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Economy of Panama

Panama's economy is based primarily on a well-developed services sector that accounts for nearly 70% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, tourism, and medical and healthcare.

In October 2006, Panamanians voted overwhelmingly in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to be completed in 2014. The Government of Panama expects the project to be a transforming event for Panama that will provide 7,000-9,000 direct new jobs during the peak construction period of 2009-2011 and increase economic opportunities for years to come. The expansion is financed through a combination of loans from multilateral institutions and current revenues. In July 2009, the Panama Canal Authority (ACP) awarded the contract to build the locks to an international consortium led by Spain’s Sacyr Vallehermoso. The locks will be 60% wider and 40% longer than the existing locks so the Canal can handle all but eight of the world’s container vessels, along with supersize tankers and bulk carriers of ores and grains.

GDP growth in 2009 was 2.4%, reflecting a slowing of the robust growth of 11.0% seen in 2008. Although growth slowed in 2009, due to the global economic downturn, it has improved in 2010 and is still one of the most positive growth rates in the region. Growth has been fueled by the construction, transportation, maritime, and tourism sectors and Panama Canal-related activities. As a result of this growth, government deficit as a percentage of GDP dropped to 43% in 2009, and government-issued debt is classified as the lowest rung of investment grade. A recent United Nations report highlighted progress in poverty reduction from 2001 to 2007--overall poverty fell from 37% to 29%, and extreme poverty fell from 19% to 12%.

Panama has bilateral free trade agreements (FTAs) in force with Chile, El Salvador, Taiwan, Singapore, Guatemala, Honduras, Nicaragua, and Costa Rica. Panama signed an FTA with Canada in May 2010, but it has not yet entered into force. Panama is exploring free trade negotiations with Mexico, Colombia, the Mercosur countries, the Andean Community, the European Union, and CARICOM. The U.S. and Panama signed a Trade Promotion Agreement (TPA) in June 2007. The agreement was overwhelmingly approved in July 2007 by the Panamanian National Assembly, but has yet to be ratified by the United States Congress. Once implemented, the agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services and will provide a framework for any trade disputes.

GDP (2008 est.): $25.04 billion.
Annual growth rate: 5.6% (2010 projected); 2.4% (2009); 11% (2008); 12% (2007).
Per capita GDP: $11,900 (2009 est., purchasing power parity); $10,900 (2007); $9,900 (2006).
Natural resources: Timber, copper, gold.
Services (67% of GDP): Finance, insurance, health and medical, transportation, telecommunications, Canal and maritime services, tourism, Colon Free Zone, public administration, and general commerce.
Agriculture (6.2% of GDP): Products--bananas, corn, sugarcane, rice, coffee, shrimp, timber, vegetables, livestock.
Industry/manufacturing (14.2% of GDP): construction, brewing, cement and other construction materials, sugar milling.
Trade (2009): Exports (goods)--$821 million in exports, with salmon/tuna as the largest dollar amount, followed by beef, watermelon, shrimp, and pineapples. Export partners (as a percentage of total export value in 2009)--U.S. 42%, China (P.R.C.) and Taiwan 5.3%, Costa Rica 7.3%, Sweden 5.4%, Netherlands 6.5%, Spain 6.2%. Imports (goods)--$7.8 billion was imported in 2009: petrol and fuel oils capture the largest percentage by weight (21%) and in dollar amount (8.5%). Capital goods, foodstuffs, chemicals, and consumer and intermediate goods are the remaining imports. Import partners (2009)--the top five countries include the U.S. 29%, Costa Rica 5.2%, Mexico 4.5%, China 4.2%, and Japan 3.6%. U.S. exports to Panama (2009)--$4.3 billion: primarily oil and capital- and technology-intensive manufactured goods. Panama exports to U.S. (2009)--$350 million: primarily seafood and repaired goods.
Foreign direct investment (2009): $1.8 billion.

