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Panama GROWTH AND STRUCTURE OF THE ECONOMY
Unavailable
Figure 7. Gross Domestic Products by Sector, 1965 and 1985
Since the early 1500s, Panamanians have relied on the country's
comparative advantage--its geography. Exploitation of this
advantage began soon after the Spanish arrived, when the
conquistadors used Panama to transship gold and silver from Peru to
Spain
(see The Conquest
, ch. 1). Ports on each coast and a trail
between them handled much of Spain's colonial trade from which the
inhabitants of the port cities prospered. This was the beginning of
the country's historical dependence on world commerce for
prosperity and imports. Agriculture received little attention until
the twentieth century, and by the 1980s had--for much of the
population--barely developed beyond indigenous Indian techniques.
Industry developed slowly because the flow of goods from Europe and
later from North America created a disincentive for local
production.
Panama has been affected by the cyclical nature of
international trade. The economy stagnated in the 1700s as colonial
exchange via the isthmus declined. In the mid-1800s, Panama's
economy boomed as a result of increased cargo and passengers
associated with the California gold rush. A railroad across the
isthmus, completed in 1855, prolonged economic growth for about
fifteen years until completion of the first transcontinental
railroad in the United States caused trans-isthmian traffic to
decline. France's efforts to construct a canal across the isthmus
in the 1880s and efforts by the United States in the early 1900s
stimulated the Panamanian economy.
The United States completed the canal in 1914, and canal
traffic expanded by an average of 15 percent a year between 1915
and 1930. The stimulus was strongly felt in Panama City and Colón,
the terminal cities of the canal. The world depression of the 1930s
reduced international trade and canal traffic, however, causing
extensive unemployment in the terminal cities and generating a flow
of workers to subsistence farming. During World War II, canal
traffic did not increase, but the economy boomed as the convoy
system and the presence of United States forces, sent to defend the
canal, increased foreign spending in the canal cities. The end of
the war was followed by an economic depression and another exodus
of unemployed people into agriculture. The government initiated a
modest public works program, instituted price supports for major
crops, and increased protection for selected agricultural and
industrial products.
The postwar depression gave way to rapid economic expansion
between 1950 and 1970, when GDP increased by an average of 6.4
percent a year, one of the highest sustained growth rates in the
world. All sectors contributed to the growth. Agricultural output
rose, boosted by greater fishing activities (especially shrimp),
the development of high-value fruit and vegetable production, and
the rapid growth of banana exports after disease-resistant trees
were planted. Commerce evolved into a relatively sophisticated
wholesale and retail system. Banking, tourism, and the export of
services to the Canal Zone grew rapidly. Most importantly, an
increase in world trade provided a major stimulus to use of the
canal and to the economy.
In the 1970s and 1980s, Panama's growth fluctuated with the
vagaries of the world economy. After 1973, economic expansion
slowed considerably as the result of a number of international and
domestic factors
(see Recent Economic Performance
, this ch.). Real
GDP growth averaged 3.5 percent a year between 1973 and 1979. In
the early 1980s, the economy rebounded with GDP growth rates of
15.4 percent in 1980, 4.2 percent in 1981, and 5.6 percent in 1982.
The acute recession in Latin America after 1982, however, wreaked
havoc on Panama's economy. GDP growth in 1983 was a mere 0.4
percent; in 1984 it was negative 0.4 percent. In 1985 Panama
experienced economic recovery with 4.1-percent GDP growth; the
corresponding figure for 1986 was estimated to be 2.8 percent.
Data as of December 1987
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