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Panama: More Than Hats

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The Panama Canal is only part of a grander vision, in which Panama becomes a major logistics center.

BY FRED BLASER

The United States should sign a free trade deal with Panama, as soon as the latter cleans up a few ethical problems.

While they are waiting - which shouldn't be long - American companies should check out opportunities in Panama, one of Latin America's most dynamic countries.

Last month, Panama's Innovation Minister (yes, they have one) announced a plan, which before the end of next year would give more than two thirds of the country's 3.3 million people free access to broadband wireless internet, in areas that include public schools, clinics, libraries and parks.

BEYOND THE CANAL

Panama's best-known feature, the canal, is cloning itself in a 10-year expansion project, intended to ensure that the country continues being part of the main sea route between Asia and North America's east coast.

Meanwhile, the canal is only part of a grander vision, in which Panama becomes the world’s third great logistics center, after Hong Kong and Singapore, basing itself on the same model of a small region that focuses on a strong banking system, modern super-ports and an air transport hub.

Panama is also a major trading center, with huge warehouse operations, to which wholesalers from all over Latin American come to buy Asian products without the expense and trouble of going to Asia.

The quality of Panamanian services tends to be far inferior to those of Hong Kong or Singapore, mainly because its infrastructure has developed faster than its human resources.

POVERTY GAP

Panama has Latin America's third-highest level of average individual purchasing power, but also the third-highest gap between rich and poor, meaning that most people earn amounts far below average.

Which brings us to Ricardo Martinelli, the supermarket magnate who took office as President last July, and who plans to increase taxes from less than 15 percent of the value of annual national output to close to 20 percent - low by the standards of most rich nations, but considerably more than that of most Latin American countries.

In addition, half of his government's proposed 2010 budget of close to $10.5 billion - huge for a country whose annual output is worth barely double that amount - would be spent on public education and health, as well as social housing (most of the rest will go for recession-busting public works, along with other infrastructure projects).

STRONG START

It remains to be seen whether or not Martinelli and his government can lay the foundation of a Panamanian society dominated for the first time in history by an educated, productive middle class - but they are off to a strong start.

In terms of business climate, the International Monetary Fund predicts that Panama will have the strongest growth of any Latin American country in the five-year period starting in 2010. For their part, American exports to Panama increased by more than 80 percent in the last two years (from $2.7 billion in 2006 to $4.9 billion last year).

US FTA

Opportunities for U.S. companies will grow, once Washington agrees to ratify a bilateral free trade deal completed last August.

Many Congresspeople on both sides of the House and Senate have opposed the agreement, on the grounds that Panama's strict bank secrecy and lax securities rules provide cover for international money laundering and tax evasion. But Panama, which has loftier goals than being a haven for drug traffickers, can be expected soon to start bringing its rules in line with those of the rest of the world.

When that happens, Washington should move quickly to develop closer ties with a country, which is trying to balance economic growth and a social agenda, and whose demand for imported goods and services is growing impressively.

Nice hats, too.

Fred Blaser is the Publisher of Centralamericalink.com

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