Economy Of Panama

The economy of Panama is predominantly anchored in the tourism and services sector, which accounts for nearly 80% of the country’s Gross Domestic Product (GDP). This sector not only represents the largest share of economic activity but also serves as the primary generator of foreign income for Panama. The dominance of services reflects the country’s strategic geographic position and its role as a regional hub for commerce and finance. Over recent decades, the expansion of this sector has transformed Panama’s economic landscape, shifting the focus away from traditional sources of revenue toward a more diversified and service-oriented economy. Within the services sector, Panama encompasses a broad range of activities that contribute significantly to its economic vitality. Key components include banking and financial services, which benefit from Panama’s status as a major international banking center due to its favorable regulatory environment and dollarized economy. Commerce and insurance also play vital roles, supporting both domestic markets and international trade. The country’s container ports, notably the ports of Balboa and Colón, serve as critical transshipment hubs that facilitate global maritime trade, leveraging Panama’s position at the crossroads of the Americas. Additionally, Panama maintains one of the world’s largest ship registries, known as the Panamanian flag of convenience, which attracts a substantial number of vessels due to its flexible regulations and cost advantages. Medical and health services have grown in importance, catering not only to local demand but also to medical tourism, which draws patients from across the region. Tourism itself remains a cornerstone of the services sector, with Panama’s rich cultural heritage, natural attractions, and the iconic Panama Canal drawing millions of visitors annually. Historically, the Panama Canal and the nearby Colón Free Trade Zone were the primary sources of the country’s income and economic development. The canal, completed in 1914, revolutionized global maritime trade by providing a vital shortcut between the Atlantic and Pacific Oceans, generating substantial revenues through tolls and related services. The Colón Free Trade Zone, established in 1948, became the largest free port in the Americas and one of the largest in the world, facilitating duty-free trade and re-export activities that boosted Panama’s commercial profile. However, over time, the economic significance of these two pillars has been surpassed by the rapidly expanding services sector. While the canal and free trade zone remain important contributors, the diversification into banking, tourism, and other service industries has reshaped Panama’s economic structure, reducing its dependence on these traditional sources of income. Panama’s industrial sector, although smaller in scale compared to services, encompasses a variety of manufacturing activities that support both domestic consumption and export markets. The country produces aircraft spare parts, reflecting a niche industrial capability that supports the aviation sector. Cement manufacturing is another key industry, driven by ongoing infrastructure development and construction projects within Panama and the broader region. The production of beverages, adhesives, and textiles further illustrates the diversity of Panama’s industrial base. These industries contribute to employment and value-added production, complementing the dominant services sector and providing a degree of economic resilience. In terms of exports, Panama offers a mix of agricultural and manufactured products that cater to international markets. Agricultural exports include bananas, shrimp, sugar, and coffee, which have traditionally been important commodities for the country. Bananas and shrimp, in particular, benefit from Panama’s favorable climate and access to global shipping routes, enabling efficient export to North American and European markets. Sugar and coffee also represent significant agricultural outputs, with coffee from Panama gaining recognition for its quality in specialty markets. Manufactured exports such as clothing highlight Panama’s participation in the textile and apparel sector, which benefits from trade agreements and proximity to major consumer markets. These export activities contribute to Panama’s trade balance and provide income for rural and industrial sectors alike. Panama’s economy is fully dollarized, with the United States dollar serving as legal tender throughout the country. This dollarization eliminates exchange rate risk and stabilizes the economy by anchoring it to the global reserve currency. The use of the U.S. dollar facilitates international trade and investment, attracting foreign capital and simplifying financial transactions. Panama’s monetary policy is effectively tied to the policies of the United States Federal Reserve, which has helped maintain low inflation and foster economic stability. The coexistence of the U.S. dollar alongside the Panamanian balboa, which exists only as coins equivalent in value to the dollar, underscores the unique monetary arrangement in the country. Panama was the first foreign nation to adopt the U.S. dollar as its official currency in 1903, immediately following its secession from Colombia. This political separation was facilitated by U.S. support, which was instrumental in Panama’s independence and the subsequent construction of the Panama Canal. The adoption of the dollar was initially driven by the temporary absence of a local currency and the need to stabilize the new nation’s economy. Since then, the dollar has remained the official currency, providing a foundation for economic confidence and integration with the global financial system. This early dollarization set Panama apart from other Latin American countries and has been a defining feature of its economic policy for over a century. Panama is classified as a high-income economy according to international standards, reflecting its relatively high per capita income and advanced economic development compared to regional peers. This classification is supported by Panama’s sustained economic growth, diversification, and integration into global markets. The country has also maintained a historical record of low inflation rates, a testament to its stable monetary framework and prudent fiscal policies. Low inflation has contributed to economic predictability and has supported investment and consumption. Together, these factors have positioned Panama as one of the more prosperous and economically stable countries in Central America and the Caribbean, with a robust services sector and a favorable environment for business and trade.

