Panama’s envious GDP growth is predicated, in part, on trade with Miami
By Doreen Hemlock
When COVID-19 hit, no world region suffered more economically than Latin America and no regional nation more than Panama. In 2020, the economy of the services-dependent country shrunk by nearly 19 percent, and unemployment spiked to double digits. Passenger flights to the main airport stopped for months.
Now Panama is roaring back, with an assist from Miami. Economic growth topped 15 percent in 2021 and was poised to top 6 percent in 2022, surpassing pre-COVID levels. No Latin American nation has rebounded as strongly, with growth forecasted to continue in 2023.
Key to the surge: increased foreign investment and greater exports, with South Florida as a leading partner and with growth extending far beyond Panama’s famed Canal and banking sector.
Millicom, the telecom company that runs operations from Miami suburb Coral Gables, shows the trend. In June, Millicom completed its purchase of Panama’s biggest mobile, cable, and internet service provider, known as Tigo Panama. Since 2018, the Europe-based firm has invested more than $2.5 billion in Panama, even setting up headquarters for its new mobile payments unit called Tigo Money. “The government of Panama was really helpful” in providing spectrum for communications and facilitating internet services during the pandemic, says Esteban Iriarte, Millicom’s chief operating officer.
PANAMA DELEGATIONS VISIT MIAMI
To spur greater investment and trade, a delegation of two-dozen Panamanian leaders visited Miami in November and met with South Florida business and government counterparts. The group even hosted a seminar on “Doing Business with Panama” that was attended by more than 75 people at a Hilton Hotel west of Miami International Airport.
“During the pandemic, we had to rethink everything – our role in the world, and what we wanted to bring to Panama,” Carmen Gisela Vergara, general administrator of business promotion authority ProPanama, told the audience. Government and business leaders decided on a plan to facilitate foreign direct investment in various areas, including multinational office space, near-shore manufacturing, and renewable energy. “We want to be the hub for sustainable investment in Latin America and the Caribbean,” Vergara said.
More than 180 multinationals now keep regional offices in Panama, with at least 30 of them setting up since the pandemic began – including Tigo Money – delegates told the Hilton group. The Central American nation of roughly 4 million residents offers incentives, from tax breaks to training grants, in order to lure investments.
During COVID, Panama also decided to ramp up local exports, identifying South Florida as a prime market. This September, the country participated for the first time in the Americas Food and Beverage Show in Miami Beach, organized by the World Trade Center Miami. Sixteen Panamanian companies showcased their wares, offering items from hot sauce and tropical honey to craft beer and liqueur made from Panama’s prized geisha coffee.
Panama’s leaders say the new growth strategy is working because their country is so business-friendly. Among its advantages: using the U.S. dollar as its currency; registering new businesses online in as little as 20 minutes; and steering clear of the leftist, populist drift in some Latin American nations.
“Panama can be considered a beacon of liberty, prosperity, and democracy in Latin America,” says Jose Alejandro Rojas Pardini, advising minister for the facilitation of private investment. A Purdue graduate, he worked for General Electric in the U.S. before returning to work in his homeland. “Social, economic and political stability in our country has been key to a solid and sustainable recovery.”
STRONG GROWTH, HIGH-INCOME STATUS PRE-COVID
Before COVID, Panama’s economy was already surging. Between 2014 and 2019, economic growth averaged more than four times the rate across Latin America and the Caribbean: 4.6 percent yearly vs. 0.8 percent yearly regionwide. That speedy advance had propelled Panama into the ranks of “high-income” nations, joining such powerhouses as the United States, Germany, and Japan, according to the World Bank. Growth back then came largely from services – especially transport and communications – as well as construction, including the $5 billion-plus widening of Panama’s Canal in the 2010s, the bank says.
During the pandemic, the expanded Panama Canal never shut down – “not for one day,” says minister Rojas Pardini – and trade through it now exceeds pre-COVID levels. Cruises through the Canal are also increasing, many by top lines that call Miami home, such as Carnival, Norwegian, and Royal Caribbean.
With so many business links, Florida is targeting Panama for its own growth. The state’s economic development agency, Enterprise Florida, sent a delegation to Panama in September, led by Florida Transportation Secretary Jared W. Perdue. The group included executives from some 20 transport and logistics firms and key Florida seaports, including Port Everglades and PortMiami.
Miami-Dade County’s leaders see potential for joint business promotion with Panama, so both locales can fill different links in the broader supply chain. For example, Panama could serve as a base for “nearshore” manufacturing of electric-vehicle batteries or other high-value goods that are made in Asia. Those goods could then be sent to Florida for distribution across the U.S.
“We share so much with Panama – business, culture, and similar economic sectors,” says Maria Dreyfus-Ulvert, executive director of Miami-Dade’s International Trade Consortium, which promotes the county as a global business gateway. “Even our skylines are similar,” she says, referring to the dense cluster of skyscrapers in Downtown Miami and in Panama’s fast-growing capital, Panama City. Indeed, some now call Panama City “the Miami of Central America.” Stephanie Pragnell, ProPanama’s investment coordinator and a graduate of two Florida universities, summed up business opportunities this way to the Hilton audience: “There are so many synergies and ways we can collaborate in this brave new world after the pandemic.”
