economy

Foreign money flows into Panama

LA PRENSA

pouring in: Foreign direct investment is eventually expected to make up more than half of the country’s gross domestic product.1099359

Foreign direct investment in Panama in the first half of the year reached $1.1 billion, a 33 percent increase over the same period in 2007, according to preliminary figures released by the Contraloría General de la República.

This increase is attributable mainly to investments made in the banking and real estate sectors, as well as foreign companies that entered Panama's cellular phone market and power-generating industry.

Consultants seem to agree that foreign investment will continue to grow in Panama unless a severe recession in the United States or a global economic downturn slows the flow of capital.

Panama is looking to foreign companies to provide the bulk of the financing to increase the country's electrical production, which will be accomplished mainly through the construction of hydroelectric projects. The cost of these projects is expected to be $1.2 billion over the next five years.

The government is also looking overseas to finance the expansion of the Panama Canal, which will bring another large infusion of foreign capital into the country. That project is expected to attract $2.8 billion by 2011.

Between 2005 and 2007, foreign investment accounted for an average of 17.5 percent of the country's gross domestic product. But, according to some estimates, the percentage could increase to 52 percent of GDP in 2011 because of projects such as the Canal expansion.

For its part, the United Nations Conference on Trade and Development recently predicted that, despite the U.S. credit crisis, foreign direct investment in Central America will continue to grow this year, and, so far, Panama has proved to be no exception.