Panama Set to Become Fastest Growing Economy in Latin America

Panama is set to become Latin America’s fastest growing economy, with the country’s expanded canal beginning to generate a record amount of income for the Central American country.

The government is expecting the levies on the Panama Canal to surge 50% this year to $1.6 billion, about 7% of fiscal revenue, according to Bloomberg, which cited comments from the country’s Finance Minister Dulcidio de la Guardia.

Panama expanded its canal, a key waterway for ships in the Americas, at a cost of $5.3 billion last year. The expansion has made it easier for large ships to pass through, besides increasing the significance of the canal in the global shipping industry.

In addition, Panama has introduced a new toll structure, and there has been a significant surge in tonnage shipped through the waterway.

“The global perspectives are much better this year than last year and that is generating a cascade effect in Panama, increasing the demand for Panamanian services,” de la Guardia told Bloomberg.

The services sector accounts for nearly 80% of the country’s GDP. Services include the Panama Canal, banking, the Colón Free Trade Zone, insurance, container ports, and flagship registry.

The government is using the canal money to accelerate growth in other areas of the economy. It is expanding the Tocumen International Airport at a cost of $800 million, and the country’s $1.86 billion metro line is slated to be completed in 2019.

Panama’s economy is not directly dependent on mineral exports, but its canal earns more revenue if South American countries export more minerals to China.

Nicaragua, another Central American country, is also building a canal similar to that of Panama. But that will take many years to complete.