Since the early 16th century, Panama’s strategic geographic position on the narrow isthmus connecting North and South America endowed it with a significant comparative advantage in global trade. The presence of ports on both the Atlantic and Pacific coasts, coupled with a trail traversing the isthmus, facilitated the flow of goods, people, and information between the two oceans. This route became a critical conduit for Spain’s colonial trade, enabling the transport of precious metals, agricultural products, and manufactured goods from the Americas to Europe and vice versa. The inhabitants of Panama’s port cities benefited economically from this trans-isthmian commerce, as the constant movement of ships and cargo stimulated local markets, created jobs, and fostered the development of ancillary services such as warehousing, ship repair, and provisioning. Panama’s economy has historically been closely tied to the rhythms of world commerce, making it particularly susceptible to the cyclical nature of international trade. During the colonial period, the isthmus served as a vital link in Spain’s mercantile system; however, by the 18th century, this colonial exchange began to wane. The decline was precipitated by several factors, including the shifting focus of Spanish trade policies, competition from other ports, and the gradual erosion of Spain’s colonial dominance. As a result, Panama experienced a period of economic stagnation during the 18th century, with reduced trans-isthmian traffic leading to diminished commercial activity and limited growth opportunities for its population. The mid-19th century marked a turning point for Panama’s economy, which experienced a significant boom driven by increased cargo and passenger traffic associated with the California Gold Rush. Beginning in 1848, the discovery of gold in California triggered a massive influx of prospectors and entrepreneurs seeking faster routes to the goldfields. Panama’s isthmus offered a shorter and more expedient passage between the eastern United States and the Pacific coast compared to the lengthy and perilous journey around Cape Horn. The completion of a railroad across the isthmus in 1855 further accelerated this growth by facilitating the rapid movement of goods and passengers. This infrastructural advancement extended the period of economic prosperity for approximately fifteen years, as Panama became a critical transit hub. However, the opening of the first transcontinental railroad in the United States in 1869 significantly reduced trans-isthmian traffic, as travelers and cargo increasingly opted for the overland route, leading to a decline in Panama’s transit-related economic activity. The late 19th and early 20th centuries saw renewed economic stimulation in Panama due to ambitious efforts to construct a canal across the isthmus. In the 1880s, French engineers, led by Ferdinand de Lesseps, initiated the first attempt to build the Panama Canal, envisioning a monumental engineering project that would revolutionize maritime trade by connecting the Atlantic and Pacific Oceans. Although the French effort ultimately failed due to technical challenges, financial mismanagement, and high mortality rates from disease, it laid the groundwork for subsequent endeavors. The United States took over the project in the early 20th century, following the Hay–Bunau-Varilla Treaty of 1903, which granted the U.S. control over the Canal Zone. The American-led construction, completed in 1914, was a monumental achievement that not only transformed global shipping routes but also significantly boosted Panama’s economy. The canal’s operation generated employment opportunities, attracted foreign investment, and established Panama as a pivotal node in international maritime commerce. The economic prosperity brought by the canal was disrupted by the Great Depression of the 1930s, which caused a sharp reduction in international trade and canal traffic. The global economic downturn led to decreased demand for goods and a contraction in shipping volumes passing through the waterway. This decline had a pronounced impact on Panama’s terminal cities, where widespread unemployment ensued as businesses reliant on canal traffic suffered. Many displaced workers turned to subsistence farming as a means of survival, marking a shift away from urban economic activities toward rural self-sufficiency. The economic hardships of the Depression underscored Panama’s vulnerability to fluctuations in global trade and highlighted the need for economic diversification. During World War II, although canal traffic did not experience a significant increase, Panama’s economy nevertheless benefited from the wartime context. The implementation of the convoy system, designed to protect Allied shipping from enemy submarines, and the substantial presence of United States military forces tasked with defending the canal, brought increased foreign spending to Panama’s canal cities. The influx of military personnel and associated expenditures stimulated local businesses, including retail, hospitality, and construction sectors. This wartime economic boom contrasted with the stagnation of canal traffic, illustrating the multifaceted ways in which the canal and its strategic importance influenced Panama’s economic fortunes. Following the post-World War II economic depression, Panama entered a period of rapid expansion between 1950 and 1970, characterized by growth across multiple sectors. Agricultural output increased as modernization efforts and improved techniques enhanced productivity, contributing to food security and export potential. Concurrently, the development of a sophisticated wholesale and retail commerce system facilitated the distribution of goods nationwide and supported the growing urban populations. The banking sector experienced rapid growth, reflecting Panama’s emergence as a regional financial center, bolstered by favorable regulatory frameworks and its role as a conduit for international capital flows. Tourism also expanded during this period, driven by Panama’s unique geographic location, cultural heritage, and the canal’s global significance. Additionally, the export of services to the Canal Zone, including logistics, maintenance, and administrative support, grew in tandem with increased world trade, collectively propelling Panama’s economy into a new phase of diversification and modernization. The economic trajectory of Panama in the 1970s and 1980s was marked by fluctuations closely tied to global economic conditions. After 1973, the pace of economic expansion slowed due to a combination of international factors, such as the oil crises and global recession, and domestic challenges, including political instability and institutional weaknesses. The early 1980s saw a brief rebound in economic activity; however, this was soon overshadowed by a severe recession affecting much of Latin America after 1982, characterized by debt crises, inflation, and declining commodity prices. This period coincided with the rise to power of General Manuel Noriega, whose authoritarian regime was marked by increasing national indebtedness and economic mismanagement. The accumulation of external debt and deteriorating governance undermined investor confidence and constrained economic growth, setting the stage for further turmoil. The United States government pursued General Noriega aggressively due to his involvement in drug trafficking and other illicit activities, leading to the imposition of economic sanctions that froze Panama’s assets held in the United States. As Panama’s official currency was the U.S. dollar, the sanctions severely restricted the country’s access to international financial markets. Consequently, Panama was forced to default on its International Monetary Fund (IMF) debt in 1987, precipitating a period of acute economic turmoil. The default triggered widespread social unrest, including a general strike that paralyzed economic activity and a two-month closure of the banking system, which further exacerbated financial instability. These events highlighted the deep interconnection between Panama’s political environment and its economic health, as well as the vulnerabilities inherent in its dollarized economy. In December 1989, the United States launched a military invasion of Panama, known as Operation Just Cause, with the objective of removing Noriega from power and restoring democratic governance. The invasion culminated in Noriega’s capture and surrender, effectively ending his regime. Following this intervention, Panama gradually regained access to international financial institutions, including the IMF, which restored funding in 1992. This restoration of financial credibility enabled Panama to embark on economic recovery and reform efforts aimed at stabilizing the economy and fostering growth. After assuming office in 1994, President Ernesto Perez Balladares implemented a comprehensive economic liberalization program designed to revitalize Panama’s economy. The program emphasized trade liberalization, seeking to reduce tariffs and non-tariff barriers to enhance Panama’s integration into the global economy. It also focused on attracting foreign investment by creating a more favorable business environment, including regulatory reforms and incentives. State-owned enterprises were privatized to improve efficiency and reduce fiscal burdens, while fiscal discipline was instituted to control public spending and reduce deficits. Following two years of near-stagnation, these reforms contributed to strong gross domestic product (GDP) growth in 1997 and 1998, driven primarily by activities related to the Panama Canal and the shipping and port operations of the Colón Free Trade Zone. This period marked a significant turnaround in Panama’s economic performance and underscored the benefits of market-oriented policies. During the administration of President Mireya Moscoso, who took office in 1999, the government prioritized strengthening social programs to address persistent poverty and inequality. Moscoso’s tenure was also notable for the successful management of the Panama Canal transfer, which occurred on December 31, 1999, when Panama assumed full control over the canal from the United States as stipulated by the Torrijos-Carter Treaties. The Moscoso administration effectively administered the canal, ensuring its continued operation and maintenance, which was critical for sustaining Panama’s economic vitality. The transfer symbolized a milestone in Panama’s sovereignty and economic independence, reinforcing the canal’s central role in the national economy. Under President Martín Torrijos, who began his term in 2004, Panama sustained strong economic growth and embarked on the ambitious Panama Canal expansion project, initiated in 2007 and completed in 2016. This project doubled the waterway’s capacity by adding a new set of locks, allowing the transit of larger vessels and enhancing Panama’s competitiveness in global shipping. By 2008, the country’s robust economic performance had contributed to a reduction in the national poverty level to 29%, reflecting improvements in living standards and economic inclusion. Torrijos’s administration also pursued policies aimed at consolidating macroeconomic stability and promoting investment in infrastructure and social development. Despite these advances, Panama exhibited the second most unequal income distribution in Latin America as of 2008, highlighting ongoing challenges in achieving equitable growth. The Torrijos government responded by implementing tax and social security reforms designed to increase fiscal revenues and expand social protection. It also supported regional trade agreements to deepen economic integration and promoted tourism development as a source of diversification and employment. Although Panama was not a signatory to the Central America Free Trade Agreement (CAFTA), it independently negotiated a free trade agreement with the United States in December 2006, further solidifying its trade relations and opening new markets for Panamanian goods and services. In May 2009, Ricardo Martinelli was elected president, campaigning on a platform that emphasized the promotion of free trade, the establishment of a metro system in Panama City, and the completion of the Panama Canal expansion plan. Martinelli’s administration focused on infrastructure development and economic modernization, seeking to capitalize on the canal’s enhanced capacity to stimulate broader economic growth. The metro system project aimed to address urban transportation challenges and improve the quality of life for residents, reflecting a commitment to sustainable urban development. Panama’s economic role has frequently been compared to that of Singapore, with commentators dubbing it “the Singapore of Central America” due to its strategic location, status as a global logistics hub, and open economy. This analogy underscores Panama’s ambition to position itself as a leading center for trade, finance, and transportation in the region. However, Panama’s involvement in the Odebrecht corruption scandal, which implicated numerous officials and undermined public trust, has negatively impacted official efforts to market the country using this analogy. The scandal highlighted governance challenges and the need for greater transparency and accountability to sustain Panama’s economic reputation and attract continued investment.