Geography of Panama

Location: Middle America, bordering both the Caribbean Sea and the North Pacific Ocean, between Colombia and Costa Rica Map references: Central America and the Caribbean Area: total area: 78,200 sq km land area: 75,990 sq km comparative area: slightly smaller than South Carolina Land boundaries: total 555 km, Colombia 225 km, Costa Rica 330 km Coastline: 2,490 km Maritime claims: territorial sea: 200 nm International disputes: none Climate: tropical; hot, humid, cloudy; prolonged rainy season (May to January), short dry season (January to May) Terrain: interior mostly steep, rugged mountains and dissected, upland plains; coastal areas largely plains and rolling hills Natural resources: copper, mahogany forests, shrimp Land use: arable land: 6% permanent crops: 2% meadows and pastures: 15% forest and woodland: 54% other: 23% Irrigated land: 320 sq km (1989 est.) Environment: current issues: water pollution from agricultural runoff threatens fishery resources; deforestation of tropical rain forest; land degradation natural hazards: NA international agreements: party to - Biodiversity, Endangered Species, Hazardous Wastes, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Wetlands; signed, but not ratified - Climate Change, Law of the Sea, Marine Life Conservation, Tropical Timber 94 Note: strategic location on eastern end of isthmus forming land bridge connecting North and South America; controls Panama Canal that links North Atlantic Ocean via Caribbean Sea with North Pacific Ocean

Government of Panama

GOVERNMENT AND POLITICAL CONDITIONS Panama is a representative democracy with three branches of government: executive and legislative branches elected by direct vote for 5-year terms, and an appointed judiciary. The judicial branch is organized under a nine-member Supreme Court (each judge is appointed for a 10-year term) and includes all tribunals and municipal courts. An autonomous Electoral Tribunal supervises voter registration, the election process, and the activities of political parties. Anyone over the age of 18 may vote. Principal Government Officials President--Ricardo MARTINELLI Vice President--Juan CARLOS Varela Ministry of Foreign Affairs--Juan CARLOS Varela Ambassador to the United States--Jaime E. ALEMAN Ambassador to the Organization of American States--Guillermo COCHEZ Panama maintains an embassy in the United States at 2862 McGill Terrace, NW, Washington, DC 20008 (tel: 202-483-1407), and consulates in Washington DC, Honolulu, Houston, Miami, New Orleans, New York, Philadelphia, San Juan, San Diego, and Tampa.

