Find out how a subscription to OVERSEAS BUSINESS REPORTS will help you make profitable decisions about overseas markets. For less than $1.50 a month you can join the thousands of U.S. businessmen who receive up-todate reviews from 117 markets for their products. Helpful when entering new markets for their products. Helpful when entering new markets or reviewing current ones. Put the world's best marketing service to work for you. September 1972 OBR 72-053 Overseas Business Reports U.S. DEPARTMENT OF COMMERCE, Peter G. Peterson, Secretary vs BUREAU OF INTERNATIONAL COMMERCE, Marinus van Gessel, Acting Director Basic Data on the Economy of the Republic of Panama Supersedes OBR 68-41 88 degrees F. While the country is well within the humid tropical zone, there is some variation from one region to another. Moisture from the Caribbean is carried by the north and north DOCUMENTS DEPARTMENTastern winds that prevail through most of the year, but the continental divide acts as a partial rainshield for the southern half of the DEC 1 13/2 country. The least moisture is found in the belt Prepared by Robert H. Bateman General Information Geography and Climate extending from Panama City to the Costa Rican border. LIBRARY Panama's S-shaped land configuration runs east to west at the southern end of the isthmus separating North and South America. About 480 miles long, the country is divided into two nearly equal parts by the Canal Zone. Panama varies from 30 to 120 miles in width. With its 29,208 square miles of area, it is slightly smaller than South Carolina. There is a central spine of mountains and hills (the continental divide), the southern slope of which has richer soils and a better climate. That part of the slope lying west of the Canal has proved most suitable for most agricultural purposes. The Caribbean coast is about 490 miles in length and includes two large gulfs well-protected from the open sea. The much more irregular Pacific coast is over 870 miles in length with more than 1,000 nearby islands. Panama's mean temperature ranges from 72 degrees to Population The 1970 Panamanian census indicated a total population of 1,428,082; and population growth is estimated at somewhat over 3% per year. The census also showed an acceleration of population growth in urban areas over the previous decade. In 1970, 47% of the total population lived in the provinces of Panamá and Colón, which include Panama's two largest cities, compared to about 44% in 1960. (See Table 1). There was a decline in the rate of increase of the population under 15 years of age. This group now appears to be growing at the same rate as the population as a whole. Language and Customs Panama's official language is Spanish. English is widely spoken, however, as a result of close cultural and business contacts with the United States and the presence of a fair number (perhaps 10% of the total population) of descendents of immigrants from the West Indies whose mother-tongue is English. While many urban middle class Panamanians have adopted the accouterments of the American life style, their customs and culture are basically Hispanic. OVERSEAS BUSINESS REPORTS; $16 a year ($5 additional for foreign mailing); 15 cents a copy. Order from any of the Department of Commerce field offices or from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402. A relatively small, elite group dominated Panamanian political and economic life until the coming to power in October 1968 of the present Provisional Junta Government (PJG), which overthrew President Arnulfo Arias only 10 days after his inauguration. The coup was made by the National Guard which has occa- sionally intervened in political matters. The Commander of the National Guard is recog- nized as the ultimate power in Panama, al- though executive authority is exercised by the President and a civilian cabinet. The National Assembly has been suspended and the PJG rules by decree. After the 1968 coup there was a moratorium on organized po- litical activity, and the Junta declared all par- 1 This section was prepared in the U.S. Department of State. ties "extinct." A non-party election was held August 6, 1972 to choose representatives from local districts. An assembly of these represent- atives met in late August to approve changes in the Constitution and elect a President and Vice-President. The PJG has stressed political and economic objectives favorable to the lower and middle classes and has endeavored to carry out programs to win support from these classes. Panama's Central Government consists of 10 ministries and three special Offices (Planning, Controller General, and Price Regulation). The Office of the Controller General has broad func- tions, from controlling and auditing public ex- penditures to the compilation of basic socio-eco- There are 21 autonomous agencies including two state-owned banks and the Social Security Fund. The National Lottery, the race tracks, and the casinos are state monopolies that are obliged to transfer all their profits to the Cen- The United States is represented in Panama by an Embassy in Panama City. The building is located at Avenida Balboa at 38th Street. The telephone number in Panama City is 25-3600. The Republic of Panama's Embassy in the U.S. is located at 2862 McGill Terrace, N.W., Wash- ington, D.C. 20008. The telephone number is (202) 483-1407. In