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                      Key Economic Indicators
        (Millions of U.S. dollars, unless otherwise noted)

                                  1991      1992      1993
                                            (est.)    (proj.)
Income, Production,
 and Employment

Real GDP (1970 prices)            2,036     2,199     2,331
Real GDP Growth (pct.)              9.3       8.0       6.0
GDP (Current Prices)              5,473     6,034     6,456
GDP by Sector (pct. share) 
  Agric./Forestry/Fisheries        11.0      10.8      10.4
  Manufacturing                     9.3       9.2       9.1
  Utilities                         4.0       3.9       3.9
  Construction                      3.6       5.3       6.4
  Commerce/Hotels/Restaurants      11.9      11.8      11.6
  Panama Canal                     10.0       9.1       8.6
  Oil Pipelines                     2.5       1.7       1.5
  Colon Free Zone                   6.3       7.3       7.8
  Transport/Communications          6.9       6.9       6.8
  Fin./Insurance/Real Estate       14.6      14.7      14.8
  Government Services              12.3      11.8      11.6
  Other                             7.6       7.5       7.5
GDP Per Capita ($, 1970 prices)   825       876       912
Labor Force (000's) /1            859       921       949
Unemployment (pct.) /1             16.1      13.6      12.9

Money and Prices

Money and quasi-money             2,863     3,535     4,300
Commercial interest rates
  Fixed deposit (pct.)              7.5       5.5       5.0
  Average lending (pct.)           12.0      11.0      10.5
Gross Savings (pct. of GDP)        12.6      17.3      16.0
Gross Investment (pct. of GDP)     19.5      22.7      20.0
CPI (annual pct. chge.)             1.3       1.8       0.9
Wholesale Prices
 (pct., annual average)             0.3       2.7      -2.5
Exchange Rate (balboa/$)          1.00      1.00      1.00

Balance of Payments and Trade

Total Merchandise Exports (FOB)     452       481       500
  Exports to U.S. (pct.)           44        45        45
Total merchandise imports CIF     1,695     1,827     2,007
  Imports from U.S. (pct.)         37        40        40
Aid from U.S.                        95       234        42
External public debt              5,414     5,204     5,369
Debt service paid 2/                272       230       234
Foreign assets                      499       504       566
Balance of payments
  Current account                  -103       -41       n/a
  Foreign Investment                -31         1       n/a


1/  Data Revised October 29, 1993.
2/  Excludes clearance of arrears to International Financial
    Institutions (IFIs) in 1992.

1.  General Policy Framework

    Panama's economy is based on a well-developed services
sector that accounts for 70 percent of gross domestic product
(GDP).  Services include the Panama Canal, banking, insurance,
government, the trans-isthmian oil pipeline, and the Colon Free
Zone (CFZ).  Manufacturing, mining, utilities, and construction
together account for approximately 20 percent of GDP. 
Agriculture accounts for about ten percent of GDP.  Panama's
economy continues to grow in 1993, but at a slower rate than in
1992 and 1991.  Private construction and capital goods spending
plus CFZ activity and certain services exports have been the
main sources of growth.

    The government has not followed through on key economic
policy reforms to reduce the public sector payroll, liberalize
the trade regime, privatize state-owned enterprises, and foster
job-creation through labor code reforms.  As a result, goods
and services exports in particular are not assuming the dynamic
growth trajectory previously anticipated.  Medium-term
prospects for strong economic growth and job-creation have
accordingly dimmed.

    The use of the U.S. dollar as Panama's currency means that
fiscal policy is the government's principal macroeconomic
policy instrument.  Because Panama does not "print" a national
currency, government spending and investment are strictly bound
by tax and nontax revenues (including Panama Canal receipts)
and the government's ability to borrow.

2.  Exchange Rate Policies

    Panama's official currency, the balboa, is pegged to the
U.S. dollar at one balboa to one U.S. dollar.  The fixed parity
means price and availability of U.S. products in Panama depend
on transport costs and tariff and nontariff barriers to entry. 
At the same time, the fixed parity means that U.S. exporters
have zero risk of foreign exchange loss on sales to Panama.

