Our comprehensive assessment of Panama's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Panama, as well as the latest industry developments that could impact Panama's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Panama before your competitors.
Panama Country Risk
Panama Country Risk
External Tailwinds Supporting Regional Underperformers
Central American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm toward the country. Similarly, Costa Rica is also facing a challenging fiscal outlook - a situation which is only exacerbated by the fragmented political environment.
In contrast, our outlook for most of Central America's underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their manufactured goods, rising remittance inflows and lower oil prices in the quarters...
Panama Industry Coverage (10)
BMI View: Coffee production in the Central America region will remain at risk over the next few years as the nature of subsistence farming will limit investment into safeguards against diseases such as coffee rust (roya). Countries in Central America are generally dependent on corn imports and we expect the corn production deficit to widen over our forecast period. Strength in the US dollar over this time frame will hurt the capital accounts of the region's countries. We believe the region's sugar industry will post strong growth over the coming years despite low international prices.
|Honduras Agribusiness To Outperform|
|Select Countries - Agribusiness Market Value (USDmn)|
BMI View: The outlook for the autos industry in the Central Americas region in 2015 is modest, with tepid sales growth expected in some markets, but contractions likely in others. This is broadly in line with our outlook for the Latin America region, although many markets in Central America are very small in volume terms, and modest changes in sales figures could have a relatively large impact on the year-on-year growth rate.
Income distribution across much of the region is highly unequal, and the majority of headline spending growth comes from the relatively wealthy sections of the population. This income structure is likely to continue to restrict growth in the regional autos sector.
Panama Freight Transport
BMI View: In 2015, the annual outperformer in terms of growth prospects is expected to be road freight (5.53%), forging ahead of both air and road freight (2.34% and 2.75% respectively). Road will also continue to significantly outperform the other modes in terms of total tonnage handled.
The country's robust financial account surpluses, bolstered by strong foreign investment into infrastructure projects, will ensure balance of payments stability in the coming years. Rising domestic demand, stemming from a stronger US dollar, and a greater need for construction materials are set to boost import growth, which we anticipate growing by 0.61% in 2015, following contractions over the past three years. This will only grow over our forecast period, while exports will also return to positive growth in 2015.
With the road freight...
Panama Freight Transport
Oil Prices Boost Regional Freight Prospects
Lower oil prices remain a positive factor for the Central American economies as a whole, as does the US recovery, with positive side-effects for the freight industry. Increased remittances from migrant workers in the US will also boost purchasing power. But uncertainties and problems remain. While the region's coffee exports are recovering from coffee leaf rust disease, generally weak commodity export prices in general are holding back export volumes. Many governments in the region are also struggling to control fiscal deficits and foreign debt levels, putting a ceiling on expected rates of GDP growth. Also, continuing high levels of crime, coupled with protests over corruption and other issues (particularly in Guatemala) have maintained a relatively high level of political risk.
Our view is that for road freight, the dominant form of cargo...
BMI View: We currently forecast an average of 3.6% real growth in Central America's construction industry value for 2015, which is considerably higher than the regional average for 2014 at 1.3%. We expect Honduras and El Salvador's construction industries to return to positive growth in 2015 on the back of increasing government support for infrastructure projects and a strengthening project pipeline, particularly in the transport sector.
Despite the small size of their construction industries, Central American countries present a wide range of small-scale opportunities (albeit the inter-oceanic canal projects) as the region aims...
BMI View: Central America's insurance markets are diverse in terms of size, ranging from Nicaragua's total premiums of just USD170mn to Panama's at almost ten times that size. Most are growing quickly, and a broad trend towards health insurance products will continue to spark growth. Many markets remain fragmented, and opportunities abound for acquisitions both from within and without. Product innovation, particularly in low-cost alternatives, has been limited but has the potential to deliver long-term growth in many sectors.
BMI expects Central American insurance markets to continue to grow rapidly in the coming years. Annual growth rates outside Nicaragua, the region's underperformer, will consistently hit high single-digit rates, with some sectors consistently posting growth rates in excess...
BMI View: Mining sectors across Central America and the Caribbean will see varying growth prospects in 2019. The region has significant untapped mineral potential, yet a range of business environments and operational challenges will lead to uneven growth. Overall, the mining sectors of Colombia and Panama will see the strongest longer-term growth, while Guatemala, and to a lesser extent Honduras, will underperform.
Colombia and Panama will outperform other countries in Central America and the Caribbean in terms...
Pharmaceuticals & Healthcare
Panama Pharmaceuticals & Healthcare
BMI View: Favourable tax incentives, continued demand for both generic and patented medicines, and regional anti-counterfiet measures solidify Central America's revenue generating opportunities for multinational pharmaceutical companies in coming years. Despite political instability in some areas of the region, Central America's medicine consumption will continue to grow in 2015.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +4.1%. Our forecast has been maintained since Q215.
Healthcare: USD16.8bn in 2014 to USD17.8bn in 2015; +5.1%. Our...
BMI View: Number portability, with four out of eight countries having implemented or in the process of implementing a form of number porting, should encourage an increase in competition, but the progress will depend on the commitment of the individual countries. Mobile forecasts show much slower growth across the board, with only Nicaragua offering any real growth potential. Increasing government interference, as is the case of Guatemala, is a worrying new development. Data-driven 3G/4G services will offer real growth potential as all the large operators are investing heavily into new infrastructure.
Number porting in Panama increased 37.4% in 2014, highlighting that the population is increasingly more willing to take advantage of better available deals as they switch operators.
BMI View: The Panamanian government is dedicated to improving the quality of its hydrological resources and its water supply and sanitation services, as well as promoting wider access to services. The country continues to prioritise and incentivise private investment at national and international levels. We believe these conditions present attractive potential opportunities for investment, although these are often hindered by a messy bureaucracy and rampant corruption.
Risks to the sector remain in the form of the widespread conflict with indigenous groups who resent the creation of large modern water infrastructure developments, which can appropriate what they perceive as 'their' water resources. Events such as the March 2014 protest by Silvia Carrera - leader of Panama's indigenous Ngobe-Bugle - who appealed to the Supreme...