Panama’s financial services sector occupies a significant role within the nation’s economy, distinguished by its operation in the absence of a central bank. Unlike many countries where a central monetary authority functions as a lender of last resort to provide emergency liquidity to banks facing financial distress, Panama has no such institution. This unique structural characteristic necessitates a highly conservative approach to banking management, as financial institutions must independently maintain sufficient capital buffers to withstand economic shocks without external support. Reflecting this prudence, Panamanian banks maintained an average capital adequacy ratio of 15.6% in 2012, a figure that nearly doubles the legally mandated minimum threshold. This elevated capital reserve requirement underscores the sector’s commitment to stability and risk mitigation, compensating for the lack of a central bank’s safety net. The origins of Panama’s financial sector are closely intertwined with the country’s strategic geographic position and its pivotal role in global maritime trade. Initially, the sector developed primarily to provide trade finance services that facilitated commerce transiting through the Panama Canal, a critical international shipping route connecting the Atlantic and Pacific Oceans. The canal’s operation generated substantial commercial activity, necessitating financial products such as letters of credit, trade credit, and currency exchange services to support the logistics and payment flows associated with the movement of goods. This foundational role in trade finance established Panama as a regional financial hub, leveraging its canal-related economic activity to attract banking institutions and related financial services. However, the financial sector’s reputation became tarnished during the regime of General Manuel Noriega, who ruled Panama from 1983 until his ousting in 1989. During this period, the sector became increasingly associated with illicit financial flows, particularly money laundering activities connected to the drug trade. Panama’s banking secrecy laws and lax regulatory oversight attracted narcotics traffickers and other criminal enterprises seeking to conceal the origins of illicit proceeds. The country’s financial institutions were exploited as conduits for laundering drug money, which contributed to an international perception of Panama as a haven for illicit finance. This association with criminal activity posed significant challenges for the sector’s legitimacy and its integration into the global financial system. In the aftermath of the global financial crisis of 2008, Panama undertook concerted efforts to rehabilitate its international standing and shed its image as a tax haven. The crisis had intensified global scrutiny of offshore financial centers and tax avoidance mechanisms, prompting Panama to implement reforms aimed at enhancing transparency and regulatory compliance. These reforms included the adoption of international standards for anti-money laundering (AML) and combating the financing of terrorism (CFT), as well as improvements in corporate governance and financial supervision. Panama’s government recognized that fostering a reputable financial environment was essential to attracting legitimate foreign investment and sustaining economic growth in an increasingly interconnected global economy. A key component of Panama’s strategy to improve its international reputation involved the negotiation and signing of numerous double taxation treaties (DTTs). These agreements primarily targeted countries within the Organisation for Economic Co-operation and Development (OECD), reflecting Panama’s intention to align its tax policies with those of advanced economies. Double taxation treaties serve to prevent the same income from being taxed by two jurisdictions, thereby facilitating cross-border trade and investment. By entering into these treaties, Panama sought to demonstrate its commitment to transparency and cooperation in tax matters, countering perceptions of secrecy and tax evasion. The expansion of Panama’s DTT network represented a significant shift toward greater integration with the global financial system and adherence to international tax standards. One of the most notable milestones in Panama’s efforts to enhance financial transparency occurred in April 2011, when the country signed a treaty with the United States focused on the exchange of financial information. This bilateral agreement aimed to strengthen cooperation between the two countries’ tax authorities by enabling the sharing of information relevant to tax enforcement and the prevention of tax evasion. The treaty marked a departure from Panama’s previous stance on banking secrecy and underscored its willingness to participate in global initiatives promoting fiscal transparency. This development was particularly significant given the historical ties between Panama and the United States, as well as the latter’s role as a major source of foreign investment and trade for Panama. The treaty contributed to improving Panama’s credibility as a financial center committed to combating illicit financial flows and adhering to international norms. Together, these developments illustrate the evolution of Panama’s financial services sector from a trade finance facilitator to a complex system grappling with challenges related to illicit finance and international scrutiny. The absence of a central bank has shaped a conservative banking culture characterized by strong capital adequacy, while the legacy of the Noriega era necessitated structural reforms to restore confidence. Panama’s proactive engagement with international partners through double taxation treaties and information exchange agreements reflects its ongoing efforts to position itself as a transparent and reliable financial jurisdiction within the global economy.

