Focus Economics reports that the economy in Panama should gradually recover in 2021 from the Covid-19-induced contraction, as the easing of restrictions provides room for a rebound in domestic activity and tourism. Potentially weak global trade ensuing from further restrictions abroad clouds the outlook. Experts see the economy expanding 6.4% in 2021, and for 2022, the economy is seen growing 5.1%. Euromonitor reports that the 2020 recession in Panama was one of the worst in the world at 18.8% and should grow by a more robust 8.8% in 2021.
Over the past decade Panama’s economy has been growing much faster than other countries in the region. Key sectors such as ports, construction and transportation all enjoyed strong gains. During this period, the economy was driven by private demand, the implementation of an ambitious public investment program and the Panama Canal expansion project. The economy’s performance led to a sharp reduction in poverty as well as a rapid fall in the debt ratio. However, the pace of growth slowed somewhat in recent years owing to a drop in public investment and delays in the Canal expansion.
Panama can now claim the highest per capita GDP on a Purchasing Power Parity, (PPP) basis, in the region at US$25,500 (2020 Est.). Growth is spearheaded by the transportation, telecommunications, and commercial and tourism sectors. Panama's economy is based primarily on a well-developed services sector, accounting for about 66.9% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, and flagship registry.
USDA’s Office of Agricultural Affairs, OAA, in Panama City, hereinafter referred to as
“Post” reports Panama is an attractive market for exporting U.S. agricultural food products. Its culturally diverse population, geographical location, and love for American food and culture provide for increasing export opportunities for U.S. high value food and beverage products. In 2020, U.S. agricultural and related products exports to Panama reached $703.3 million, a decline of 9% from 2019. Panama has an ambitious public infrastructure plan and an expanding services sector that benefits from the country’s emerging role as a regional hub for trade.
Panamarecognizes the clear link between free trade and competitiveness and seeks to join an elite group of countries that have achieved growth and development through trade. Panama has Free Trade Agreements in force with: Canada, European Union, (EU), Mexico, Colombia, Peru, and Chile, Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua). In 2020 Panama ratified a Free Trade Agreement with South Korea.
The U.S.-Panama Trade Promotion Agreement (TPA) entered into force on October 31, 2012. Almost half of current trade received immediate duty-free treatment, with most of the remaining tariffs to be eliminated within 15 years. Panama will eliminate duties on high-quality beef, frozen turkeys, soybeans, soybean meal, crude soybean and corn oil, almost all fruit and fruit products, wheat, peanuts, whey, cotton, and many processed products. The Agreement also provides duty-free access for specified volumes of some agricultural products through Tariff Rate Quotas (TRQ).
Consumer oriented food products continue to be the most important category of U.S. agricultural exports to Panama. They totaled US$429.9 million in 2020, which is about 62% of the agricultural total but down 11% from the record high in 2019. Panama is the 2nd largest export market in Central America for processed food products from the U.S., importing US$378.7 million from the U.S in 2020, a decline of 8% and nearly 57% of the agricultural total. Top processed food exports to Panama in 2020 included:
Food Preparations & Ingredients
Processed/Prepared Dairy Products
Processed Vegetables & Pulses
Advantages and Challenges for U.S. Food Exporters in Panama
Strategic geographical location and its serviceoriented economy. Panama will continue to strengthen its seaports and logistics assets (Panama Canal, seaports, airports, special economic zones, logistics parks, and railroad) over the coming years.
Diverse ethnic backgrounds of thousands of tourist and U.S. expatriates coming to Panama each year.
Increased immigration with permanent residents from Venezuela, Colombia, Nicaragua, The Antilles, Asia, Europe, and others.
Static production of agricultural products leading to strong demand for food and feed imports.
Possible growth in Chinese food and beverage import due to negotiations of the Panama-China free trade agreement that started in July 2018, (the negotiations are currently stalled).
China is expanding its influence across Latin America as Panama is looking to boost re-exports of Chinese goods throughout the region.
China is the world’s second most frequent customer to the Panama Canal and the largest supplier to the Colon Free Trade Zone.
Strong competition in the region with ports in Colombia, the Caribbean, and Mexico.
Recent governmental protectionist policies making importing food, beverages, and agricultural products more burdensome.
“All of Food Export’s programs were a tremendous help getting us export ready, understanding the challenges that come with international business, and learning how to navigate them.”
Euromonitor has estimated that the retail sales of packaged food products in Panama reached just over US$2.1 billion in 2020. This also represents an increase of US$337.1 million or 18.5% from 2016. They also forecast the packaged food market to grow to US$2.6 billion by 2025, an increase of US$469 million and 21.1%. High growth categories in the forecast include:
Sweet Biscuits, Snack Bars & Fruit Snacks
Post reports that preference continues to grow towards supermarkets and away from traditional markets. Today’s supermarkets can offer reduced consumer prices relative to traditional, family-owned retail. Supermarkets exhibit increasing product safety and diversity, and robust e-commerce platforms with delivery services exist within the 5 largest supermarket chains: Super 99, Supermercado Rey, Super Xtra, Riba Smith and Machetazo.
The sudden and ongoing shutdown of economic activities in Panama to address the coronavirus (COVID-19) pandemic has forced the sector to adapt and innovate with e-commerce and delivery platforms. In the short and medium term, consumers are expected to stay at home more and consequently eat more meals at home. Panama will continue to be one of the top markets for U.S. consumer-oriented products in Central America.