3.  Structural Policies

    The Government of Panama has declared its policy commitment
to trade liberalization, but liberalization is proceeding very
slowly in practice.  Early in 1993, the Panamanian government
lowered ad valorem tariff rates to 40 percent on industrial
products and 50 percent on agro-industrial products for some
227 product classifications, while a 60 to 90 percent rate was
applied to some 60 sensitive agricultural products.  In July
1993 another decree eliminated specific tariffs on about 280
tariff line items.  The legislative assembly and private sector
interests have challenged several of the above policy measures
and other government actions removing nontariff barriers on
agricultural products.  The issues are currently pending with
the supreme court.

    Panama is an observer to the General Agreement on Trade and
Tariffs (GATT) and took a major step toward full GATT
membership when it submitted its Foreign Trade Memorandum to
the GATT in May 1993.

    Panama enacted a new tax law in December 1991 and a
privatization framework law in July 1992.  The tax reform act
that reduces corporate income tax rates to 30 percent by 1994
should stimulate economic activity.  The privatization law does
not allow for debt for equity swaps, and while intended to
accelerate the process, the actual privatization of eligible
state enterprises under the framework act is proceeding very
slowly.  In addition, the Legislative Assembly in the spring of
1993 rejected a bill which would have permitted privatization
of the state telecommunications company.

4.  Debt Management Policies

    Panama is current on interest and principal due to the IMF,
World Bank, Inter-American Development Bank, and International
Fund for Agricultural Development.  It cleared $645.8 million
in arrears with these institutions during February/March 1992. 
Panama also remains current on interest and principal payments
to U.S. government creditor agencies.  Panama has yet to
normalize relations with foreign commercial creditors
(bondholders, commercial banks, and suppliers).

    Following through on the plan adopted in 1992 to deal with
its external commercial debt, in 1993 the Government of Panama
held two meetings (in April and September) with its Bank
Advisory Committee in New York.  While no deal was reached as a
result of these discussions the Government of Panama remains
committed to reaching an agreement with its external
creditors.  Some foreign suppliers may receive payment in the
form of tax credits issued by Panama's Treasury that can be
discounted on the local securities market.  Total debt will
increase to an estimated $5.4 billion in 1993 (83 percent of

5.  Significant Barriers to U.S. Exports

    Panama's economic reform program continues to face legal
obstacles.  Certain trade liberalization policies are being
legally disputed and other measures have raised procedural
questions.  During this transition period uncertainty over the
applicability of government decrees and laws creates
artificial, presumably temporary barriers to U.S. exports.

    The Panamanian agricultural sector is protected by
significant nontariff barriers.  Agricultural products such as
corn, beef, dairy products, soybeans, and wheat are controlled
by the Ministry of Agriculture and the Agricultural Marketing
Institute (IMA).  Import permits are required from the Ministry
of Agriculture for imports of animal products, animal
by-products, and seeds.  In 1993, the government passed a law
restricting imports of poultry products based on zoosanitary
restrictions and trade reciprocity.

    IMA maintains a list of 48 agricultural products under
import quota and 30 products under import permit.  Recently,
the government issued several decrees (effective December 1,
1993) eliminating seven products from the list of products
under quota and two from the list of products under import

    Product registration requirements, which were previously
applied prior to market entry (by customs authorities) now
become effective six months after initial product entry.  Thus,
importers can establish product sales potential prior to an
investment of financial and staff resources in the registration

    The Panamanian government officially promotes foreign
investment and affords foreign investors national treatment, as
well as actively promoting specific investment opportunities in
agriculture, industry, tourism, and an expanded range of

    A limitation in Panamanian law on foreign government
ownership of land affects a few U.S. government investment
insurance programs, but places no legal limitations on foreign
private investment or ownership; Panamanian authorities are
working on nullifying this legal provision.

