Flowing to the Crossroads

Panama continues to cement its position as one of the most attractive countries for foreign investment in the Latin American region, with a total of $5.038 billion in FDI received in 2015. This represents a 16.9% YoY increase compared to the inflows of foreign investments in 2014 and represents 9.7% of Panama’s GDP, which reached an estimated $51.677 billion in 2015. At nearly 57%, a large part of the country’s GDP reflects reinvested earnings by foreign multinational corporations that are already established in Panama, while another 25% reflects investments in shares of Panamanian firms.

Panama, which according to the Economic Commission for Latin America (ECLA) was already the country in the region with the most FDI with respect to its size in 2014, continues to inspire confidence in the global investor community. In 2014, it also represented 45% of the total investments into Central America, more than double the amount received by Costa Rica (20%), which came in second place.

The operation of the Panama Canal, as well as its ongoing expansion megaproject and the complimentary upgrades taking place across the country, continue to serve as a major magnet for FDI. The upcoming inauguration of the canal expansion as well as the country’s numerous port projects including the new Port of Corozal and the expansion of the Port of Singapore Authority (PSA) International Terminal have raised Panama’s profile as a hub for logistics and warehousing, which in the first nine months of 2015 accounted for 12% of total foreign investment flows into the country. The financial sector accounted for 15% of all FDI while the manufacturing sector’s share of foreign investments reached 10%, but commerce was by far the biggest recipient of foreign investments in 2015, with a 28% share of the total value. New opportunities in the renewable energy sector were also major contributors to Panama’s strong levels of FDI inflows in 2015.

Canada was the biggest foreign investor in Panama, thanks in large part to First Quantum’s investment in the Cobre Panama copper mining project in Coclé, which represented 18% of last year’s total foreign direct investments. Colombia and the US were the next two largest contributors of foreign investments, with a 15% and 12% share respectively. Another major contributor to Panama’s emerging role as a regional economic hub is the ongoing Laudato Si wind farm project in Penonome, the first phase of which began operation in 2013 and is currently operated by Unión Eólica Panameña (UEP) I as a special purpose vehicle owned by China-based firm Goldwind. The second phase of the project represents a $436 million foreign investment and is being carried out by UEP Penonomé II, an InterEnergy Holdings subsidiary. The consolidated portfolio of InterEnergy Holdings consists of energy projects across the Latin American region, including wind farms in Jamaica, Chile, Argentina, and the Dominican Republic, further underlying the growing recognition by sources of foreign investments the numerous untapped opportunities for development that Panama holds.

The $5.038 billion financial injection, which represents 9.7% of Panama’s GDP in 2015, places Panama far ahead of other countries in the Latin America region, where the average rate of FDI received as a percentage of GDP was closer to 2.6%. These figures are encouraging for Panama, whose current account deficit has hovered at 10% for the past decade. The steady levels of FDI into the Panama represent new employment opportunities for the country’s most strategic driving sectors and reaffirms its status as a hub for attracting the attention of foreign investors.