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One of four key pillars of economic growth in the Strategic Economic Plan 2010-14, the tourism sector has experienced rapid development in the past decade. According to the World Travel & Tourism Council, the sector contributed an estimated 13.1% to national GDP and was responsible for 12.4% of total employment. Panama City has seen a surge of international hotel chains enter the market in recent years, while the high-end beach and luxury segment is set to receive significant government investment. Moreover, Panama’s strong biodiversity lends itself to a nascent ecotourism sub-sector. Although hotels in Panama City are facing short-term pressure in the form of lower occupancy rates and reduced prices, this is expected to be temporary. Increased investment and major infrastructure projects promise to boost visitor numbers to the capital and ensure long-term growth, especially as incomes rise throughout South and Central America. This chapter features an interview with Ernesto Orillac, Deputy Minister of Tourism.

According to the National Public Services Authority, ICT revenues rose from $743m in 2007 to $957m in 2013, maintaining a contribution to national GDP of around 3%. Much of this growth has been generated through the expansion of mobile services and broadband, which continue to offer significant room for growth. Fixed-line connections also registered significant expansion, rising 14% year-on-year in 2012, with the installation of 80,000 new lines. Thanks to Panama’s location, foreign investment incentives and connection to the continent’s primary fibre-optic networks, it is well placed to become a regional ICT centre. The biggest challenge facing the sector is capacity, primarily in human resources. A combination of expatriate employment and longer-term educational efforts will be required for the sector to overcome a shortage of skilled ICT professionals and reach its full potential.

With demand for power estimated to grow around 7.5% per year until 2016 and maintaining annual averages of 5.6% in the following 10 years, managing the balance between demand and supply is a key concern for Panama. In other utility segments, such as water, rising consumption levels are exposing decades-long underinvestment in infrastructure networks. As a result, ambitious investment plans – from both public and private sources – are being rolled out across the utility spectrum. Meanwhile, commercial oil finds in the country’s south-eastern region have led to a preliminary set of rules and regulations to govern oil extraction in years to come. Plans for the diversification of the energy mix include renewables such as wind, solar and biofuel facilities, while the country also seems eager to expand other resources such as gas and, to a lesser extent, coal. This chapter features an interview with Fernando Marciscano, General Manager, Empresa de Transmision Electrica Panamena.

A major driver of GDP growth over the past decade, the construction sector generated more than $2.5bn in 2013, accounting for around 9% of GDP, a year-on-year (y-o-y) increase of 30%, according to the Panamanian Chamber of Construction. Public infrastructure works are leading this surge, but the private sector is also playing a significant role through residential and commercial developments. The real estate sector is also experiencing a boom supported by real demand and increased purchasing power among the local population. Preliminary data released by the National Institute of Statistics and Census indicates that real estate, corporate and leasing activities expanded by an average of 10.3% y-o-y during the third quarter of 2013. While prices are slightly on the rise in both residential and commercial segments, indicators suggest that the market is cooling off and reaching a healthy equilibrium. Even so, tax incentives are set to maintain demand and continue to attract foreign investment. This chapter includes an interview with Victor Alberola, President, Fomento de Construcciones y Contratas Central America.

Double-digit GDP growth for four of the past seven years, moderate inflation and high employment have had a positive impact on Panama’s retail sector. According to the National Institute of Statistics and Census, retail revenues increased 19.1% between 2011 and 2012, outpacing those of other service segments, and attracting growing interest from potential foreign entrants, particularly from the US. The sector has been an essential economic contributor, accounting for 14% of GDP in 2012. However, developing new facilities will be crucial for the country to compete with regional shopping destinations. While a gradual reduction in infrastructure investment and salary growth is likely to ease the retail boom of the past three years, sound economic growth is likely to sustain the continued expansion of both purchasing power and retail revenues. This chapter includes an interview with Leopoldo Benedetti, General Manager, Colón Free Trade Zone.

Growing at double-digit rates in each of the past five years apart from 2009, the transportation and logistics sector contributed 24.1% to GDP in 2012 and is identified as one of four pillars of economic growth in the Strategic Economic Plan 2010-14. To secure the future of the sector the administration is investing $9.6bn, equivalent to 70% of public sector investment, from 2010 to 2014 in infrastructure upgrades. Public spending on infrastructure extends well beyond the flagship $5.25bn Panama Canal expansion and includes construction of the Panama City Metro, an overhaul of the road network and upgrades to maritime and airport infrastructure. With a business-friendly regulatory framework and the canal’s ability to attract global trade, Panama is set to continue developing the transport and logistics hub. This chapter includes interviews with Rafael Barcenas, Director-General, Civil Aviation Authority; Daniel Isaza, President, Logistics Business Council; Roberto Roy, Minister for Canal Affairs, and CEO, Metro de Panamá; and Pedro Heilbron, CEO, Copa Airlines.