Panama Industry Sectors

By: EconomyWatch Content   Date: 16 March 2010

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The development of Panama’s industry sectors has been slow due to several factors, such as its small domestic market which restricts economies of scale. High unit and labor costs in Panama is another key factor responsible for the slowdown of Panama industrial development. In fact, the nation had a negative industrial production growth rate of 0.4% during 2009, according to CIA reports. Currently, Panama’s industry sector is dominated by construction, mining and milling. 

Panama Industry Sectors: Major Contributors

Panama industry sectors play a significant role in the nation’s economy, accounting for the employment of about 18% of its 1.423 million strong labor force in 2009. The current status of some major players in the Panama industry sector is as follows:

Construction

The initiation of the Panama Canal reconstruction project by the US has spurred the growth of the construction industry significantly. The sector expanded by 25% in 2007, making it the fastest growing segment of Panama’s economy. The sector currently accounts for over 5% of Panama’s GDP.

Maritime Industry

The Panamanian maritime industry, the fastest growing sector in Panama’s economy, accounts for about 20% of the nation’s GDP. The industry is regulated by the Panama Maritime Authority, which approves, registers and authorizes all port transactions. During the last decade, port activities in Panama have grown considerably. The industry shipped 3,935,000 TEUs in 2008 alone.  

Energy

 

Panama’s energy sector has a production capacity of over 60,000 barrels per day. US-based Texaco operates the largest oil refinery in the nation. The refinery satisfies a large of portion of the nation’s oil needs. In addition, the refinery exports over 8,000 barrels per day. The Panamanian government is planning to build a pipeline from Colombia to fulfill its energy consumption needs. The project has been allocated a budget of US$400 million. The government is also in negotiations with other nations in Central America to connect their electrical grids, helping increase Panama’s electricity exports.

 

Panama Industry Sectors: Outlook

Despite persistent measures by the government to stimulate Panama’s industry sectors, the chances of Panama becoming an important industrial and manufacturing center seem bleak. Panama’s service sector continues to be the backbone of its economy. Besides, Panama’s relation with its key trade partner is deteriorating. The primary reason for this is Panama’s inability to successfully compete with the other trade partners of the US, such as Mexico, which has greater proximity to the US market and offers cheaper labor and unit costs.

 


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