Foreign Direct Investment Hits All-time High

May 3, 2007
Panama City, Panama

Foreign capital investment in Panama reached some $2.56 billion in 2006 according to the Panama comptroller’s office, the entity responsible for the national budget and public spending. According to the comptroller, this is the highest foreign direct investment (FDI) the country has ever recorded. The previous record was established in 1997, when the privatization of state entities contributed to a total of about $1.29 billion foreign capital investment.

Public investment also registered impressive growth in 2006. According to national statistics compiled by the comptroller, the state spent some $1.8 billion of its annual investment budget―about $623 million more than in 2005.

Panama is breaking records abroad as well as at home. This tiny powerhouse beat out the rest of Latin America in 2006 as the country with the greatest per-capita FDI―about $780, according to local firm Latin Consulting Co. The prestigious Latin Business Chronicle also recognized Panama’s economic growth in 2006, ranking the nation as the region’s most globalized economy.

Panama’s Colon Free Trade Zone and the long-established financial sector have traditionally kept FDI strong, but the 2006 spike was primarily due to HSBC’s acquisition of the largest national bank, Banistmo, to the tune of about $1.77 billion.

Economists estimate that foreign investment will continue to rise, thanks to the pending U.S.-Panama Free Trade Agreement and the Panama Canal expansion mega-project. Though an expanded Panama Canal will generate millions more in toll revenue for Panama, the investment and growth opportunities created by the project could have an even greater positive impact on the economy, experts say.

Latin American FDI runner-ups were Chile, in second place with $399, and Mexico, in third place with a $160 per capita FDI, according to the U.N. Economic Commission for Latin America and the Caribbean (ECLAC).

Best regards,

Jessica Ramesch
Editor, Panama Insider