Agriculture has historically played a significant role within Panama’s economy, representing a vital component of the country’s overall economic activities. The sector encompasses a diverse array of crops and livestock, reflecting the nation’s varied climatic zones and fertile soils. Among the major agricultural products cultivated and produced in Panama are bananas, which have long been a staple export crop due to the country’s favorable tropical conditions. Cocoa beans also hold economic importance, with Panama producing high-quality varieties that contribute to both domestic consumption and export markets. Coffee cultivation, particularly in the highland regions, has been a traditional agricultural pursuit, valued for its distinctive flavor profiles and export potential. Additionally, coconuts are widely grown along Panama’s coastal areas, providing raw materials for both food products and industrial uses. Timber extraction forms another critical component of the agricultural sector, with Panama’s extensive forested areas supplying wood for construction and manufacturing. Livestock farming contributes significantly through the production of beef and chicken, which serve as primary sources of animal protein for the local population. Aquaculture, especially shrimp farming, has expanded in recent decades, positioning Panama as a notable producer in the regional seafood market. Staple food crops such as corn (maize), potatoes, rice, soybeans, and sugar cane are cultivated extensively, supporting both subsistence needs and commercial agriculture. These crops underpin food security and supply raw materials for various agro-industries within the country. In 2009, the combined sectors of agriculture and fisheries contributed 7.4% to Panama’s Gross Domestic Product (GDP), underscoring the sector’s role as a modest yet essential pillar of the national economy. This figure reflects the integration of traditional farming practices with modern agricultural and aquacultural enterprises, highlighting the sector’s gradual evolution amid broader economic diversification. Despite the notable output of agricultural products, Panama remains a net importer of food, a situation driven by several factors including limited arable land, climatic variability, and the scale of domestic production relative to population demand. The United States stands as Panama’s principal supplier of imported food products, benefiting from established trade relations and geographic proximity. This reliance on food imports underscores challenges in achieving full self-sufficiency and reflects the interconnected nature of Panama’s economy within global and regional markets. The agricultural sector in Panama employs a substantial portion of the population, a figure that is disproportionately high when compared to agriculture’s share of the national GDP. This discrepancy largely stems from the prevalence of subsistence farming, which remains widespread among many Panamanian farmers, particularly in rural and indigenous communities. Subsistence agriculture involves small-scale cultivation primarily aimed at meeting the immediate food needs of households rather than generating surplus for commercial sale. Such farming practices often utilize traditional methods and limited mechanization, resulting in lower productivity per worker relative to commercial agricultural enterprises. Consequently, while a significant segment of the population depends on agriculture for their livelihoods, the sector’s economic output does not correspondingly reflect this high level of employment. This dynamic highlights ongoing challenges related to rural development, agricultural modernization, and poverty alleviation within Panama’s agricultural landscape.

As of 2006, the mineral-mining industry in Panama accounted for approximately 1% of the country’s Gross Domestic Product (GDP), a figure that notably excluded the manufacturing sectors associated with mineral commodities such as cement production and petroleum refining. This distinction highlights the relatively modest direct contribution of raw mineral extraction to the national economy at that time, despite the broader economic influence of mineral-related manufacturing activities. The mining sector’s limited share of GDP reflected both the scale of mineral resource exploitation and the stage of development of mining operations within the country. It also underscored the potential for growth in this sector, given Panama’s rich mineral endowments and strategic geographic location. One of the most significant mining operations in Panama was the Petaquilla gold mine, which had garnered attention for its potential to contribute substantially to the country’s mineral output. However, this mine was ultimately abandoned following a ruling that declared its operations unconstitutional. The legal challenges surrounding Petaquilla underscored the complex regulatory and environmental considerations inherent in Panama’s mining industry. The ruling not only halted production but also signaled broader issues related to land rights, environmental protection, and community consent, which have historically influenced the viability and sustainability of mining projects in the region. The cessation of activities at Petaquilla represented a setback for the sector, illustrating how legal and operational difficulties can impede mining development despite the presence of valuable mineral resources. In contrast to the challenges faced by Petaquilla, the operations of Cobre Panama have had a markedly positive impact on the mining sector’s contribution to the national economy. As a major copper mining project, Cobre Panama has significantly increased the percentage of Panama’s GDP attributed to mining activities in recent years. This rise reflects the project’s scale and its role as one of the largest copper mines in the Americas, which has attracted substantial investment and generated considerable export revenues. The success of Cobre Panama has demonstrated the economic importance of copper extraction to Panama, positioning the country as a notable player in the global copper market. The project’s development has also stimulated ancillary industries, infrastructure improvements, and employment opportunities, thereby amplifying its broader economic effects beyond direct mineral production. The dynamic nature of Panama’s mining industry necessitates continual updates to reflect recent developments and newly available information. As of April 2024, there is a recognized need to incorporate the latest data concerning the status of the Petaquilla mine and to further analyze the evolving economic impact of Cobre Panama. These updates would provide a more comprehensive understanding of the sector’s current state, including any legal resolutions, operational changes, or shifts in production levels. Additionally, integrating recent environmental and social considerations would offer a fuller picture of the mining industry’s role within Panama’s economy and society. The ongoing evolution of mining activities underscores the importance of maintaining accurate and current information to assess the sector’s contribution and challenges effectively. Historical context for Panama’s economic activities, including mining, is provided by an economic activity map from 1981, which illustrates the distribution and significance of various sectors across the country at that time. This map serves as a valuable reference point for understanding the spatial and economic landscape in which mining developed. It reveals the geographic concentration of mining operations and their relative importance compared to other economic activities such as agriculture, manufacturing, and services. By examining this historical data, one can trace the progression of Panama’s mining industry from a peripheral contributor to a more prominent economic force, especially with the emergence of large-scale projects like Cobre Panama. The 1981 economic activity map thus offers essential background for analyzing the sector’s growth trajectory and its integration within the broader national economy.

