Jul 3, 2012


Panama City has expanded significantly during the last 10 years. The amount of construction is reminiscent of some Chinese cities. These are some telling indicators in Central America: 

It is clear that Panama relative good performance in the region is not recent. In 2007 Steve H. Hanke wrote
Panama's GDP growth rates have been relatively high and their volatility relatively low. This is rather remarkable when you consider that Panama is a classic dual economy. On the one hand, the services sector (banking) is export-oriented, capital intensive, highly productive, generates little employment and is largely free of government interference. On the other hand, the agricultural and manufacturing sectors are stagnant, highly regulated and subsidized, inefficient, labor intensive and uncompetitive.
  • Interest rates have mirrored world market rates, adjusted for transaction costs and risk.
  • Inflation rates have been somewhat lower than those in the US.
  • Panama's real exchange rate has been very stable and on a slightly depreciating trend vis-à-vis that of the US.
  • Panama's banking system, which operates without a central bank lender of last resort, has proven to be extremely resilient. Indeed, it weathered a major political crisis between Panama and the United States in 1988 and made a strong comeback by early 2000.
Currently the main concerns at least within some sectors of the population is the increase in prices and crime. 

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