Updated January 4, 2022
Panama: An Overview
Panama’s central location in the Americas (linking North
was acquitted twice on illegal wiretapping, most recently in
and South America), large financial sector, use of the U.S.
November 2021, and reportedly is considering running for
dollar as currency, and transportation infrastructure—
president in 2024. In December 2021, the former
especially the Panama Canal, which connects the Atlantic
president’s two sons pleaded guilty to money laundering in
and Pacific Oceans—make the country a global trade hub
U.S. federal court in New York in a case involving
and a strategic partner for the United States.
Odebrecht, the Brazilian construction company.
Figure 1. Map of Panama
Panama continues to contend with the severe public health
and economic effects of the Coronavirus Disease 2019
(COVID-19) pandemic. Deaths surged from November
2020 to January 2021 and in June and July 2021. As of
January 4, 2022, Panama reported over 7,400 deaths (with a
mortality rate of 175 per 100,000 people) and 58% of its
population was fully vaccinated, according to Johns
Hopkins University. The government has purchased
vaccines from pharmaceutical companies, received vaccine
donations from the United States (see below), and has
procured vaccines through the COVID-19 Vaccines Global
Access Facility, a mechanism developed by global health
organizations to facilitate equitable vaccine distribution.

Panama at a Glance
Source: CRS.
Population: 4.337 mil ion (2021, IMF est.).
Political and Economic Environment
Area: 29,120 square miles, slightly smaller than South Carolina.
Panama holds regular free and fair democratic elections and
GDP: $60.1 bil ion (2021, current prices, IMF est.).
generally respects civil liberties and political rights,
Real GDP Growth (% change, constant prices, IMF): 2019,
although corruption remains a significant challenge.
3.0%; 2020, -17.9%; 2021, 12.0% est.; 2022, 5.0% est.
Current President Laurentino “Nito” Cortizo of the center-
Per Capita GDP: $13,861 (2021, current prices, IMF est.).
left Democratic Revolutionary Party (PRD) won a narrow
victory in Panama’s May 2019 elections, receiving 33% of
Key Trading Partners: U.S. (22.2%), China (12.5%), Mexico
the vote in a seven-candidate contest. Cortizo’s PRD also
(4.9%), Spain (4.2%), and Costa Rica (4.1%) (2020, total trade,
won 35 seats in Panama’s 71-seat National Assembly; it is
TDM).
working in coalition with the National Republican Liberal
Sources: International Monetary Fund (IMF), World Economic
Movement (Molirena), which has five seats in the
Outlook Database, October 2021; Panama National Institute of
Assembly, providing the government with a majority.
Statistics, as presented by Trade Data Monitor (TDM).
Cortizo heads Panama’s seventh civilian government since
Panama’s services-based economy averaged almost 6.2%
the December 1989 U.S. military intervention that ousted
growth annually from 2010 to 2019, according to IMF
the military regime of General Manuel Antonio Noriega.
statistics, in large part because of the Panama Canal
The endurance of elected civilian democracy in Panama for
expansion and other large infrastructure projects, such as a
more than 30 years is a significant departure from the
metro system for Panama City; a third bridge over the
country’s history of military rule, including the populist
canal; and expansion of the country’s airports, roads, and
rule of General Omar Torrijos (1968-1981) and the
highways. The Panama Canal expansion was completed in
increasingly repressive rule of Noriega (1983-1989).
2016 and included adding a new set of locks and channels,
Cortizo succeeded Juan Carlos Varela (2014-2019) of the
which doubled the canal’s capacity.
center-right Panameñista Party. Varela served as vice
The IMF reports that Panama’s economy contracted almost
president during the Ricardo Martinelli administration
18% in 2020 due to the pandemic but estimates a growth
(2009-2014) and as foreign minister for two years until
Martinelli fired him, related to Varela’s allegations of
rate of 12% in 2021. Increased mining and a metro system
expansion are contributing to economic growth.
governmental corruption. Once in office, the Varela
administration pursued numerous corruption cases against
Before the pandemic, Panama’s strong growth and targeted
Martinelli government officials, including Martinelli
social programs contributed to poverty reduction, although
himself, who was investigated over irregularities in a public
poverty remained higher in rural areas, particularly among
welfare program and illegal wiretapping and pardons. The
Indigenous people. According to the World Bank, the
United States extradited Martinelli to Panama in 2018; he
pandemic led to an increased poverty rate of 14.9% in 2020,
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Panama: An Overview
up from 12.1% in 2019, but poverty would have been
factors include lack of capacity to identify bulk cash
higher had it not been for targeted social programs.
shipments, inexperience with money laundering
investigations and prosecutions, inconsistent enforcement
During the 2019 election, Cortizo pledged to reform the
of laws, corruption, and an under-resourced judicial system.
