Updated July 18, 2022
Panama: An Overview
Panama’s central location in the Americas (linking North
himself, who was investigated over irregularities in a public
and South America), large financial sector, use of the U.S.
welfare program and illegal wiretapping and pardons. The
dollar as currency, and transportation infrastructure—
United States extradited Martinelli to Panama in 2018; he
especially the Panama Canal, which connects the Atlantic
was acquitted twice on illegal wiretapping, most recently in
and Pacific Oceans—make the country a global trade hub
November 2021, and reportedly is considering running for
and a strategic partner for the United States.
president in 2024. In December 2021, the former
president’s
Figure 1. Map of Panama
two sons pleaded guilty to money laundering in
U.S. federal court in New York in a case involving
Odebrecht, the Brazilian construction company.
Panama at a Glance
Population: 4.337 mil ion (2021, IMF est.)
Area: 29,120 square miles, slightly smaller than South Carolina
GDP: $63.6 bil ion (2021, current prices, IMF est.)
Real GDP Growth (% change, constant prices, IMF): 2019,
3.0%; 2020, -17.9%; 2021, 15.3% est.; 2022, 7.5% forecast
Per Capita GDP: $14,664 (2021, current prices, IMF est.)
Key Trading Partners: U.S. (20.3%), China (16.2%), Mexico
(3.9%), Spain (3.7%), and Costa Rica (3.3%) (2021, total trade,

