Chiquita in Panama. The company is the largest landowner in the country as well as the main exporter of bananas.
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Panamanian economy: the prospects
Reports made by the World Bank, the IMF, and various Latin American and Caribbean organizations show that the economy of Panama is recovering very well from the recent global crisis. The international organizations expect that the Panamanian GDP will grow by 6.2% to 7.5% in 2022. In their turn, the Panamanian authorities make even more optimistic forecasts: they expect the economy to grow by up to 9%.
The main driving force of the economic growth in Panama is the service sector without doubt. It brings three quarters of the overall national income. The Panama Canal remains a highly significant element of the Panamanian economy. It contributes to the development of the shipping industry. Besides, Panama is one of the global centers of marine vessel registration.
If you are considering the opportunity to register a business company in the region, Panama should be one of your top priorities. Please write to info@offshore-pro.info and request a free consultation on starting a company in Panama. Our experts will help you set up a company of the type that would fit your main business objectives perfectly well.
