Shifting Gears: A growth diagnostic of Panama

Produced by: 
Harvard University
Available from: 
October 2016
Paper author(s): 
Ricardo Hausmann
Luis Espinoza
Miguel Angel Santos
Topic: 
Macroeconomics - Economic growth - Monetary Policy
Year: 
2017

Panama has been one of the fastest growing economies in the world, duplicating its income per capita between 2004 and 2014. A vibrant network of exportable services surrounding the Panama Canal – ports, logistics, trade, communications, and financial services – has burgeoned. These activities have in turn spurred the demand for construction. Private non-residential developments – office buildings, warehouses, telecom infrastructure, shopping malls – have been complemented by large public infrastructure projects, such as the expansion of the Canal, the first line of the Panama City Metro, and the new terminal of Tocumen international airport. As a labor-intensive sector that relies mostly on non-skilled workers, the construction boom has effectively promoted a reduction in poverty and inequality. In parallel, an air hub has developed in Panama City, and many multinational companies have set foot in Panama under the umbrella of the Law of Multinational Headquarters (SEM). 1 A favorable business environment, a stable economy, and significant improvements in personal security, have been enhanced by fiscal and migratory benefits, attracting more than 120 regional headquarters of multinational companies.

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