Panama’s strategic location has been the backbone of its service-oriented economy from as far back as the 17th century when the isthmus was famous for the Portobolo fairs held by the Spanish whose galleons arriving from Europe brought merchandise for the new territories prior to loading the gold and silver destined for the court of King Ferdinand. The construction of the Panama Canal and the unique monetary system based on the US dollar since 1904, have led the country to become an important international trading, banking and maritime center.

While Panama’s neighbors in South and Central America battled to survive on-going crises during the past decade, the economy of Panama had sustained a relatively continuous growth, showing a performance higher than many other Latin American countries. Nevertheless, the global recession, combined with the tragic events of September 11th, have put some stress on the country’s economy. According to government officials, Panama’s gross domestic product per capita is one of the highest in the region with an estimated US$3,663 in 2001, though it reflects a general trend in the metropolitan area of Panama City and Colon where 75% of all economic activity is concentrated. Inequalities in income distribution remain a problem in rural areas.

The economy grew 0.3% in real terms in 2001, falling from 2.7% growth the year before and 3.2% in 1999. Although it was the lowest growth rate registered in a decade, the economic slowdown in the United States, which is Panama’s main commercial partner, was the factor that affected a decrease in exports, particularly traditional products. By October 2002, the government announced a GDP growth of 0.8% during the first quarter and of 1% during the second quarter of the year and forecast an annual increase of 1%-1.5%.

The banking sector, which provides some 10,000 well-paid jobs, has now developed strong regulations in compliance with the Basle recommendations. It remained stable despite the global recession and problems in Latin American countries, with assets totaling US$38.08bn at the end of 2001. By July 2002, total assets had fallen by 9.2% to US$ 34.53m mostly because of the financial problems in Argentina which forced several banks of the center to reduce their exposure in that country. Deposits fell slightly to US$24.18m down from US$26.59m in December 2001, of which internal deposits accounted for US$13.08m and US$11.095m for external deposits. The number of banks dropped to 77 in March 2002. There were 82 at the end of 2000, 104 in 1998. The drop is as a result of mergers and acquisitions. However the Banking Superintendency had granted five additional new licences to Latin American banks in June 2002.

Courtesy of www.PanamaVacationRealEstate.com