Updated October 24, 2019
Panama: An Overview
Panama’s central location in the Americas (linking North
Cortizo succeeded Juan Carlos Varela (2014-2019) of the
and South America) and its transportation infrastructure—
center-right Panameñista Party, who could not run because
especially the Panama Canal, which connects the Atlantic
Panama’s constitution does not permit consecutive
and Pacific Oceans—make the country a global trade hub
reelection. Varela served as vice president during the
and a strategic partner for the United States.
Martinelli administration and served as foreign minister for
two years until Martinelli fired him, related to Varela’s
Figure 1. Map of Panama
allegations of governmental corruption. Once in office, the
Varela administration pursued numerous corruption cases
against Martinelli government officials, including
Martinelli himself, who was investigated over irregularities
in a public welfare program and illegal wiretapping and
pardons. Pursuant to an extradition request from Panama,
U.S. marshals arrested Martinelli in Florida in June 2017;
he was extradited to Panama in June 2018. In August 2019,
he was acquitted on charges of ordering the illegal
wiretapping of his opponents.
Panama at a Glance
Population: 4.159 million (2018, IMF est.).

Area: 29,120 square miles, slightly smaller than South Carolina.
Source: CRS.
GDP: $65 billion (2018, current prices, IMF est.).
Political and Economic Environment
Real GDP Growth: 5.3% (2017, IMF); 3.7% (2018, IMF est.);
Current President Laurentino “Nito” Cortizo of the center-
4.3% (2019, IMF forecast).
left Democratic Revolutionary Party (PRD) won a narrow
Per Capita GDP: $15,643 (2018, current prices, IMF).
victory in Panama’s May 2019 elections, receiving 33% of
U.S. Trade: U.S. imports, $462 million (2018); U.S. exports
the vote in a seven-candidate contest; he was inaugurated to
$6.88 billion (2018) (U.S. Department of Commerce).
a five-year term on July 1, 2019. Cortizo defeated Rómulo
Roux of the center-right Democratic Change party of

