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Panama: Industry
Country Study > Chapter 3 > The Economy > Industry

INDUSTRY


Industrial development has been uneven in Panama. Between 1965 and 1980, industry grew at an average annual rate of 5.9 percent; between 1980 and 1985, that rate was negative 2.2 percent. In 1985 industry accounted for nearly 18 percent of GDP. Within the industrial sector, manufacturing (based primarily on the processing of agricultural products) and mining contributed 9.1 percent to GDP, followed by construction (4.7 percent) and energy (3.4 percent).

Several factors contributed to the rapid expansion of industry between 1950 and 1970. A 1950 law granted liberal incentives and protection from imports to investors, including those in manufacturing. An agreement in 1955 phased out a number of manufacturing activities in the Canal Zone and opened a market for such Panamanian products as bakery goods, soft drinks, meats, and bottled milk. Foreign investment went into relatively large plants for oil refining, food processing, and utilities. The government invested in the infrastructure, especially in roads and the power supply. A building boom increased the demand for construction materials and furniture, further stimulating manufacturing. Management gained experience during the period, and labor productivity increased.

The stagnation in industrial growth during the 1970s resulted from external and internal causes that reduced private investment. Externally, the rise of oil prices, recession in the industrialized countries, and uncertainty relating to the future status of the canal clouded the investment climate. Domestically, a recession reduced construction activity and lowered the demand for manufactured goods. The government built cement and sugar mills to compete with privately owned mills; it also implemented an agrarian reform program, instituted a liberal labor code, and enforced rent control laws. These measures created apprehension on the part of investors, and although the government granted tax holidays, export incentives, and protection from imports, private investment declined. A key goal of the structural adjustment program of the mid-1980s was to increase private investment in industry and to make Panama's industry competitive internationally.

Data as of December 1987




Last Updated: December 1987


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Panama was first published in 1987. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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