Updated October 7, 2021
Panama: An Overview
Panama’s central location in the Americas (linking North
Like other countries, Panama is contending with the severe
and South America), large financial sector, use of the U.S.
public health and economic consequences of the
dollar as currency, and transportation infrastructure—
Coronavirus Disease 2019 (COVID-19) pandemic. Initially,
especially the Panama Canal, which connects the Atlantic
the government’s response helped curb the disease’s spread,
and Pacific Oceans —make the country a global trade hub
but cases and deaths surged from November 2020 to
and a strategic partner for the United States.
January 2021 and again from June to July 2021. As of
October 7, 2021, Panama reported 7,255 deaths with a
Figure 1. Map of Panama
mortality rate of 170 per 100,000 people, the highest in
Central America, according to Johns Hopkins University.
Panama has reported that almost 54% of its population was
fully vaccinated as of October 7. The government has
purchased vaccines from pharmaceutical companies,
received vaccine donations from the United States (see
below), and has procured some vaccines through the
COVID-19 Vaccines Global Access (COVAX) Facility, a
mechanism developed by global health organizations to
facilitate equitable vaccine distribution.
Panama at a Glance
Population: 4.279 mil ion (2020, IMF).

Area: 29,120 square miles, slightly smal er than South Carolina.
Source: CRS.
GDP: $52.9 bil ion (2020, current prices, IMF est.).
Political and Economic Environment
Real GDP Growth (% change, constant prices, IMF): 2019,
Current President Laurentino “Nito” Cortizo of the center-
3.0%; 2020, -17.9% est.; 2021, 12.0%, projected.
left Democratic Revolutionary Party (PRD) won a narrow
Per Capita GDP: $12,373 (2020, current prices, IMF).
victory in Panama’s May 2019 elections, receiving 33% of
the vote in a seven-candidate contest. Cortizo’s PRD also
Key Trading Partners: U.S. (22.2%), China (12.5%), Mexico
won 35 seats in Panama’s 71-seat National Assembly; it is
(4.9%), Spain (4.2%), and Costa Rica (4.1%) (2020, total trade,
working in coalition with the National Republican Liberal
Panama National Institute of Statistics).
Movement (Molirena), which has five seats in the
Note: IMF = International Monetary Fund.
Assembly, providing the government with a majority.
Panama’s services-based economy averaged almost 6.9%
Cortizo heads Panama’s seventh civilian government since
growth annually from 2010 to 2017, according to the
the December 1989 U.S. military intervention that ousted
International Monetary Fund (IMF), in large part because of
the military regime of General Manuel Antonio Noriega.
the Panama Canal expansion and other large infrastructure
The endurance of elected civilian democracy in Panama for
projects, such as a metro system for Panama City; a third
more than 30 years is a significant departure from the
country’s
bridge over the canal; and expansion of the country’s
history of military rule, including the populist
airports, roads, and highways. The Panama Canal expansion
rule of General Omar Torrijos (1968-1981) and the
was completed in 2016 and included adding a new set of
increasingly repressive rule of Noriega (1983-1989).
locks and channels, which doubled the canal’s capacity and
Cortizo succeeded Juan Carlos Varela (2014-2019) of the
allowed it to accommodate giant container cargo ships.
center-right Panameñista Party. Varela served as vice
Economic growth slowed to 3.6% in 2018 and 3% in 2019
president during the Ricardo Martinelli administration
but was still among the highest in the region.
(2009-2014) and as foreign minister for two years until
Martinelli fired him, related to Varela’s allegations of
Due to the pandemic, the IMF estimates the economy
contracted almost 18% in 2020 but forecasts that growth
governmental corruption. Once in office, the Varela
will reach 12% in 2021. Increased mining and a metro
administration pursued numerous corruption cases against
system expansion are contributing to economic growth.
Martinelli government officials, including Martinelli
himself, who was investigated over irregularities in a public
Before the pandemic, Panama’s strong growth and targeted
welfare program and illegal wiretapping and pardons. The
social programs contributed to poverty reduction, although
United States extradited Martinelli to Panama in June 2018;
poverty remained higher in rural areas, particularly among
in August 2019, he was acquitted of ordering the illegal
Indigenous people. According to the World Bank, the
wiretapping, but this verdict was overturned in November
pandemic led to an increased poverty rate of 14.9% in 2020,
2020. A new trial began in July 2021.
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Panama: An Overview
up from 12.1% in 2019, but poverty would have been
Panama, according to the INCSR “is a willing and effective
higher had it not been for targeted social programs.
partner in combating the narcotics trade,” and its efforts
resulted in significant maritime seizures in 2020. Panama
During the 2019 election campaign, Cortizo pledged to
has improved its compliance with international standards
reform the constitution, but his efforts have slowed
for anti-money laundering (AML) measures, but according
considerably. In July 2019, Cortizo submitted to the
to the INCSR, numerous factors impede such efforts. These
National Assembly a package of reforms prepared by a
include lack of capacity to identify bulk cash shipments,
consultative body consisting of business, labor, and civil
inexperience with money laundering investigations and
society groups. The reforms aimed to strengthen the
prosecutions, inconsistent enforcement of laws, corruption,
judiciary and the separation of powers and to improve
and an under-resourced judicial system.
