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Panama FOREIGN ECONOMIC RELATIONS
In the 1980s, Panama has struggled to adjust to the constraints
imposed on its economy by a high external debt. To compensate for
a deficit in the capital account, its current account has
registered a surplus since 1983, because the service sector has
maintained a surplus. Debt has remained high in per capita terms,
but the actual debt burden has fallen.
Trade
The value of Panama's merchandise exports has always lagged
behind imports. The level of imports relative to the size of the
economy has remained large. Panama's consumption standards have
been high for a developing country. In the early 1900s, nearly
everything consumed in the metropolitan areas was imported because
little agricultural surplus and virtually no manufacturing existed.
By the mid-1980s, the country was largely self-sufficient in foods
except for wheat, temperate-zone fruits and vegetables, and oils
and fats. Domestic manufacturing provided a growing share of
consumer goods, but the country still imported a wide range of
commodities.
With the decline of commodity prices on world markets in the
1980s, the
terms of trade (see Glossary)
have steadily moved
against Panama. Based on a terms of trade index of 100 in 1980,
Panama's index stood at 82 in 1985, meaning that it had to export
considerably more in order to import the same value of goods it had
previously imported.
Panama controlled trade by issuing import and export licenses.
Since 1983 tariffs have gradually replaced quantitative
restrictions on imports. Taxes were levied on some imports, and
incentives were given to nontraditional exports through tax credit
certificates.
In 1985 merchandise exports totalled US$414.50 million
(excluding reexports from the CFZ) down from US$526.10 million in
1980 (see
table 16, Appendix A). Refined petroleum topped the list
of export items, at US$100.60 million, but its net contribution to
the trade balance was much smaller, given that Panama's crude oil
is imported. Bananas, traditionally the largest export item,
accounted for US$78.1 million in exports, followed by shrimp
(US$53.4 million), manufactured goods (US$45 million), sugar
(US$33.3 million), coffee (US$15.6 million), and clothing (US$11.5
million).
About 75 percent of Panama's exports went to industrial
countries; Latin America received the other 25 percent. The United
States was by far the largest single market, and in 1985 received
60.5 percent of Panama's exports. Most of the remaining exports
went to Costa Rica (7.5 percent), the Federal Republic of Germany
(West Germany) (5.5 percent), Belgium (4.9 percent), and Italy (4.5
percent). The CBI was expected to increase Panama's exports to the
United States. The CBI seeks to provide long-term trade, aid, and
investment incentives to promote the economic revitalization of the
Caribbean Basin. The most significant incentive is twelve-year,
duty-free access of most goods to the United States market. Some
omitted goods were footwear, textiles, leather and general apparel,
canned tuna, petroleum and petroleum products, rubber and plastic
gloves, luggage, and handbags. In addition, special rules limited
the eligibility of sugar for duty-free treatment. Twenty countries,
including Panama, were granted this access in January 1984. In 1987
judging the long-term CBI benefits for Panama was premature.
Critics charged that few new trade benefits would accrue from the
CBI beyond those under the Generalized System of Preferences, which
already accommodated 87 percent of Caribbean Basin exports to the
United States. In the initial years of CBI implementation, the
share of Panama's exports going to the United States remained
unchanged.
In 1985 Panama's merchandise imports amounted to US$1.34
billion, or about 30 percent of GDP. In that year, manufactured
goods were the largest import item (US$348.6 million), followed by
crude oil (US$271.8 million), machinery and transport equipment
(US$266.7 million), chemicals (US$158.0 million), and food products
(US$142.6 million). Crude oil has traditionally been the largest
import item, but in the 1980s its share of imports fell as
petroleum prices declined and hydroelectric energy capacity
increased.
About one-third of Panama's imports came from the United
States, another third from other industrial countries, and onethird from Latin America. In 1985 Panama's imports came from the
United States (30.8 percent), Japan (8.9 percent), Mexico (8.2
percent), Venezuela (6.8 percent), and Ecuador (7.2 percent).
Mexico and Venezuela supplied 70 percent of Panama's crude oil
under the San José Agreement.
Data as of December 1987
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