TDM)
Source: CRS.
Sources: International Monetary Fund (IMF); World Economic
Political and Economic Environment
Outlook Database, April 2022; Panama National Institute of
Panama holds regular free and fair democratic elections and
Statistics, as presented by Trade Data Monitor (TDM).
generally respects civil liberties and political rights,
although corruption remains a challenge. Current President
Like other countries worldwide, Panama faced severe
Laurentino “Nito” Cortizo of the center-left Democratic
public health and economic impacts of the Coronavirus
Revolutionary Party (PRD) won a narrow victory in
Disease 2019 (COVID-19) pandemic. As of mid-July,
Panama’s May 2019 elections, receiving 33% of the vote in
2022, Panama reported over 8,380 deaths (with a mortality
a seven-candidate contest. Cortizo’s PRD also won 35 seats
rate of 194 per 100,000 people) and 72% of its population
in Panama’s 71-seat National Assembly; it is working in
was fully vaccinated, according to Johns Hopkins
coalition with the National Republican Liberal Movement
University. The government has purchased vaccines from
(Molirena), which has five seats in the assembly, providing
pharmaceutical companies, received vaccine donations
the government with a majority. The next national
from the United States (see below), and procured some
elections, both legislative and presidential, are scheduled
vaccines through the COVID-19 Vaccines Global Access
for May 2024; the constitution prohibits immediate
Facility, a mechanism developed by global health
presidential reelection for two terms.
organizations to facilitate equitable vaccine distribution.
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 due to the Panama Canal expansion
The endurance of elected civilian democracy in Panama for
and other large infrastructure projects. These projects
more than 30 years is a significant departure from the
include a metro system for Panama City; a third bridge over
country’s history of military rule, including the populist
the canal; and expansion of the country’s airports, roads,
rule of General Omar Torrijos (1968-1981) and the
and highways. The Panama Canal expansion was completed
increasingly repressive rule of Noriega (1983-1989).
in 2016 and included adding a new set of locks and
channels, which doubled the canal’s capacity.
Cortizo succeeded Juan Carlos Varela (2014-2019) of the
center-right Panameñista Party. Varela served as vice
Due to the pandemic, however, Panama’s economy
president during the Ricardo Martinelli administration
contracted 18% in 2020; poverty also increased, according
(2009-2014) and as foreign minister for two years until
to the World Bank, but would have been higher had it not
Martinelli dismissed him in response to Varela’s allegations
been for targeted social programs. The IMF estimates 15%
of governmental corruption. Once in office, the Varela
growth in 2021 and projects 7.5% growth in 2022.
administration pursued numerous corruption cases against
Increased mining and the metro system expansion are
Martinelli government officials, including Martinelli
contributing to growth, but a weakening of the global
economy due to Russia’s 2022 invasion of Ukraine could
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Panama: An Overview
dampen growth prospects. In July 2022, rising living costs
partners in countering illicit narcotics. Panama has
sparked countrywide protests and road closures calling for
improved its compliance with international standards for
price cuts on fuel, food, and medicines.
anti-money laundering (AML) measures, but, according to
the INCSR, deficiencies exist in information sharing, risk
U.S.-Panamanian Relations
management, prosecutions of white-collar criminals, and
The record of close U.S.-Panamanian relations stems in part
implementation of a 2020 beneficial ownership law. The
from the extensive linkages developed when the Panama
establishment of a bilateral AML/anti-corruption task force
Canal was under U.S. control (1914-1999) and Panama
in 2021 led to an increase in non-drug-related money
hosted major U.S. military installations. A bilateral free-
laundering investigations, although the INCSR asserted that
trade agreement that entered into force in 2012 has
Panama needs to prosecute these cases.
strengthened relations and significantly liberalized trade.
Because Panama has a services-based economy, it runs a
In 2019, the multilateral Financial Action Task Force added
large merchandise trade deficit with the United States. In
Panama to its list of countries with deficiencies in AML
2021, the United States exported $8.1 billion in goods to
standards. Both the IMF and the World Bank are providing
Panama (about half petroleum products) and imported $756
technical assistance to help Panama improve financial
million; U.S. services exports amounted to $2.3 billion and
integrity. In 2016, the International Consortium of
services imports from Panama amounted to almost $1.3
Investigative Journalists (ICIJ) released leaked confidential
billion. The stock of U.S. foreign direct investment in
and legal records—the so-called Panama Papers—from a
Panama was $4.6 billion in 2020, led by nonbank holding
Panamanian law firm. The documents showed the use of
companies, wholesale trade, and finance and insurance.
Panama as an offshore tax haven by a wide range of
celebrities, leaders, public officials, and criminals
Under the Biden Administration, high-level engagement
worldwide. ICIJ’s October 2021 release of the Pandora
with Panama is continuing, with senior officials visiting
Papers identified prominent Panamanians and international
Panama in 2021 and 2022. Secretary of State Antony
figures as using Panamanian offshore companies.
Blinken and Secretary of Homeland Security Alejandro
Mayorkas visited in April 2022 to discuss migration. Other
Concerns About China. Panama established diplomatic
visits have included First Lady Dr. Jill Biden in May 2022
relations with the People’s Republic of China (PRC) in
and General Laura Richardson, Commander of the U.S.
2017 (and cut ties with Taiwan) in an effort to attract more
Southern Command (SOUTHCOM), in June 2022.
Chinese investment. In its 2022 posture statement,
President Cortizo participated in the White House’s virtual
SOUTHCOM expressed concern that PRC-based
Summit for Democracy in December 2021 and the Ninth
companies are engaged in, or bidding for, several projects
Summit of the Americas, held in June 2022 in Los Angeles.
related to the Panama Canal. Some analysts view President
Cortizo as being cautious in his approach toward China
Migration. Increased irregular migration through Panama’s
because of U.S. concerns and note that many planned
Darien Gap region bordering Colombia has become a high-
Chinese projects have not been realized.
profile issue and a humanitarian and security concern for
the region. Panama maintains that over 133,000 migrants
U.S. Assistance. The United States provided $35.6 million
entered Panama through the Darien region in 2021. For
in assistance to Panama in FY2020 from all agencies
2022, Panama estimates that more than 48,000 migrants had
(https://foreignassistance.gov/cd/panama/). Most U.S. aid to
crossed through Darién through June.
Panama is security related, focused on improving Panama’s
ability to deter drug trafficking. Panama receives assistance
Panama has worked closely with the United States and
from U.S. regional programs for Central America
other regional countries to advance cooperation on
implemented by the State Department and the U.S. Agency
migration. In October 2021, it participated in a regional
for International Development (USAID) to improve its
ministerial in Colombia. In April 2022, Panama hosted a
capabilities to interdict, investigate, and prosecute drug
follow-up regional ministerial and signed a Bilateral
trafficking and other transnational crimes. For FY2023, the
Arrangement on Migration and Protection with the United
Administration requested $1.2 million for State
States detailing collaborative commitments to improve
Department- and USAID-administered aid and an
migration management, expand efforts to stabilize
unspecified amount from regional and global programs
displaced populations and host communities, and increase
administered by those and other agencies.
access to legal pathways and protections for those in the
region. At the Summit of the Americas, Panama signed the
Among other aid spigots, the Department of Defense
Los Angeles Declaration for Migration and Protection,
supports counterdrug activities, including infrastructure and
which seeks to mobilize the entire region around actions to
equipment; the Inter-American Foundation supports
create conditions for safe, orderly, humane, and regular
grassroots development projects through grants to local
migration and to strengthen frameworks for international
organizations; and, until the pandemic, Panama hosted over
protection and cooperation.
190 Peace Corps volunteers. The United States also
provides humanitarian assistance to help Panama contend
Drug Trafficking and Money Laundering. According to
with the influx of almost 122,000 Venezuelan migrants. To
the State Department’s 2022 International Narcotics
date, USAID has provided $4.8 million to support
Control Strategy Report (INCSR), transnational drug
Panama’s pandemic response and the United States has
trafficking organizations use Panama as a transit country to
donated over 503,000 vaccine doses.
smuggle cocaine to the United States and other markets,
with up to 30% of cocaine produced in Colombia passing
Mark P. Sullivan, Specialist in Latin American Affairs
through Panamanian waters. Nevertheless, according to the
IF10430
INCSR, Panama is among the region’s most capable
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Panama: An Overview


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https://crsreports.congress.gov | IF10430 · VERSION 17 · UPDATED

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