constitution, but he has not received broad support for his
proposed changes. In 2019, Cortizo submitted a package of
In 2019, the multilateral Financial Action Task Force added
reforms to the National Assembly aimed at strengthening
Panama to its list of countries with deficiencies in their
the judiciary and the separation of powers and improving
AML standards. Both the IMF and the World Bank are
public-sector transparency and accountability. The
providing technical assistance to help Panama improve
assembly amended the reforms, watering down anti-
financial integrity. In 2016, the International Consortium of
corruption measures, among other changes. Protests ensued,
Investigative Journalists (ICIJ) released leaked confidential
and by December 2019 Cortizo had pulled the reform
and legal records—the so-called Panama Papers—from a
package. In November 2021, a year-long government-
Panamanian law firm. The documents showed the use of
sponsored national dialogue led to 187 recommendations on
Panama as an offshore tax haven by a wide range of
various topics—infrastructure, health, water, education—
celebrities, leaders, public officials, and criminals
and constitutional reform. Cortizo appointed a high-level
worldwide. ICIJ’s October 2021 release of the Pandora
commission to follow up on the recommendations.
Papers identified prominent Panamanians and international
figures as using Panamanian offshore companies.
U.S.-Panamanian Relations
The record of close U.S.-Panamanian relations stems in part
Concerns About China. Panama established diplomatic
from the extensive linkages developed when the Panama
relations with the People’s Republic of China in 2017 (and
Canal was under U.S. control (1914-1999) and Panama
cut ties with Taiwan) in an effort to attract more Chinese
hosted major U.S. military installations. A bilateral free-
investment. In its 2020 posture statement, the U.S. Southern
trade agreement that entered into force in 2012 has
Command expressed concern that China’s investment in
strengthened relations and significantly liberalized trade in
“infrastructure on both sides of the Panama Canal could
goods and services. Because Panama has a services-based
enable the Chinese military to threaten sea lanes vital to
economy, it runs a large merchandise trade deficit with the
global commerce and the movement of U.S. forces.” Some
United States. In 2020, the United States exported $5.8
analysts view President Cortizo as being cautious in his
billion in goods to Panama and imported $693 million. In
approach toward China because of U.S. concerns and note
2020, U.S. services exports amounted to $2.2 billion and
that many planned Chinese projects have not been realized.
services imports from Panama amounted to $1.0 billion.
In the context of U.S. strategic competition with China, the
The stock of U.S. foreign direct investment in Panama was
Biden Administration has been working to launch a new
$4.6 billion in 2020, led by nonbank holding companies,
global infrastructure initiative, Build Back Better World
wholesale trade, and finance and insurance.
(B3W), to advance infrastructure development in low- and
middle-income countries. A White House-led U.S.
Under the Biden Administration, high-level engagement
delegation traveled to Panama in September 2021 to
with Panama is continuing. Under Secretary of State
examine the country’s infrastructure needs.
Victoria Nuland held discussions in Panama in June 2021
focused on managing irregular migration, addressing
U.S. Assistance. The United States provided a total of
climate change and environmental protection, and
$35.6 million in assistance to Panama in FY2020 from all
combatting illicit finance. In October 2021, U.S. officials
agencies (https://foreignassistance.gov/cd/panama/). Most
participated in a High-Level Security Dialogue with
U.S. aid to Panama is security related, focused on
Panama to advance collaboration on regional migration
improving Panama’s ability to deter drug trafficking.
challenges, as well as money laundering and drug
Panama receives assistance from U.S. regional programs
trafficking. The Administration also has expressed support
for Central America implemented by the State Department
for an informal arrangement among Panama, Costa Rica,
and the U.S. Agency for International Development
and the Dominican Republic—the Alliance for
(USAID) to improve the country’s capabilities to interdict,
Development in Democracy—to address economic
investigate, and prosecute drug trafficking and other
recovery and development and cooperation on political and
transnational crimes. For FY2022, the Administration
migration challenges facing the region. Increased irregular
requested $1.2 million for State Department- and USAID-
migration through Panama’s Darien Gap region bordering
administered aid and an unspecified amount from regional
Colombia has become a high-profile issue. Panama
and global programs administered by those agencies.
maintains that over 126,000 migrants entered Panama
Among other aid spigots, the Department of Defense
through the Darien region in 2021.
supports counterdrug activities, including infrastructure and
Drug Trafficking and Money Laundering. According to
equipment; the Inter-American Foundation supports
the State Department’s 2021 International Narcotics
grassroots development projects through grants to local
Control Strategy Report (INCSR), transnational drug
organizations; and, until the pandemic, Panama hosted over
trafficking organizations use Panama as a transit country to
190 Peace Corps volunteers. The United States also
smuggle cocaine to the United States and other markets.
provides humanitarian assistance to help Panama contend
Panama, according to the INCSR, “is a willing and
with the influx of almost 122,000 Venezuelan migrants. To
effective partner in combating the narcotics trade.” Panama
date, USAID has provided $4.8 million to support
has improved its compliance with international standards
Panama’s pandemic response and the United States has
for anti-money laundering (AML) measures, but, according
donated a half-million vaccine doses.
to the INCSR, numerous factors impede such efforts. These
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 16 · UPDATED

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