The real estate industry in the Republic of Panama has long been heavily reliant on foreign investment, which emerged as a significant catalyst for growth beginning in 2006. This influx of international capital played a pivotal role in stimulating both the national economy and the housing market, fostering rapid development in urban and suburban areas. Foreign investors, attracted by Panama’s strategic geographic location, favorable tax policies, and relatively stable political environment, contributed to a surge in construction projects ranging from residential condominiums to commercial real estate and luxury developments. The expansion fueled by these investments not only generated employment opportunities within construction and related sectors but also enhanced Panama’s appeal as a regional hub for real estate investment, further reinforcing the industry’s positive feedback loop of growth and development. Despite the notable expansion of Panama’s economy and the housing sector, poverty has remained a persistent and critical issue within the country. Indigenous populations, in particular, have continued to experience extreme poverty, with many communities living under conditions that severely limit access to basic necessities. These indigenous groups, scattered primarily throughout rural and remote regions, face systemic socioeconomic challenges that hinder their ability to benefit from the broader economic advancements seen in urban centers. Likewise, a significant proportion of rural inhabitants endure basic poverty, characterized by insufficient income and limited access to essential services. The disparity between the booming real estate markets in metropolitan areas and the impoverished conditions in rural and indigenous regions underscores the uneven distribution of economic gains across Panama’s diverse population. The poor living conditions prevalent among these vulnerable groups are exacerbated by inadequate access to essential services that directly impact housing quality and overall living standards. Many households, particularly in indigenous and rural communities, lack reliable sanitation infrastructure, which increases exposure to health hazards and environmental contamination. Similarly, inconsistent or absent electricity supply limits opportunities for economic advancement and diminishes quality of life. Access to clean water remains a critical challenge, with many residents relying on unsafe water sources that contribute to waterborne diseases. Healthcare and education services are also insufficiently available or of low quality in these areas, compounding the difficulties faced by impoverished populations and limiting their capacity to improve their living conditions. The cumulative effect of these deficiencies has perpetuated cycles of poverty and hindered broader social and economic development within Panama. Recognizing the importance of foreign investment for sustained economic growth, the Panamanian government has implemented protective legislation designed to stimulate real estate projects and infrastructure development while safeguarding the rights of both foreign and domestic investors. These legal frameworks aim to provide a secure and transparent environment for investment, thereby enhancing confidence among international stakeholders. Measures include clear regulations governing property ownership, streamlined processes for land acquisition, and guarantees against arbitrary expropriation. Additionally, the government has promoted incentives such as tax exemptions and simplified bureaucratic procedures to attract further capital inflows into the real estate sector. This legislative approach reflects Panama’s strategic intent to position itself as an attractive destination for real estate development, balancing investor protections with national economic interests. However, the real estate market in Panama has also been affected by issues of corruption, which have complicated efforts to maintain transparency and integrity within the sector. Allegations have surfaced regarding the use of drug trafficking profits and money laundering activities to finance real estate developments, raising concerns about the infiltration of illicit funds into the legitimate economy. Panama’s geographic location as a key transit point for narcotics and its status as an international financial center have made it vulnerable to such criminal financial flows. These illicit activities not only distort the real estate market by inflating property values and skewing investment patterns but also undermine governance and regulatory frameworks. Efforts to combat corruption and financial crimes have included increased regulatory oversight, enhanced due diligence requirements, and cooperation with international anti-money laundering initiatives, yet challenges persist in fully eradicating these influences. Panama employs a system of publicly recorded titled deeds to establish and verify real estate ownership, a practice that closely resembles the systems used in the United States and Canada. This deed registration system provides a formal mechanism for documenting property rights, thereby offering legal certainty to owners and investors. By maintaining public records of transactions, liens, and encumbrances, the system facilitates transparency and reduces disputes over ownership. The registration process involves the submission of deeds to a centralized public registry, where they are indexed and made accessible for verification by interested parties. This approach has been instrumental in supporting the growth of the real estate market by providing a reliable legal foundation for property transactions and investment. In addition to the formal titled deed system, Panama has a distinctive Rights of Possession framework that allows individuals to occupy and improve unused government land, thereby establishing certain usage rights even in the absence of formal title. Under this system, occupants who demonstrate continuous and productive use of land—such as through cultivation, construction, or other improvements—may acquire legal recognition of their possession rights over time. This mechanism has historically provided a pathway for land tenure security to marginalized populations who might otherwise be excluded from formal property ownership due to economic or bureaucratic barriers. The Rights of Possession system reflects Panama’s pragmatic approach to land management, accommodating informal settlement patterns while offering a degree of protection to occupants. Nonetheless, the lack of formal title can limit access to credit and complicate legal transactions, highlighting ongoing challenges in integrating informal land tenure into the broader real estate framework.

Taxation in Panama is principally governed by the Fiscal Code, which establishes the legal framework for the country’s tax system. The Panamanian tax regime operates on a territorial basis, meaning that taxation is applied exclusively to income or gains that are derived from business activities conducted within the geographical boundaries of Panama. This territorial principle ensures that income generated from foreign sources remains outside the scope of Panamanian taxation, thereby exempting activities and earnings that occur beyond its borders. Consequently, businesses and individuals are only liable for taxes on profits and revenues that have a direct connection to economic operations physically carried out in Panama. This territorial approach to taxation has specific implications for the presence of multinational companies and international trade operations within Panama. For instance, the mere existence of a sales or administrative office in Panama does not automatically subject a company to Panamanian taxes if the underlying commercial transactions take place outside the country. Similarly, the practice of re-invoicing external transactions at a profit within Panama does not, by itself, trigger tax obligations under Panamanian law unless the actual business activities generating the income occur domestically. This distinction helps maintain Panama’s status as an attractive hub for international commerce and finance, particularly for companies engaged in cross-border trade and logistics. In line with the territorial tax system, dividends paid out of earnings generated from activities conducted outside Panama are exempt from taxation. This exemption applies regardless of whether the dividends are distributed to domestic or foreign shareholders, providing a significant incentive for investment and capital repatriation. The policy effectively encourages foreign investment by allowing profits earned abroad to be repatriated without additional tax burdens, reinforcing Panama’s role as a regional financial center and a conduit for international capital flows. This exemption on foreign-sourced dividends aligns with the broader territorial tax principle and contributes to the country’s competitive business environment. In February 2005, Panama’s unicameral legislature undertook a major fiscal reform effort aimed at enhancing government revenues and addressing fiscal challenges. The reform package comprised a series of measures designed to increase tax collection by introducing new business taxes and raising the country’s allowable debt level. The legislative process culminated in a vote that saw 46 members of the National Assembly in favor of the reforms, while 28 voted against, reflecting a significant but not unanimous consensus on the need for fiscal adjustment. This reform marked a pivotal moment in Panama’s economic policy, as it sought to balance the need for increased public resources with the maintenance of a business-friendly tax environment. Among the key components of the 2005 fiscal reform was the introduction of a new tax set at 1.4% on companies’ gross revenues. Unlike income taxes that target net profits, this gross revenue tax applied to the total income generated by businesses before deducting expenses. This measure was intended to broaden the tax base and ensure a more stable revenue stream for the government, particularly from sectors with substantial turnover but potentially lower profit margins. The imposition of this tax represented a shift toward capturing value from business activity at an earlier stage in the revenue cycle, thereby enhancing fiscal sustainability. In addition to the general gross revenue tax, the reform package included a specific levy targeting firms operating within the Colón Free Trade Zone. Recognized as the largest free port in the Americas, the Colón Free Trade Zone plays a critical role in Panama’s economy by facilitating international trade and re-export activities. The reform introduced a 1% tax on companies within this zone, a measure designed to generate additional government revenue from a sector that had previously enjoyed significant tax advantages. By imposing this levy, the government aimed to balance the benefits of the free trade zone’s economic activity with the need to contribute to public finances, reflecting a nuanced approach to taxation within one of Panama’s most strategically important commercial areas.

