Panama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, tourism, and  medical and healthcare.

In October 2006, Panamanians voted in favor of a $5.25 billion Canal expansion project to construct a third set of locks, which is expected to take eight to ten years to complete. The Government of Panama expects the project to be a transforming event for Panama that will provide 7,000-9,000 direct new jobs during the peak construction period of 2009-2011 and set the tone economically for years to come. The expansion is expected to be financed through a combination of increased tolls and debt.

GDP growth in 2007 was 11.2 percent, surpassing most private and government projections and the robust growth seen in 2006 and 2005, which was 8.1% percent and 6.9 percent, respectively. Growth has been fueled by the construction sector, transportation, port and Panama Canal-related activities, and tourism. Though Panama has the highest GDP per capita in Central America, about 38 percent  of its population remains mired in poverty.

Panama has bilateral free trade agreements with Chile, El Salvador, Taiwan,  Singapore, Honduras, and Costa Rica. Panama is exploring free trade negotiations with Mexico and other Latin American countries.  The U.S. and Panama signed a Trade Promotion Agreement (TPA) in June 2007. Panama ratified the agreement in July 2007; it still requires U.S. congressional approval to enter into force. This agreement will promote economic opportunity by eliminating tariffs and other barriers to trade of goods and services.

FOREIGN RELATIONS

Panama is a member of the UN General Assembly and most major UN agencies and started its fourth term as a member of the UN Security Council in January 2007.  It maintains membership in several international financial institutions, including the World Bank, the Inter-American Development Bank, and the International Monetary Fund.

Panama is a member of the Organization of American States and was a founding member of the Rio Group. Although it was suspended from the Latin American Economic System--known informally both as the Group of Eight and the Rio Group--in 1988 due to its internal political system under Noriega, Panama was readmitted in September 1994 as an acknowledgment of its democratic credentials.

Panama is a member of the Central American Parliament (PARLACEN) as well as the Central American Integration System (SICA).  Panama joined its six Central American neighbors at the 1994 Summit of the Americas in signing the Alliance for Sustainable Development known as the Conjunta Centroamerica-USA or CONCAUSA to promote sustainable economic development in the region.

U.S.-PANAMANIAN RELATIONS

The United States cooperates with the Panamanian Government in promoting economic, political, security, and social development through U.S. and international agencies. Cultural ties between the two countries are strong, and many Panamanians come to the United States for higher education and advanced training. In 2007, the U.S. and Panama partnered to launch a regional health worker training center. The center provides training to community healthcare workers in Panama and throughout Central America . About 25,000 American citizens reside in Panama, many retirees from the Panama Canal Commission [as well as a smaller number of retirees from the U.S. military] and individuals who hold dual nationality. There is also a rapidly growing enclave of American retirees in the Chiriqui Province in western Panama .