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History of Panama

Panama's history has been shaped by the evolution of the world economy and the ambitions of great powers. The earliest known inhabitants of Panama were the Cuevas and the Coclé tribes, but they were decimated by disease and fighting when the Spanish arrived in the 1500s. Rodrigo de Bastidas, sailing westward from Venezuela in 1501 in search of gold, was the first European to explore the Isthmus of Panama. A year later, Christopher Columbus visited the Isthmus and established a short-lived settlement in the Darien. Vasco Nunez de Balboa's tortuous trek from the Atlantic to the Pacific in 1513 demonstrated that the Isthmus was, indeed, the path between the seas, and Panama quickly became the crossroads and marketplace of Spain's empire in the New World. Gold and silver were brought by ship from South America, hauled across the Isthmus, and loaded aboard ships for Spain. The route became known as the Camino Real, or Royal Road, although it was more commonly known as Camino de Cruces (Road of the Crosses) because of the abundance of gravesites along the way. Panama was part of the Spanish empire for 300 years (1538-1821). From the outset, Panamanian identity was based on a sense of "geographic destiny," and Panamanian fortunes fluctuated with the geopolitical importance of the Isthmus. The colonial experience also spawned Panamanian nationalism as well as a racially complex and highly stratified society, the source of internal conflicts that ran counter to the unifying force of nationalism. Building the Canal Modern Panamanian history has been shaped by its transisthmian canal, which had been a dream since the beginning of Spanish colonization. From 1880 to 1890, a French company under Ferdinand de Lesseps attempted unsuccessfully to construct a sea-level canal on the site of the present Panama Canal. In November 1903, with U.S. encouragement, Panama proclaimed its independence and concluded the Hay/Bunau-Varilla Treaty with the United States. The treaty granted rights to the United States "as if it were sovereign" in a zone roughly 10 miles wide and 50 miles long. In that zone, the U.S. would build a canal, then administer, fortify, and defend it "in perpetuity." In 1914, the United States completed the existing 83-kilometer (52 mile) canal, which is one of the world's greatest feats of engineering. The early 1960s saw the beginning of sustained pressure in Panama for the renegotiation of this treaty. Military Coups and Coalitions From 1903 until 1968, Panama was a constitutional democracy dominated by a commercially oriented oligarchy. During the 1950s, the Panamanian military began to challenge the oligarchy's political hegemony. In October 1968, Dr. Arnulfo Arias Madrid, twice elected president and twice ousted by the Panamanian military, was ousted for a third time as president by the National Guard after only 10 days in office. A military government was established, and the commander of the National Guard, Brigadier General Omar Torrijos, soon emerged as the principal power in Panamanian political life. Torrijos' regime was harsh and corrupt, but his charisma, populist domestic programs, and nationalist (anti-U.S.) foreign policy appealed to the rural and urban constituencies largely ignored by the oligarchy. Torrijos' death in 1981 altered the tone but not the direction of Panama's political evolution. Despite the 1983 constitutional amendments, which appeared to proscribe a political role for the military, the Panama Defense Forces (PDF), as they were then known, continued to dominate Panamanian political life behind a facade of civilian government. By this time, General Manuel Noriega was firmly in control of both the PDF and the civilian government. The United States froze economic and military assistance to Panama in the summer of 1987 in response to the domestic political crisis in Panama and an attack on the U.S. Embassy. General Noriega's February 1988 indictment in U.S. courts on drug trafficking charges sharpened tensions. In April 1988, President Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian Government assets in U.S. banks and prohibiting payments by American agencies, firms, and individuals to the Noriega regime. When national elections were held in May 1989, Panamanians voted for the anti-Noriega candidates by a margin of over three-to-one. The Noriega regime promptly annulled the election and embarked on a new round of repression. By the fall of 1989 the regime was barely clinging to power, and the regime's paranoia made daily existence unsafe for American citizens. On December 20, 1989, President George H.W. Bush ordered the U.S. military into Panama to protect U.S. lives and property, to fulfill U.S. treaty responsibilities to operate and defend the Canal, to assist the Panamanian people in restoring democracy, and to bring Noriega to justice. The U.S. troops involved in Operation Just Cause achieved their primary objectives quickly, and Noriega eventually surrendered to U.S. authorities. He completed his sentence for drug trafficking charges in September 2007. In August 2007, a U.S. federal court in Miami found Noriega extraditable to France to serve a sentence imposed there after an in absentia conviction for money laundering. Noriega remains in custody pending the outcome of his legal challenges to the certificate of extraditability issued August 2007. Rebuilding Democracy Panama's Electoral Tribunal moved quickly to rebuild the civilian constitutional government, reinstated the results of the May 1989 election on December 27, 1989, and confirmed the victory of President Guillermo Endara and Vice Presidents Guillermo Ford and Ricardo Arias Calderon. During its 5-year term, the often-fractious Endara government struggled to meet the public's high expectations. Its new police force was a major improvement over its predecessor but was not fully able to deter crime. Ernesto Perez Balladares was sworn in as President on September 1, 1994, after an internationally monitored election campaign. Perez Balladares ran as the candidate for a three-party coalition dominated by the Democratic Revolutionary Party (PRD), the erstwhile political arm of the military dictatorship during the Torrijos and Noriega years. A long-time member of the PRD, Perez Balladares worked skillfully during the campaign to rehabilitate the PRD's image, emphasizing the party's populist Torrijos roots rather than its association with Noriega. He won the election with only 33% of the vote when the major non-PRD forces, unable to agree on a joint candidate, splintered into competing factions. His administration carried out economic reforms and often worked closely with the U.S. on implementation of the Canal treaties. On September 1, 1999, Mireya Moscoso, the widow of former President Arnulfo Arias Madrid, took office after defeating PRD candidate Martin Torrijos, son of the late dictator, in a free and fair election. During her administration, Moscoso attempted to strengthen social programs, especially for child and youth development, protection, and general welfare. Moscoso's administration successfully handled the Panama Canal transfer and was effective in the administration of the Canal. The PRD's Martin Torrijos won the presidency and a legislative majority in the National Assembly in 2004. Torrijos ran his campaign on a platform of "zero tolerance" for corruption, a problem endemic to the Moscoso and Perez Balladares administrations. Since taking office, Torrijos has passed a number of laws making the government more transparent. He formed a National Anti-Corruption Council whose members represent the highest levels of government, as well as civil society, labor organizations, and religious leadership. In addition, many of his closest Cabinet ministers are non-political technocrats known for their support for the Torrijos government's anti-corruption aims. Despite the Torrijos administration's public stance on corruption, few high-profile cases, particularly involving political or business elites, have been acted upon.

