Despite the abundance of natural resources, from copper to wood and shrimp, the Panamanian economy, based on the U.S. dollar, is based largely on services, mainly due to manufacturing activities surrounding the Panama Canal and the Colon Free Zone. Panama is a small country with about 4.4 million inhabitants. It has benefited from steady economic growth, but poverty and income inequality have been persistent and have disproportionately affected rural indigenous territories and to the Afro-Panamanian populations.
It should be noted that the increase of protected land from 33% to 54% and strong ocean conservation efforts have made Panama one of only three countries with negative carbon emissions in the world. These revelations come just five years after the so-called Panama Papers, which exposed the shady activities of Mossack Fonseca, the now defunct Panamanian firm that was once one of the largest offshore financial services companies in the world. Fiscal policy is expected to adhere to Panama's Social and Fiscal Responsibility law, although incoming authorities will need to enact measures to address fiscal risks stemming from imbalances in pensions and revenues from the Canal and mining, in addition to the potential impacts of climate change. To prevent political interference from undermining the efficient management of the canal, successive Panamanian governments headed by the country's two main parties (and backed by strong public support) adopted rigorous measures to guarantee the autonomy of the state-owned Panama Canal Authority, in particular through a constitutional amendment. The fact that the engine of the Panamanian economy has almost certainly remained politically isolated helps explain Panama's ability to achieve rapid economic growth despite high levels of corruption in other parts of the country.
Panama's economy is based primarily on the tourism and services sector, which represent almost 80% of its GDP and account for the majority of its foreign income. With a stable macroeconomic environment, Panama is likely to need additional fiscal reforms in the medium term. These are no small feats, especially since Panama and Granada are the only two countries that have been successfully democratized through a military invasion since World War II. France's efforts to build a canal across the isthmus in the 1880s and U.S.
efforts in the early 20th century stimulated the Panamanian economy. However, Panama is one of the most impactful political and economic success stories in Latin America in the last three decades. The lack of sanitation, electricity, basic water, health and education among the poor is a serious problem affecting housing conditions in Panama. The Panamanian economy, based on the dollar, is based primarily on a well-developed service sector that represents more than three quarters of GDP.
Panama has always relied on world trade for its prosperity, and is affected by the cyclical nature of international trade.