public-sector transparency and accountability. The National
Assembly amended the reforms in October 2019, watering
In June 2019, the multilateral Financial Action Task Force
down anti-corruption measures and banning marriage
added Panama to its so-called grey list of countries with
equality, among other changes. Protests ensued, and in
deficiencies in their AML standards, and in February 2020,
December 2019, Cortizo pulled the reform package and
the European Union added Panama to its list of
announced that his government would start the process over
noncooperative jurisdictions for tax purposes. Both the IMF
again. In November 2020, the Cortizo government launched
and the World Bank are providing technical assistance to
a national dialogue to achieve consensus in such areas as
help Panama improve financial integrity. The October 3,
health care, education, security, and the economy;
2021, release of the Pandora Papers by the International
constitutional reforms reportedly are part the agenda. Some
Consortium of Investigative Journalists identified
civil society groups have united in a campaign to gather
prominent Panamanians and international figures as using
signatures (20% of those on the electoral registry) for a
Panamanian offshore companies and could call into
constituent assembly to reform the constitution.
question the adequacy of Panama’s AML efforts.
On foreign policy issues, Panama established diplomatic
Concerns About China. In recent years, U.S. officials
relations with People’s Republic of China in June 2017
have raised concerns about China’s projects in Panama. In
(and cut ties with Taiwan) in an effort to attract more
its 2020 posture statement, the U.S. Southern Command
Chinese investment. Free-trade agreement (FTA)
expressed concern that China’s investment in
negotiations began under President Varela but have not
“infrastructure on both sides of the Panama Canal could
resumed under President Cortizo. With regard to the crisis
enable the Chinese military to threaten sea lanes vital to
in Venezuela, Panama is a member of the Lima Group
global commerce and the movement of U.S. forces.” Some
supporting a peaceful return to democracy.
analysts view President Cortizo as being cautious in his
approach toward China because of U.S. concerns and note
U.S.-Panamanian Relations
that many planned Chinese projects have not been realized.
The record of close U.S.-Panamanian relations stems in
large part from the extensive linkages developed when the
U.S. Assistance. The United States provided a total of $26
Panama Canal was under U.S. control (1914-1999) and
million in assistance to Panama in FY2019 from all
Panama hosted major U.S. military installations. A bilateral
agencies (latest full-year data available, at
FTA that entered into force in 2012 has strengthened
https://foreignassistance.gov/cd/panama/). Most U.S. aid to
relations and significantly liberalized trade in goods and
Panama is security related, focused on improving Panama’s
services. Because Panama has a services-based economy, it
ability to deter drug trafficking. Panama receives assistance
runs a large merchandise trade deficit with the United
from U.S. regional programs for Central America
States. In 2020, the United States exported $5.8 billion in
implemented by the State Department and the U.S. Agency
goods to Panama and imported $693 million. In 2020, U.S.
for International Development (USAID) to improve the
services exports amounted to $2.2 billion and services
country’s capabilities to interdict, investigate, and prosecute
imports from Panama amounted to $1.0 billion. The stock
drug trafficking and other transnational crimes. For
of U.S. foreign direct investment in Panama was $4.6
FY2022, the Administration requested $1.2 million for
billion in 2020, led by nonbank holding companies,
State Department- and USAID-administered aid, and an
wholesale trade, and finance and insurance.
unspecified amount from regional and global programs
administered by those agencies.
Under Secretary of State Victoria Nuland traveled to
Panama in June 2021 to hold discussions focused on
Among other aid spigots, the Department of Defense
managing irregular migration, climate change and
supports counterdrug activities, including through the
environmental protection, and Panama’s efforts to combat
provision of infrastructure and equipment. The Inter-
illicit finance. Increased irregular migration through
American Foundation supports grassroots development
Panama’s Darien Gap region bordering Colombia has
projects through grants to local organizations. Until the
become a high-profile issue. Panama maintains that an
COVID-19 pandemic, Panama hosted over 190 volunteers
estimated 95,000 migrants, largely Haitians, attempted the
working on agriculture, education, environment, and health
passage during the first nine months of 2021, and has called
projects. The United States is also providing humanitarian
for international support to deal with the migration flow.
assistance to help Panama with the influx of migrants from
Venezuela, estimated at almost 122,000. USAID has
Drug Trafficking and Money Laundering. According to
provided $2.5 million to support Panama’s response to the
the State Department’s 2021 International Narcotics
COVID-19 pandemic, and in July 2021, the United States
Control Strategy Report (INCSR), transnational drug
donated a half million vaccine doses.
trafficking organizations use Panama as a transit country to
smuggle cocaine to the United States and other markets.
Mark P. Sullivan, Specialist in Latin American Affairs
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Panama: An Overview

IF10430


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https://crsreports.congress.gov | IF10430 · VERSION 15 · UPDATED

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