    While the Government of Panama does not officially present
any barriers to U.S. suppliers of banking, insurance,
travel/ticket, motion picture, and air courier services, some
professionals can expect certain technical/procedural
impediments, i.e., architects, engineers, and lawyers have to
be certified by Panamanian boards.

    Panama does not have an investment screening mechanism, and
the Panama Trade Development Institute works to attract
investment to priority areas.  Under the terms of its Bilateral
Investment Treaty with the United States, Panama places no
restrictions on the nationality of senior management.  Panama
does restrict foreign nationals to ten percent of the
blue-collar work force, however, and specialized foreign or
technical workers may number no more than 15 percent of all
employees in a business.  Disinvestment may be difficult for
foreign (and Panamanian) companies because of labor code
regulations, which restrict dismissal of employees and require
large severance payments.

6.  Export Subsidies Policies

    Export subsidies policies benefit both foreign-owned and
domestic export industries.  The tax credit certificate (CAT)
is a major export subsidy.  CATs are given to firms producing
nontraditional exports when the exports' national content and
national value added both meet minimum established levels. 
Exporters receive CATs equal to 20 percent of the exports'
national value added.  The certificates are transferable and
may be used to pay tax obligations to the government.  They can
also be sold in secondary markets at a discount.

    A number of industries that produce exclusively for export
also are exempted from paying certain types of taxes and import
duties.  The Panamanian government uses these exemptions as a
way of attracting investment to the country.  However,
Companies that benefit from these exemptions are not eligible
to receive CATS for their exports.

7.  Protection of U.S. Intellectual Property

    Panama is currently considering legislation to modernize
both its industrial property and copyright laws.  Panama is a
member of the World Intellectual Property Organization (WIPO),
the Geneva Phonograms Convention, the Brussels Satellite
Convention, and the Universal Copyright Convention, but it is
not a member of the Bern Convention for the protection of
Literary and Artistic Works or the Paris Convention for the
Protection of Industrial Property.  Panama signed with other
Central American countries a declaration of intent to join the
Paris Convention in October 1992.  Officially, Panama's
adherence to some of the major international conventions
governing intellectual property rights offers more protection
than that which is given to domestic Panamanian interests under
Panamanian law.

    The Legislative Assembly's Commerce and Industries
Committee is considering an industrial property law, modeled
after the Mexican industrial property rights law.  The draft
law establishes a standard of 20 years of protection for all
patent holders, in place of the current range of five to 20
years for Panamanians and five to 15 years for foreigners.  The
bill also protects processes.

    The draft law imposes a working requirement on patent
holders, although the patent holder can satisfy the working
requirement by importing the product.  Under the draft law, the
government may issue compulsory licenses only after notice to
and a hearing for the patent holder.  In addition, a patent
holder may still preserve his rights by beginning manufacture
or importation within one year of the initial notification of
the compulsory licensing proceeding.  The recipient of a
compulsory license must have the capacity to manufacture the
product himself in Panama.

    The draft law also provides for protection of trademarks
and trade secrets.  The bill simplifies trademark registration,
and gives protection for ten years, renewable for an unlimited
number of additional ten-year periods.

    Existing Panamanian law does not provide specific
protection for computer software, integrated circuits, or
semiconductors chips.  In one test case, however, a Panamanian
court upheld protection of computer software authorship rights
based on the broad interpretation of a Panamanian
administrative code article.

    The Legislative Assembly also approved a comprehensive
copyright bill in first debate in October 1993.  Two more
debates are required prior to final approval.  The bill draws
on both a WIPO draft and the recent Mexican copyright law.  It
would strengthen copyright protection, facilitate prosecution
of copyright violators and make copyright infringement a
felony, punishable by fine and incarceration.  The bill also
would protect computer software as a literary work.