former President Ricardo Martinelli (2009-2014), who
In July 2019, President Cortizo submitted to the National
received 31% of the vote, and independent candidate
Assembly a package of constitutional reforms prepared by a
Ricardo Lombana, who received almost 19% of the vote
consultative body consisting of business, labor, and civil
running on an anti-corruption platform. Cortizo’s PRD also
society groups. The reforms aim to strengthen the judiciary,
won 35 seats in Panama’s 71-seat National Assembly, the
improve public sector transparency and accountability, and
most for a single party; it is working in coalition with the
strengthen the separation of powers. The National
National Republican Liberal Movement (Molirena), which
Assembly finished debating and amending the reforms on
has five seats in the Assembly, providing the government
October 23, 2019; the reforms now need to be approved
with majority support. During the campaign, Cortizo made
again by the National Assembly in its next legislative
inequality and poverty his main campaign issues, including
session in 2020 and then approved by public referendum.
making health care more accessible. He also pledged to
Panama’s services-based economy has been booming since
push for constitutional reform
2010, in large part because of the Panama Canal expansion
Cortizo heads Panama’s seventh civilian government since
and other large infrastructure projects, such as a metro
the December 1989 U.S. military intervention that ousted
system for Panama City; a third bridge over the canal (and a
the military regime of General Manuel Antonio Noriega.
fourth one planned); and expansion of the country’s airport,
The endurance of elected civilian democracy in Panama for
roads, and highways. The Panama Canal expansion was
almost 30 years is a significant departure from the country’s
completed in 2016 and included adding a new set of locks
history of military rule, including the populist rule of
and channel, which doubled the canal’s capacity and
General Omar Torrijos (1968-1981) and the increasingly
allowed it to accommodate giant container cargo ships.
repressive rule of Noriega (1983-1989). Noriega died in
May 2017; after the U.S. intervention, he served prison time
According to the International Monetary Fund, Panama’s
on drug charges in the United States and France and then
economic growth averaged almost 6.9% from 2010 to 2017.
returned to Panama in 2011 to serve time related to charges
Economic growth slowed to 3.7% in 2018, and the forecast
for 2019 is 4.3% growth (lower than the 6% forecast earlier
for political killings.
in the year but still among the highest in the hemisphere).
Strong economic growth and targeted social programs have
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Panama: An Overview
contributed to poverty reduction. Nevertheless, although the
a transit country to smuggle cocaine to the United States
World Bank classifies Panama as having an upper-middle-
and other markets. Panama’s antidrug cooperation with the
income economy, inequality in the country remains high.
United States is strong, according to the INCSR, with
The World Bank maintains that poverty prevails in rural
Panama viewed as a trusted strategic partner and regional
areas, particularly among indigenous people.
leader in interdicting illicit drugs. The State Department
cautioned, however, that the increasing volume of drugs
On foreign policy, Panama established diplomatic relations
from Colombia and the spillover of criminality from
with China in June 2017 (and in turn cut ties with Taiwan)
neighboring countries exceeds Panama’s capabilities to
in a move designed to attract more investment from China.
manage these challenges alone.
Panama and China have signed some 30 cooperation
agreements and are negotiating a free-trade agreement.
According to the 2019 INCSR, although Panama has
Chinese President Xi Jinping visited Panama in December
improved its anti-money laundering (AML) regime,
2018, and then-President Varela visited China twice, most
numerous factors impede the country’s efforts to combat
recently in April 2019. With regard to the crisis in
such activity, including inexperience with money-
Venezuela, Panama is a member of the Lima Group
laundering investigations and prosecutions, inconsistent
supporting a peaceful resolution to the crisis and has
enforcement of laws and regulations, corruption, and an
recognized Juan Guaidó as Venezuela’s interim president.
under-resourced judicial system. In June 2019, the
Under President Cortizo, Panama joined the United States
multilateral Financial Action Task Force (FATF) added
and 10 other countries in September 2019 in invoking the
Panama to its so-called gray list of countries with
Rio Treaty to facilitate a regional response to the crisis.
deficiencies in their standards to deter money laundering
and combat the financing of terrorism. Panama had been on
U.S.-Panamanian Relations
the FATF list in 2014 but was removed in 2016, after it
The record of close U.S.-Panamanian relations stems in
took efforts to improve its AML regulatory framework.
large part from the extensive linkages developed when the
Panama Canal was under U.S. control (1914-1999) and
Concerns About China. U.S. officials have raised
Panama hosted major U.S. military installations. A bilateral
concerns with Panama about China’s investment in Panama
free-trade agreement that entered into force in 2012
and its alleged predatory economic activity. In September
strengthened relations and significantly liberalized trade in
2018, the Trump Administration recalled its top diplomats
goods and services. Because Panama has a services-based
from Panama, El Salvador, and the Dominican Republic for
economy, it runs a large merchandise trade deficit with the
consultation because all three countries had switched their
United States; in 2018, the United States exported almost
recognition from Taiwan to China. At the time, President
$6.9 billion in goods to Panama and imported $462 million.
Varela issued a statement asking for respect for Panama’s
U.S. services exports to Panama amounted to $1.7 billion in
sovereign decisions. In its 2019 posture statement, the U.S.
2018, and services imports from Panama amounted to $1.5
Southern Command expressed concern about “China’s
billion. The stock of U.S. foreign direct investment in
effort to exert control over key infrastructure associated
Panama was almost $5.1 billion in 2018, led by nonbank
with the Panama Canal.” Looking ahead, some observers
holding companies.
see President Cortizo as being more cautious in his
approach toward China because of U.S. concerns.
Reflecting the close state of relations, then-President Varela
visited the White House in June 2017, where talks focused
U.S. Assistance. The United States provided a total of
on shared priorities in combating transnational organized
almost $27 million in assistance to Panama in FY2017
crime and illegal migration. Vice President Mike Pence
(latest full-year data available). Most U.S. aid to Panama is
visited Panama in August 2017; he reaffirmed the two
security related, focused on improving Panama’s ability to
countries’ historic friendship and committed to strengthen
deter drug trafficking. For bilateral assistance, the United
the partnership in security and prosperity. In October 2018,
States provided $3.3 million in FY2017 and $3.1 million in
Secretary of State Mike Pompeo visited Panama and
FY2018 for military education and training and support to
reaffirmed the partnership on bilateral and regional issues,
help Panama strengthen its strategic trade control system;
including Panama’s advocacy for the restoration of
for each of FY2019 and FY2020, the Trump Administration
democracy to Venezuela and Nicaragua. In July 2019,
requested $1.2 million for these programs. Panama also
Secretary of Commerce Wilbur Ross led the U.S.
receives assistance from U.S. regional programs for Central
delegation to Cortizo’s inauguration. In August 2019, then-
America implemented by the State Department and the U.S.
Acting Secretary of Homeland Security Kevin McAleenan
Agency for International Development to improve
visited Panama to discuss cooperation on irregular
Panama’s capabilities to interdict, investigate, and
migration; the Secretary toured Panama’s border with
prosecute drug trafficking and other transnational crimes.
Colombia in the Darien region.
The Department of Defense also supports drug interdiction
and counterdrug activities, including infrastructure and
Drug Trafficking and Money Laundering. The same
equipment. The Peace Corps (with over 190 volunteers) and
characteristics that make Panama a strategic U.S. partner—
the Inter-American Foundation provide support for
its transportation infrastructure (especially the canal), free-
Panama’s economic development.
trade zones, use of the U.S. dollar as currency, and large
financial sector—also make it vulnerable to drug
The United States also provided almost $3.6 million in
trafficking, money laundering, and other organized criminal
humanitarian assistance from FY2017 to FY2019 to help
activity. According to the State Department’s 2019
with the influx of refugees and migrants from Venezuela in
International Narcotics Control Strategy Report (INCSR),
Panama, estimated at almost 95,000.
transnational drug trafficking organizations use Panama as
Mark P. Sullivan, Specialist in Latin American Affairs
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Panama: An Overview

IF10430


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