President Ricardo Martinelli initially pledged to overhaul Panama’s tax system by introducing a flat tax structure with a uniform rate of 10 percent. This proposal was designed to simplify the tax code, enhance government revenue collection, and create a more predictable fiscal environment conducive to economic growth. The flat tax was also intended to help control inflationary pressures by stabilizing government income streams while simultaneously enabling significant real wage growth for Panamanian workers. By reducing the complexity and variability of tax rates, the Martinelli administration aimed to stimulate investment and consumption, thereby fostering broader economic development. However, the administration ultimately diverged from this initial commitment and implemented a series of tax increases instead. Rather than adopting the flat tax system, the Martinelli government raised the general sales tax rate from 5 percent to 7 percent. This adjustment marked a substantial increase in indirect taxation and was part of a broader fiscal strategy to generate additional revenue. In addition to the sales tax hike, other forms of taxation were also increased to provide the necessary funding for an ambitious agenda of infrastructure projects across Panama. These projects included improvements to transportation networks, public utilities, and urban development initiatives aimed at supporting the country’s rapid economic expansion and urbanization. The current Value Added Tax (VAT) framework in Panama reflects a differentiated rate structure tailored to various categories of goods and services. The standard VAT rate stands at 7 percent, which applies broadly to most taxable transactions within the economy. However, certain goods and services are subject to higher or lower rates depending on their nature and perceived social impact. Tobacco products, for instance, are taxed at a significantly elevated rate of 15 percent, reflecting public health considerations and efforts to discourage consumption. Alcoholic beverages and hotel services attract a 10 percent VAT rate, which balances revenue generation with the promotion of tourism and hospitality industries. Essential goods, recognized for their critical role in everyday consumption and social welfare, benefit from a reduced VAT rate of 5 percent to mitigate the tax burden on lower-income households and maintain affordability. In terms of direct taxation, Panama’s corporate tax rate is set at 25 percent. This rate applies uniformly to the profits of companies operating within the country, positioning Panama competitively within the regional tax landscape while ensuring a steady contribution from the corporate sector to public finances. Regarding personal income taxation, the highest marginal tax rate applicable to individuals is 27 percent. This top rate is levied on the upper brackets of income earners, reflecting a progressive approach to income taxation designed to balance equity and revenue needs. Together, these tax policies form the backbone of Panama’s fiscal framework, supporting government expenditures and economic development objectives while navigating the complex trade-offs inherent in tax policy design.

The Republic of Panama has long been recognized as one of the oldest and most prominent tax havens in the Caribbean region, establishing a well-entrenched presence in this capacity over the course of the twentieth century. Its emergence as a tax haven dates back to the early 1900s, a period during which Panama began to develop legal and financial frameworks that attracted foreign capital seeking favorable tax treatment and confidentiality. This early adoption of offshore financial services positioned Panama as a pivotal jurisdiction in the global landscape of tax avoidance, drawing businesses and individuals aiming to minimize their tax liabilities through the use of Panamanian corporate entities and banking facilities. Over time, Panama’s tax haven status became deeply embedded in its economic structure, contributing significantly to the country’s financial sector and overall economic growth. Since its inception as a tax haven, Panama has maintained a reputation for facilitating tax avoidance on an international scale. The country’s legal environment, characterized by strict banking secrecy laws and lenient regulatory oversight, provided an attractive environment for the incorporation of shell companies, trusts, and other offshore vehicles. These mechanisms allowed foreign investors and corporations to shield assets, obscure ownership, and reduce tax burdens in their home countries. Panama’s strategic geographic location, coupled with its dollarized economy and stable political environment, further enhanced its appeal as a jurisdiction conducive to tax planning and avoidance strategies. Throughout the twentieth century and into the twenty-first, Panama’s role in global tax avoidance practices remained significant, with its financial institutions and corporate service providers playing a central role in facilitating cross-border financial flows designed to exploit gaps and mismatches in international tax systems. In recent years, however, Panama’s position as a tax haven has attracted increased scrutiny from the international community, particularly in relation to tax transparency and regulatory cooperation. The country has been repeatedly cited by various international organizations and watchdogs as a jurisdiction that does not fully cooperate with global tax transparency initiatives. These concerns intensified following high-profile leaks such as the Panama Papers in 2016, which exposed widespread use of Panamanian entities for tax evasion, money laundering, and other illicit financial activities. Despite efforts by the Panamanian government to improve regulatory standards and comply with international norms, including signing agreements on the automatic exchange of tax information, Panama continues to face criticism for perceived shortcomings in enforcement and transparency. This ongoing tension underscores the challenges Panama faces in balancing its economic reliance on offshore finance with mounting international pressure to adhere to stricter tax compliance and anti-money laundering standards. The offshore financial sector in Panama is intricately linked to the Panama Canal, a critical maritime passage that serves as a strategic gateway and entrepôt for international trade. The canal’s significance as a global shipping route enhances Panama’s role in global commerce and finance, creating synergies between its maritime and financial services sectors. The presence of the canal facilitates the movement of goods and capital, attracting shipping companies, freight forwarders, and multinational corporations to establish operations in Panama. This integration of maritime logistics and offshore finance has reinforced Panama’s status as a hub for international business, where the facilitation of global trade is complemented by the availability of sophisticated financial and corporate services. The canal’s economic importance thus extends beyond transportation, contributing to the broader ecosystem that supports Panama’s tax haven activities. The economic and operational characteristics of Panama’s tax haven status exhibit strong similarities to other prominent offshore financial centers such as Hong Kong, Singapore, and Dubai. Like these jurisdictions, Panama offers a combination of low or zero taxation on certain types of income, robust legal frameworks for corporate secrecy, and a business-friendly regulatory environment. These features attract a diverse range of international clients seeking to optimize their tax positions, protect assets, and conduct cross-border transactions with minimal regulatory interference. Additionally, Panama’s infrastructure, including its banking system, legal services, and corporate registries, parallels those of other leading tax havens, providing efficient mechanisms for the creation and management of offshore entities. The convergence of these factors places Panama within a global network of financial centers that compete to offer favorable conditions for wealth management and tax planning, each leveraging unique geographic and economic advantages. According to the Tax Justice Network, Panama officially holds the distinction of having the largest shipping fleet in the world on paper, surpassing even the combined fleets of the United States and China. This remarkable statistic highlights Panama’s dominant position in maritime registration, where a substantial portion of the world’s commercial vessels are registered under the Panamanian flag. The practice of “flagging” ships in Panama is driven by the country’s lenient regulatory requirements, low registration fees, and favorable tax treatment for shipowners. This extensive maritime registry not only underscores Panama’s significant presence in the global shipping industry but also reinforces its offshore financial prominence, as many shipping companies utilize Panamanian corporate structures to manage their fleets. The scale of Panama’s maritime fleet exemplifies the country’s strategic integration of shipping and offshore finance, positioning it as a critical node in international trade and financial networks.

