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 have turned more negative on our short-term outlook regarding the regional sugar industry as a result of low international prices, but expect Central America to remain self-sufficient in sugar and even increase its potential for sugar exports out the long term. In this time frame, the sugar industry has strong potential to attract investment.
|Honduras Agribusiness To Outperform|
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Panama Freight Transport
Once the Panama Canal expansion project concludes in 2016, after delays in 2014 due to strikes look poised to prolong the construction process, real GDP growth will slow due to a deceleration in construction. That said, growth will continue to be healthy in the air and maritime freight sectors going forward with the expansion of the Canal offering widespread upside risk over the medium to long term.
Also, the newly expanded Tocumen International Airport has become a regional hub in Latin America for travel across that part of the world and the facility is projected to handle 18 million passengers by 2022 (which represents a huge number for a country of just 3.6 million people) thus providing optimism for the air freight sector over the medium term.
In 2015, we anticipate total trade growth to return to the positive after a contraction in growth in 2014. Meanwhile, year-on-year (y-o-y) air freight growth is set to come...
Panama Freight Transport
Oil Prices Boost Regional Freight Prospects
Since our last quarterly report it is clear that as 2015 began, international oil prices slumped more sharply than most analysts had been expecting. It is also evident that they will remain lower than at first projected for 2015 as a whole. This is good news for the Central American freight transport sector in various ways. First, it helps strengthen the US recovery, which boosts US demand for Central American exports, as well as increasing remittance payments sent back home by Central American migrant workers. Second, it creates a windfall saving on import costs which raises consumer spending and may find its way into increased freight demand. And third, because fuel costs are a significant item for freight companies, it improves operating margins for the industry.
That said, the freight industry improvement will be relatively limited. Higher demand...
BMI View: We currently forecast an average of 2.3% real growth in Central America's construction industry value for 2015, which is considerably higher than our regional average estimate for 2014 at 0.4%. We expect Honduras, El Salvador and Nicaragua's construction industries to return to positive growth in 2015 while Panama's will contract, as the completion of the Canal expansion nears its end.
We see high risks, small scale and limited growth opportunities across the region as a whole. A crucial factor underpinning our forecasts for infrastructure investments in future years is political and security risk. This is a particular concern in El Salvador, Honduras, and...
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: A growing ageing population, favourable tax incentives and high demand for medicines confirm Central America's ability to continue offering revenue-generating opportunities to foreign drugmakers. However, the region's growing preference for traditional medicines could interfere with productive sales in coming years.
Headline Expenditure Projections
Pharmaceuticals: USD3.7bn in 2014 to USD3.9bn in 2015; +5.6%. Our forecast has been revised upwards since Q115 due to historical data.
Healthcare: USD16.8bn in 2014 to USD17.8bn in 2015; +5.7 %. Our forecast has been revised upwards since Q115 due to revised historical data.
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: This quarter has seen a significant expansion of the water forecasts, together with a revision of the existing data in order to factor in the new content. We now cover sanitation connections, water extraction from sources, mains consumption and mains household consumption, mains extraction by individual sector and losses. Overall, we believe the water services sector will benefit from a moderate uptick in investment into infrastructure, reducing losses and boosting supplies, however, the incremental population growth and limited demand for additional mains supplies reduces the likelihood of widespread sustained investment into the sector. This leaves limited opportunities for water infrastructure companies and we continue to see Panama as one of the least attractive regional water sectors in this regard.
The Panamanian government is dedicated to improving the quality of its hydrological...