People of Panama

Panamanians' culture, customs, and language are predominantly Caribbean Spanish. The majority of the population is ethnically mestizo or mixed Spanish, indigenous, Chinese, and West Indian. Spanish is the official and dominant language; English is a common second language spoken by the West Indians and by many businesspeople and professionals. More than half the population lives in the Panama City-Colon metropolitan corridor. Panama is rich in folklore and popular traditions. Lively salsa--a mixture of Latin American popular music, rhythm and blues, jazz, and rock--is a Panamanian specialty, and Ruben Blades its best-known performer. Indigenous influences dominate handicrafts such as the famous Kuna textile molas. Artist Roberto Lewis' Presidential Palace murals and his restoration work and ceiling in the National Theater are widely admired. As of 2009, more than 105,000 Panamanian students attended the University of Panama, the Technological University, the Autonomous University of Chiriqui (third-largest in the country), and the University of Santa Maria La Antigua, a private Catholic institution. Including smaller colleges, there are 88 institutions of higher education in Panama. The first 6 years of primary education are compulsory. As of 2007, there were there were about 445,000 students enrolled in grades one through six. The total enrollment in the six secondary grades for the same period was about 260,000. More than 90% of Panamanians are literate. Nationality: Noun and adjective --Panamanian(s). Population (May 2010): 3,322,576. Annual population growth rate: 1.503%. Ethnic groups: Mestizo (mixed African, Amerindian, and European ancestry) 70%, Amerindian and mixed (West Indian) 14%, Caucasian 10%, Amerindian 6%. Origins --36.5% African, 37.6% indigenous, and 25.9% Caucasian. Religions: Roman Catholic 84%, Protestant 15%, other 1%. Languages: Spanish (official); 14% speak English as their native tongue; various indigenous languages. Many Panamanians have a working knowledge of English and many professional college-educated Panamanians in Panama City are bilingual. Education: Years compulsory --primary grades 1-6, or through age 15. Attendance --95% for primary school-age children, 62.2% for secondary, 34.9% for tertiary. Literacy-- 92.6% overall; urban 94%; rural 62%. Health: Infant mortality rate (2010)--11.97 deaths/1,000 live births. Life expectancy-- 77.61 yrs. Work force: 1.392 million: Commerce (wholesale and retail)--17.9%; agriculture, cattle, hunting, silviculture--15%; construction--9.8%; industries (manufactures)--18%; transportation, storage, communications--6.9%; private home domestic services--5.8%; public and defense administration--5.6%; hotels and restaurants--5.4%; other community and social activities, teaching--4.9%; real estate activities, business, and rentals--4.8%; social and health services--3.5%; financial intermediation--2.0%. Unemployment (2009): 7%. Poverty rate (2006): 28.6%.