Panama City is served by six major highways that form the backbone of its road transportation network. These include the Panama-Arraijan Bridge of the Americas, which spans the Pacific entrance of the Panama Canal and connects the city to the western suburbs. Complementing this is the Panama-Arraijan Centennial Bridge, a more recent addition designed to alleviate congestion on the Bridge of the Americas by providing an alternative route across the canal. The Arraijan-Chorrera highway extends westward, linking the city with the rapidly growing towns of Arraijan and La Chorrera, facilitating commuter and commercial traffic. Within the metropolitan area, the Corredor Norte and Corredor Sur highways serve as vital expressways that enable faster travel across the northern and southern sectors of Panama City, respectively. The Autopista Panama-Colon highway is a crucial corridor that connects Panama City to the northern port city of Colón, supporting both passenger and freight movement across the country. The overall safety of Panama’s roadways, traffic, and transportation systems has been regarded as generally good, reflecting ongoing efforts to modernize and regulate traffic management. One significant improvement has been the recent overhaul of older traffic light systems, which were often outdated and prone to malfunction. These have been replaced by advanced, remotely controllable traffic lights, even at busy intersections where such remote operation is not strictly necessary. This modernization has enhanced traffic flow control and allowed for more responsive management of congestion and incidents. The implementation of these technologies demonstrates Panama’s commitment to improving urban mobility and reducing road accidents. Despite these advancements, midday driving in Panama City remains a challenging experience due to the dense traffic conditions that prevail during peak hours. Frequent traffic jams are a common occurrence, exacerbated by the city’s rapid urban growth and the limitations of its existing infrastructure. Additionally, ongoing street renovation programs aimed at upgrading and expanding roadways often contribute to congestion by temporarily reducing available lanes and rerouting traffic. These factors combine to create slow-moving traffic that demands patience from drivers and complicates daily commutes across the city. Night driving in Panama City presents its own set of difficulties and is often subject to restrictions imposed by local authorities. Areas with poor street lighting and hazardous road conditions, particularly within informal settlements or less developed neighborhoods, are considered especially dangerous after dark. In these zones, night travel is frequently discouraged or outright restricted to minimize the risk of accidents and crime. The lack of adequate lighting and road maintenance in such areas poses significant challenges for drivers, making nighttime travel risky and less accessible for residents and visitors alike. Traffic in Panama adheres to the right-hand side of the road, consistent with traffic regulations in many countries worldwide. Panamanian law mandates the use of seat belts for both drivers and passengers, reflecting the country’s efforts to promote road safety and reduce fatalities and injuries resulting from traffic accidents. Enforcement of these regulations is carried out by traffic authorities, who monitor compliance to ensure that vehicle occupants observe these safety measures. Historically, Panama boasted an extensive and efficient public transportation system that was notably characterized by its colorful and uniquely decorated buses known as diablo rojo (literally “red devil”). These buses were a ubiquitous feature of Panama’s urban and interurban transit landscape, especially throughout Panama City and its neighboring towns. The diablo rojo buses were renowned for their vibrant paint jobs and artistic designs, often featuring bright colors and images depicting famous actors, politicians, singers, or cultural icons. This customization extended beyond mere aesthetics; drivers took pride in personalizing both the interior and exterior of their vehicles, creating a distinctive and lively atmosphere for passengers. The popularity of the diablo rojo buses stemmed not only from their eye-catching appearance but also from their role as an affordable and accessible means of transportation for many Panamanians. They served as a critical link connecting various parts of the city and surrounding areas, facilitating daily commutes and contributing to the city’s social and economic vibrancy. However, the informal nature of their operation and concerns about safety, traffic congestion, and pollution led to increasing scrutiny by municipal authorities. Panama City’s streets have frequently experienced traffic jams, a problem largely attributed to poor urban planning. The rapid urbanization and population growth have outpaced the development of adequate infrastructure, resulting in bottlenecks and inefficient traffic distribution. Narrow streets, limited public transportation options, and the proliferation of private vehicles have compounded these issues, making traffic congestion a persistent challenge for city planners and residents alike. In response to these challenges, significant regulatory changes were implemented starting in 2010, which included the prohibition of diablo rojo buses from operating within Panama City except for recreational purposes. This move was part of a broader effort to modernize the city’s public transportation system, reduce traffic congestion, and improve safety standards. The ban effectively ended the era of the diablo rojo as a primary mode of public transit in the capital, marking a shift toward more regulated and standardized transportation services. Currently, the only available public transportation methods in Panama City are the Metrobus and the Metro system. The Metrobus is a fleet of modern buses operating on fixed routes throughout the metropolitan area, offering an organized and reliable alternative to the informal bus networks of the past. Meanwhile, the Panama Metro, inaugurated in 2014, represents the city’s first rapid transit system and has significantly transformed urban mobility. The Metro provides fast, efficient, and environmentally friendly transportation, reducing reliance on road-based vehicles and helping to alleviate traffic congestion. Together, these systems constitute the backbone of Panama City’s current public transportation infrastructure, reflecting ongoing efforts to enhance urban transit and improve the quality of life for its residents.

The economic indicators of Panama from 1980 through 2019, supplemented by International Monetary Fund (IMF) staff estimates for the period 2020 to 2026, provide a comprehensive overview of the country’s economic trajectory over nearly five decades. These indicators encompass gross domestic product (GDP) measured in both purchasing power parity (PPP) and nominal terms, GDP per capita, real GDP growth rates, inflation rates, unemployment figures, and government debt expressed as a percentage of GDP. This extensive dataset enables a nuanced understanding of Panama’s economic performance, structural changes, and fiscal health across varying global and domestic contexts. Inflation rates throughout this period reveal distinct patterns, with levels below 5% highlighted to denote relatively low inflationary environments. Most years exhibited such moderate inflation, signifying effective monetary management and price stability. Exceptions to this trend occurred during the early 1980s and the years 2007 to 2008, when inflation rates exceeded this threshold. These intervals corresponded to periods of economic adjustment and external shocks that temporarily disrupted price stability. In 1980, Panama’s GDP in PPP terms stood at 7.0 billion US dollars, with a GDP per capita of 3,530.8 US dollars PPP. The nominal GDP was recorded at 4.1 billion US dollars, translating to a nominal GDP per capita of 2,071.0 US dollars. The economy experienced real GDP growth of 4.5%, indicating moderate expansion. Inflation during this year was relatively high at 13.8%, reflecting price pressures possibly linked to global economic conditions or domestic fiscal policies. Unemployment was measured at 8.4%, suggesting a moderate level of labor market slack. Data on government debt