addition, Panama main- tains Consulates General in the following cities: New York, N.Y.; Portland, Me.; Philadelphia, Pa.; Washington, D.C.; Augusta, Ga.; Miami, Fla.; Chicago, Ill.; Detroit, Mich.; Houston, Dal- las and San Antonio, Texas; New Orleans, La.; Los Angeles, San Diego and San Francisco, Structure of the Economy General Panama's economy shares a number of characteristics with many other lesser developed countries. For example, Panama depends to a great extent on foreign trade; domestic agriculture is oriented toward the production and export of bananas, and most non-food industrial products need to be imported. Thus while the demand for imports rises with a growing economy, export earnings are highly susceptible to the vicissitudes of local climatic conditions and world market prices. Moreover, there is the same duality common to many lesser developed countries; while the metropolitan areas of Panama City and Colón are highly developed (having most of the amenities and some of the ecological problems of a U.S. city of equivalent size), most of the rural population is engaged in subsistence agriculture only at the margin of the money economy. There are, on the other hand, some rather unique aspects to the Panamanian economy. For example, roughly 15% of the country's Gross Domestic Product is derived from revenue flows from the Panama Canal Zone ($168 million in 1971). This includes wages paid to Panamanians and income received from the miscellaneous goods and services bought in Panama by all Zone agencies. (Income earned in the Canal Zone by Panamanians is considered by Panama to be part of its GDP.) But the overall effect of this revenue on Panama is greater than the 15% figure might indicate. (See Role of the Canal Zone). An equally unique characteristic in the Panamanian case is the disproportionate amount of foreign private investment (principally U.S.) in the country. This investment-over $1.2 billion in 1970 from the U.S. alone (see Table 2)has been attracted by Panama's liberal banking and tax policies and the uncontrolled movement of funds in and out of the country facilitated by the country's dollar-based monetary system and lack of a central bank. Not all of this private capital inflow has resulted in tangible, productive investments; a good deal of it is thought to be earnings from foreign subsidiaries of large corporations merely banked in Panama. Recent History The Panamanian economy grew at a moderate rate during the 1950's; about 5% per year in terms of the real Gross Domestic Product (GDP). The rate increased to about 8% per year during the period 1961-1971, according to officially published data. (See Table 3). In order to maintain this high growth rate, the government is undertaking an expanded public investment program. But given the low rate of public savings, financing of this program has come largely from foreign sources. This increased foreign borrowing has resulted in a sharp rise in Panama's external debt and the servicing of this debt. (See Table 4). 11970 data is preliminary. Please see original source for precise definitions of terms employed. Source: The International Investment Position of the United States: Developments in 1970. U.S. Department of Commerce (see bibliog raphy). Panama has been plagued for some time with a serious trade deficit. It rose sharply from $128 million in 1968 to about $240 million in 1971. The adverse effect of this deficit on the balance of payments has been substantially offset by private investment, foreign aid, Canal Zone and tourism earnings, and short-term inflows into the Panamanian banking system such as transfers to local branch banks by foreign private banks. (See Table 5). Panama has traditionally enjoyed relative price stability; between 1962 and 1970, for example, prices grew on an average only 1.4% per year according to Panama's cost of living index for low and middle income families. While prices are growing at a somewhat faster rate now, this is thought to be essentially a result of significant rises in the price of imported goods, which comprise almost 40% of the weight of Panama's wholesale price index. This factor, together with poor local climatic conditions that reduced the supply of some basic food products, forced Panama's wholesale price index up 4.7% in 1970. The effects of both recent labor legislation and new taxes on consumer goods may well lead to continued upward movement in prices. Role of the Government While the absence of both a central bank and a paper currency of its own introduces some inflexibility in carrying out economic policy, the Panamanian Government does not lack means of directing the domestic economy. There is the control exercised and priorities set in government budgeting. Of the projected $240.9 million in Panama's 1972 Ordinary Budget (domestically financed), $26.8 million is set aside for the Public Investment Budget. Of the remainder, $22.7 million is to support the autonomous agencies, $45.5 million goes to service the foreign and domestic debt, and $146.7 million is for the operating expenses of the government. The total Public Investment Budget, which takes into account foreign loans and grants, amounts to $175.6 million in 1972. Data on the economic sectors benefitting from public investment in recent years is contained in Table 6. (See Development Planning). |