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: The Central America region continues to struggle with disease outbreaks in the coffee sector, which decimated the 2013 crop. We believe that coffee production will remain at risk over the next few years as the nature of subsistence farming will limit investment into safeguards. 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 expect Central America to remain self-sufficient in sugar and even increase its potential for sugar exports. The sugar industry has potential to attract investment over the medium term.
|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
Moderate To Strong Freight Growth In 2015
2015 will see moderate to strong growth across the Central American freight industry. The positives will be a small acceleration in macro-economic growth and trade in most of the Central American economies, benefitting the dominant freight mode, road haulage, as well as boosting activity levels at some of the largest ports in the region. Air freight will see more modest growth, in the low single percentage digits. Despite some interesting efforts to rehabilitate some of the region's railways, it will take some years before any concrete results can be seen. In terms of industry news, the big headlines concern the expected increase in competition among ports when the widening of the Panama Canal is completed in 2016, and Nicaragua's extremely ambitious and enigmatic 'Grand Canal' project to compete with the Panama Canal. More immediately and pragmatically, we are tracking...
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,...
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...
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: Although the rise in 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, BMI believes that it would be challenging for newcomers like Xinwei to penetrate the market. 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.
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...