Monday, May 09, 2011

The Dubai of Central America?

A friend of mine visiting Panama snapped the following two pictures:

Some economic history of the country:
After taking office in 1994 President Ernesto Perez Balladares set forth an economic liberalization program designed to liberalize the trade regime, attract foreign investment, privatize state-owned enterprises, institute fiscal discipline and privatized its two ports in 1997 and approved the sale of the railroad in early assets. Panama joined the World Trade Organization (WTO) and a banking reform law was approved by the legislature in early 1998 and dismantled the Central bank.
After two years of near stagnation the reforms began to take root; GDP grew by 3.6% in 1997 and grew by more than 6% in 1998. The most important sectors which drove growth were the Panama Canal and the shipping and port activities of The Colon Free Zone which also rebounded from a slow year in 1996.
After the global economic slowdown in the early 2000s, growth sharply rebounded, peaking at 11.2 percent in 2008. While the country's prosperity is due in large part to exogenous factors such as a global trade boom, the combination of privatization, free trade and fiscal discipline (especially compared to the US) certainly hasn't hurt. Next up: a flat 10 percent income tax?

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