Why Panama’s Economy Continues To Boom

I’m back in Panama after having been away for a year.

Kathleen and I arrived in the country about a month ago and headed straight out to the Veraguas coast.

We remained in residence at Los Islotes until this week. After months of lockdown in our Paris apartment, we sure did appreciate the chance to spread out in that wide-open space… and access to our own private beach.

We drove from Los Islotes to Panama City on Monday.

On one hand, now that we’ve had a chance to settle in, I’m reminded of when we first began spending time in this country some two decades ago.

The streets of Panama City are blissfully traffic-free. Gone are the soul-sucking traffic jams Kathleen and I faced as part of our daily commute when we lived here full time.

Kathleen ran out at lunch time yesterday to run errands… an adventure, she admitted as she headed out the door, that she never would have braved a year ago.

An upside of pandemic quarantines and the new WFH normal.

On the other hand, driving from Los Islotes to the city on Monday, we were surprised and pleased to see that this country continues to do what it does best—build and expand.

Traveling the Pan-American Highway from Santiago through Penonomé to the City Beaches and then, finally, Panama City, we noted a great deal of new construction. New banks, new shopping malls, new gas stations, new roadside restaurants, and other commercial space are going up in the many still fast-growing interior cities and towns.

Penonomé, in particular, is exploding. I believe this interior city, capital of the province of Coclé, is going to become a new engine for this country, alongside the Panama Canal. More on this in a minute.

At the same time, major infrastructure projects are underway.

In my long experience in this part of the world, this is the only country in Central America that actually follows through on its infrastructure promises. When Panama says it’s going to build a bridge or a road… you can count on it.

Los Islotes is among the big beneficiaries of current big infrastructure undertakings. The road down the Veraguas coast is being expanded, rebuilt, and repaved. When the work is finished, the travel time from Santiago to our Los Islotes gate will be much shorter and smoother.

Back in Panama City, a new major highway is being constructed to connect to the new bridge over the Panama Canal.

All that is not to suggest that the country hasn’t suffered as a result of the quarantines and shutdowns of the past year. Like everywhere, Panama’s economy has taken a hit.

This means reduced tax revenues flowing through government coffers. However, in Panama, that’s not the big deal it can be elsewhere (like across the border in Costa Rica, for example).

Panama’s economy doesn’t rely on tax income. This is a tax haven, after all.

No, for the past two decades or so, it’s been Canal revenues that have kept this country moving and shaking.

Now Panama has two cash cows. The Canal continues to do its thing (and has not missed a day’s income over the past year).

In addition, the recently inaugurated copper mine in the middle of the country is fully operational… and, within the next few years, will be contributing Canal-level revenues to Panama’s coffers.

A developer friend took me on a helicopter fly-over a couple of weeks ago so I could see the scale of the operation. It is big indeed… and it’s still just getting started.

The mine is expected to produce for as many as 35 years… and another section of mountain in the continental divide has been identified that could hold more ore than the current operation.

Panama’s economy slipped but recovered quickly post the global recession of 2008/2009 and will recover quickly again once the pandemic is under control.

I’m more bullish than ever on the country’s prospects both short and long term.

Lief Simon