United States Embassy Commercial Service Panama City, Panama

Panama Executive Summary Overall GDP growth is strong: 8.5 % in 2013, 6.2% 2014, and nearly 6.0% in 2015 (World Bank figures) Service driven economy (80%) Net importer of energy, food, manufactured goods Low inflation Advantages are visible Challenges remain Infrastructure Projects U.S. FTA opens up opportunities

Panama The Crossroads of the World “Location, Location, Location” Population: 3.9 million. GDP est. $52.35 billion Services 80% Industry 10% Agriculture 6%

Principal Trading Partners Panama’s Imports from U.S. = $8.25 bn (over 30% of total imports) 20% rise in exports since FTA began Other major trading partners: Europe, Japan, Mexico and S. America U.S. Imports from Panama: $390 million. We export $17 to Panama for every $1 Panama exports to the U.S.

Panama’s Advantages FTA with the U.S. Logistics hub for Americas: Canal operations, direct air routes Dollarized economy: simplifies business planning, no currency risk. Sophisticated banking sector: finance & credit availability. Stable economic and political environment. Affinity for U.S. goods and services. Safe. Relatively high-level of personal security.

Panama’s Challenges Education. Key limiting factor. Workforce. Inflexible labor laws, small population. Institutions. Limited capability, susceptible to influence. Legal Complications. Building trust is key. Security. Could deteriorate.

The Panama Canal Eighth Wonder of the World Panama’s Unique Advantage. $250 mn./yr procurement. $5+ bn. Canal Expansion – why it matters. Other: Corozal Port, Water Ferry, Ro- Ro Terminal, LNG

The Panama Canal Why it Still Matters Source: econedlink.org

What the expanded Canal looks Like From 4500 to 12,000 TEUs Source: NYT, ACP Source: New York Times, Panama Canal Authority

Why Expand Canal? Panama Canal Authority Wants to Maximize Profits Almost 2/3 of container capacity can’t fit through today’s Canal. 44% of ocean cargo to U.S. goes through Long Beach/LA. Then 60% of that goes east of the Rockies. An expanded Canal could also serve super tanker trade, e.g. LNG tankers But the Impact on U.S. ports is less clear… That multimodal method is fast. But it is: Expensive. Fuel inefficient. Too dependent on the Long Beach/LA bottleneck.

Factors impacting U.S. Ports Panama Canal will want to raise tariffs to capture fuel savings. Port of Long Beach/LA motivated to address challenges. West Coast railroads may adjust tariffs to remain competitive. Most East Coast/Gulf Ports can’t handle largest new Panamax (yet). Triple-E vessels that cannot pass through the expanded canal are already under construction Significant bets being made on transshipment in Caribbean. Wage gap between China and Mexico closing – near shoring trend?

The Colon Free Trade Zone Second Largest Worldwide $24 Billion in Trade (2014) SME Consumer Retail Manufacturer. Large Consumer Retail Multinational with demand throughout the region. Capital Equipment Supplier with maintenance contract obligations in the region.

FREE TRADE AGREEMENT U.S. – Panama Ratified by Panama in 2007. Ratified by U.S. Congress in October 2011. Entered into force October 31, 2012.

Free Trade Agreement will Benefit U.S. Companies Tariffs: drop from 10-15% to 0%. Makes your goods and services more competitive. Gives you better margins. Bypass burdensome exemption processes to secure subcontracting business with Canal, Metro projects. Greater Transparency in Public Procurement. Statutes give U.S. Government greater leverage to encourage an open and transparent process. Political Statement. Re-affirmation of U.S. – Panama historic relationship, which fosters even more trade. Strengthens Panama’s goal of becoming another Singapore. More selling opportunities for you.

Embassy of the United States of America Questions? Embassy of the United States of America www.export.gov/panama