Modern food retailers in Panama have been improving in quality and convenience. Supermarkets are led by the two largest supermarkets in the country, Super 99 and Supermercados Rey, with other supermarkets such as Super X-tra offering lower prices to serve their less affluent consumers, and supermarkets such as Riba Smith and Super Kosher offering more variety in value added foods. Supermarkets, hypermarkets and independent food stores, which are most popular among consumers, primarily drive the grocery market in Panama.
Independent grocery and convenience stores are also transforming their store plans by strategically opening stores in more convenient locations—usually in local neighborhoods. There are approximately 11,000 of these independent grocery and convenience stores in Panama. There are also mini-convenience stores (conventional sized stores with expanded foodservice) and hyper convenience stores with an extensive variety of product offerings and in-store seating for foodservice.
Best Product Prospects:
Post reports that Panamanians are consuming more convenience foods and more functional food that offers health benefits beyond their nutritional value. These trends have improved prospects for U.S. food exports and created import demand in the following categories at specialty stores and at the most popular retail outlets: low fat, low sodium, gluten free, sugar free, plant based alcoholic beverages, baking ingredients, beef, condiments, cooking ingredients, dairy, delicatessen, fruits, drink mixes and non-alcoholic beverages.
Food Service Sector
Post reports that international food service operators and local companies such as Sysco, H.T. Tzanetatos, Proserv, Procesadora Monte Azul, Dicarina, Pedersen Fine Foods, and others have been servicing the food service sector for more than 50 years providing imports of U.S. food and beverages, logistics in warehousing and transportation, and product sales and marketing. With these institutions and facilities, fueling both local and international cuisines, Panama’s food service industry is among the strongest in the country. Fast food franchises, cafes, bars, bakeries, ice-cream shops, family-owned restaurants, food trucks, street side vendors, convenience stores, and catering services all benefit from this strong trade framework.
Restaurants in Panama City are highly developed and possess world class chefs. Due to expanding tourism, growing immigration, and higher consumer purchasing power, the selection of restaurants and international cuisine is expected to continue to grow. Currently, the Panamanian Association of Restaurants and related businesses have more than 400 members.
Travel and tourism is an engine of economic development and a vehicle for sharing cultures. Many factors influence the flow of travelers to visit the country. Panama is an attractive destination, and its dollarized currency is considered a strength. U.S. and international hotel chains present in Panama include the Waldorf, Hilton, Marriott and J.W. Marriott, Bristol, Country Inn, Sheraton, Radisson, Holiday Inn, Intercontinental, Riu, Westin, Wyndham Garden, Novotel, Hard Rock Hotel, Hotel Las Americas Golden Tower, and Tryp Hotel.
Panamanian hotels and resorts primarily purchase from food service companies or directly from distributors, supermarkets, and restaurants. Panama’s cruise ship market is expanding from both the United States and Europe as Panama continues to grow as a premier travel destination. Cruise ships to Panama City anchor either at Fuerte Amador and Balboa located at Panama Canal’s Pacific Ocean entrance, or Port Colon 2000 in the Caribbean. COVID-19’s impact on the global cruise industry also severely affected these markets in Panama.
Best Product Prospects:
Post reports that high value products offer good market opportunities in Panama, especially ready-made or convenience food, wholesome and healthy products. A list of favorite imports from the HRI sector includes pre-cooked potatoes, snacks, frozen or ready-made food, seafood, cheese, vegetable oil, frozen vegetables, condiments and dressings and margarine.
Post reports that Panama is a tourism destination and a regional logistics hub. It is primarily a service-based economy, but food processing is one of its top industries. Panama’s past and present make it a very culturally diverse nation, famous for its fusion cuisine. The dynamic culinary culture combined with strong tourism and processing industries mean significant business opportunities for U.S.-origin ingredient suppliers. Its geographical proximity and cultural ties to the United States continue to drive a strong preference for U.S.-origin products.
Panama has long imported a large percentage of its food and beverage supply, given the relative weakness of its agricultural production and manufacturing sector. The major driver of this weakness is the fact that it is primarily a service-oriented economy with a relatively high cost of labor. With 150 food-processing companies, Panama’s food processing ingredients market accounts for US$135 million in U.S. exports, which represent about a 60% market share. These local companies include dairy processors, meat and poultry products processors, fishery products processors, fruits processors, beverages and spirits, bakery, snacks, pet food among others
Panama’s food and beverage sector is one of the main manufacturing sectors of the economy. Two forces that contribute to investment opportunities in this area are the U.S. – Panama Trade Promotion Agreement (TPA), which entered into force on October 31, 2012, and capacity building programs offered by USDA to the Panamanian government and industry on food safety inspection and quality
Panama’s diversified food industry is a stable sector of the economy. Many local companies have been acquired or have teamed up with multinational corporations as a strategy to increase global exports. Besides bananas, sugar, seafood, shrimp, fishmeal, coffee and meat, exports of other products, such as alcoholic beverages, fruits and vegetables, poultry, and eggs, have increased significantly in recent years. U.S. agricultural goods and services enjoy a reputation for high quality and are extremely competitive. Consumer attitudes and many brand preferences are like the United States.
Best Prospect Products
Post reports that the Panamanian market offers good export opportunities in the food processing sector for additives, preservatives, flavorings, vegetable colorings, sauces and condiments, grains (wheat, yellow corn, and rice), vegetable and soybean oils and sweeteners and beverage bases.
Panama is the third largest market in Central America for U.S. agricultural products exports. Exports include corn (US$86.4 million), soybean meal (US$11.8 million), prepared food (US$51.3 million), dairy products (US$58 million), and pork & pork products (US$44.5 million).
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