for this year were not available, limiting insights into fiscal leverage at that time. Throughout the 1980s, Panama’s economic growth exhibited considerable volatility. Real GDP growth rates fluctuated, with notable contractions occurring in 1983, when the economy shrank by 4.5%, and in 1987, which saw a decline of 1.8%. The most severe downturn occurred in 1988, with a sharp GDP contraction of 13.4%. These negative growth episodes likely reflected internal political instability, external economic pressures, or structural adjustments within the Panamanian economy. Conversely, inflation rates during this decade declined significantly from the elevated 13.8% observed in 1980 to below 2% by the mid-1980s, indicating successful containment of inflationary pressures despite the economic turbulence. Unemployment rates, however, increased steadily throughout the decade, peaking at 18.9% in 1989, highlighting growing challenges in the labor market. Government debt data remain unavailable for this period, which constrains a full assessment of fiscal policy and indebtedness during these years. The 1990s marked a period of more stable and steady economic growth for Panama. Real GDP growth rates ranged from a low of 1.8% to a high of 9.4%, reflecting a generally positive economic environment. Inflation rates during this decade were mostly subdued, remaining below 2% for the majority of the years, which contributed to macroeconomic stability. Unemployment rates exhibited a gradual decline, falling from 16.7% in 1990 to 9.5% by 1999, signaling improvements in the labor market and economic conditions. Government debt as a percentage of GDP was first reported in 1994 at a relatively high level of 81.2%. However, fiscal consolidation efforts and economic growth contributed to a steady decline in this ratio throughout the decade, reaching 57.4% by 1999. This reduction in debt burden enhanced Panama’s fiscal sustainability and creditworthiness. Between 2000 and 2007, Panama experienced rapid economic expansion. The GDP in PPP terms increased significantly from 25.3 billion US dollars in 2000 to 45.2 billion US dollars in 2007. Real GDP growth rates during this period were robust, culminating in a peak of 12.1% growth in 2007, underscoring the dynamism of the Panamanian economy. Inflation rates remained generally low and stable, mostly under 5%, with a recorded rate of 4.2% in 2007. Unemployment rates improved markedly, decreasing from 13.5% in 2000 to 6.4% in 2007, reflecting strong job creation and economic vitality. Concurrently, government debt as a percentage of GDP declined significantly from 55.8% in 2000 to 49.4% in 2007, indicating prudent fiscal management amid rapid growth. Nominal GDP per capita, measured in balboas or US dollars, demonstrated steady increases during the early 2000s. According to data from the Office of Statistics and Census of the Government of Panama, nominal GDP per capita was reported as 11,691 in 2002, rising to 13,099 in 2004. Preliminary figures indicated further growth to 14,004 in 2005, with an estimated 15,141.9 in 2006. These increments reflect rising income levels and improved standards of living within the country during this period. The transport and communications sector experienced particularly strong growth from 2002 to 2006, emerging as the largest component of Panama’s GDP. This expansion was driven by increased investment in infrastructure, enhanced connectivity, and the strategic importance of Panama as a regional logistics hub. Other sectors also exhibited robust growth, contributing to the overall economic expansion. Real GDP growth rates during 2003 to 2006 were notably high, with annual increases of 7.5% (2003–04), 6.9% (2004–05), and 8.1% (2005–06), underscoring the sustained momentum across multiple industries. In 2008, Panama’s economic growth moderated slightly, with GDP expanding by 9.2%, down from 11.5% in 2007. The global economic downturn, precipitated by the financial crisis, impacted the country, leading to a further slowdown in the first half of 2009 when growth contracted to 2.4%. Despite this deceleration, Panama’s economy was expected to rebound in 2010, maintaining one of the strongest growth rates in the Latin American region. The growth during this period was primarily driven by sectors such as construction, transportation, port activities, operations related to the Panama Canal, and tourism, all of which benefited from both domestic demand and international trade flows. Fiscal indicators during this time reflected improving government finances. The government deficit as a percentage of GDP declined to 43% in 2009, signaling enhanced fiscal discipline amid challenging economic conditions. Moreover, Panama’s government-issued debt attained investment grade status in February 2010, marking a significant milestone in the country’s creditworthiness and facilitating access to international capital markets at favorable terms. A United Nations report highlighted notable social progress in Panama between 2001 and 2007. Overall poverty rates declined from 37% to 29%, while extreme poverty decreased more substantially from 19% to 12%. These improvements were attributed to sustained economic growth, targeted social policies, and increased employment opportunities. However, despite these gains, Panama continued to exhibit one of the most unequal income distributions in Latin America, ranking second in terms of income inequality. This persistent disparity underscored ongoing challenges in achieving inclusive growth and equitable wealth distribution. From 2010 to 2019, Panama’s GDP in PPP terms expanded markedly from 55.2 billion US dollars to 139.1 billion US dollars. Correspondingly, GDP per capita rose from 15,076.0 to 32,973.2 US dollars PPP, reflecting significant improvements in average income levels. Real GDP growth rates during this decade exhibited variability, with peaks such as 11.3% in 2011 and lows like 1.2% in 2009, the latter reflecting the lingering effects of the global financial crisis. Inflation remained predominantly below 5%, with exceptions including 5.9% in 2011 and a higher rate of 8.8% recorded in 2008. Unemployment rates during this period generally remained low compared to earlier decades, decreasing from 6.5% in 2010 to 7.1% in 2019, though some fluctuations were observed. Government debt as a percentage of GDP remained relatively stable, fluctuating between 35.6% and 42.2%, indicating consistent fiscal management. IMF staff projections for the period 2020 to 2026 anticipate continued economic growth for Panama. GDP in PPP terms is expected to increase from 115.5 billion US dollars in 2020 to 191.9 billion US dollars by 2026. Nominal GDP per capita is forecasted to rise from 12,373.0 US dollars in 2020 to 18,326.5 US dollars in 2026, reflecting ongoing improvements in living standards. Real GDP growth is projected to stabilize at approximately 5.0% annually from 2022 onwards, signaling sustained economic dynamism. Inflation rates are expected to remain around 2.0% during the 2022 to 2026 period, indicating continued price stability. Unemployment is projected to hold steady at approximately 8.9%, while government debt as a percentage of GDP is anticipated to gradually decline from 66.3% in 2020 to 55.4% in 2026, reflecting ongoing fiscal consolidation efforts. The year 2020 witnessed a sharp economic contraction in Panama, with real GDP declining by 17.9%, a reflection of the profound impact of the COVID-19 pandemic on economic activity. Inflation turned negative at -1.6%, indicating deflationary pressures, while unemployment surged to 18.5%, highlighting severe disruptions in the labor market. Recovery commenced in 2021, with GDP growth rebounding to 12.0%, inflation moderating to 1.4%, and unemployment decreasing to 10.2%. Government debt as a percentage of GDP stood at 62.2% in 2021, reflecting the fiscal costs associated with pandemic-related support measures. Overall, the economic data for Panama from 1980 through the projected period of 2026 illustrate a trajectory marked by periods of volatility and resilience, culminating in significant expansion, poverty reduction, and the stabilization of key macroeconomic indicators. The country’s evolution reflects the interplay of internal policy decisions, external economic conditions, and structural transformations that have shaped its economic landscape over the past four decades.