    Video piracy is a major concern in Panama.  Some firms are
illegally reproducing videos and distributing them from the
Colon Free Zone (CFZ) to Panama, Central America, and elsewhere
in South America.  Recently, some U.S. firms, particularly
textile firms, have also complained about trademark
infringement by firms in the CFZ and about use of the CFZ as a
transshipment point for pirated products.

8.  Worker Rights

    a.   Right of Association

    Under the Panamanian labor code, private sector workers
have the right to form and join unions of their choice, subject
to registration by the government.  Workers in the CFZ and the
banking sector, however, are effectively denied this right
through the de facto exclusion of unions in these sectors. 
According to Ministry of Labor statistics, approximately 24
percent of the private-sector workforce is organized.  Most
public sector workers are not permitted to organize unions or
bargain collectively, but do have the right to form
representative associations.  Workers of certain state owned
companies, such as public utilities, are unionized.  Civil
servants are not permitted to strike, however, and in the
absence of good will between the government and public
employees, there is no effective avenue for addressing employee
grievances.  There are no restrictions on the civil liberties
of unionists.  Unions may freely form or join federations,
confederations, and international bodies.  Unions have the
right to strike.

    b.   Right to Organize and Bargain Collectively

    As noted above, the Panamanian labor code grants
individuals the right to organize labor unions and employee
associations.  On January 13, President Endara signed Law 2 of
1993 which restored full freedom of association and collective
bargaining rights to workers in the private sector.  Earlier,
Law 25 of November 1992 amended Law 16 of 1990 by reimposing
the obligation of firms operating in export processing zones to
enter into collective bargaining agreements with workers. 
Panama's labor code prohibits anti-union discrimination by
employers.  Disputes or complaints may be brought to a
conciliation board in the Ministry of Labor for resolution. 
The labor code provides a general mechanism for arbitration
once conciliation procedures have been terminated.

    In 1991 the AFL-CIO filed a petition to remove GSP benefits
from Panama for failure to provide internationally recognized
worker rights.  In June 1993, Panama was found to have taken
steps to improve worker rights conditions and the review was

    c.   Prohibition of Forced or Compulsory Labor

    The Panamanian labor code prohibits forced or compulsory
labor, and there are no reports of either practice.

    D.   Minimum Age for Employment of Children

    The Panamanian labor code prohibits the employment of
children under the age of 14, or under the age of 15 if the
child has not completed primary school.  The code also
prohibits the employment of persons under age 18 in night
work.  Children between the ages of 12 and 14 may perform farm
or domestic labor as long as the work is light and does not
interfere with the child's schooling.  Enforcement of these
provisions is triggered by a complaint to the Ministry of Labor
which can order the termination of illegal employment.  Child
labor provisions were generally enforced in Panama in 1993,
although less so in the interior of the country because of
insufficient resources to monitor any abuses.

    e.   Acceptable Conditions of Work

    The labor code establishes minimum wage rates for most
categories of labor and requires substantial bonuses for
overtime work.  Panama has a substantial informal sector in
which some workers earn below the minimum wage.  In December
1992, the government decreed a 20.5 percent nominal increase in
the minimum wage effective January 1, 1993.  While the minimum
wage varies according to region and type of work, the prevalent
minimum wage increased from $.78 per hour to $.94 per hour.

    The labor code establishes a standard legal workweek of 48
hours throughout Panama and provides for at least one 24-hour
rest period.  The Labor Code also sets numerous health and
safety standards for all places of employment.  However, The
Ministry of Labor, which is responsible for insuring that
employers comply with these regulations, does not have enough
inspectors and resources to enforce these laws effectively.

    f.   Rights in Sectors with U.S. Investment

    Although Panamanian labor laws differ from sector to
sector, within each sector U.S. firms adhere to the prevailing

         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                694
Total Manufacturing                                      622
    Food & Kindred Products                     18
    Chemicals and Allied Products               76
    Metals, Primary & Fabricated                 1
    Machinery, except Electrical                 0
    Electric & Electronic Equipment              0
    Transportation Equipment                     0
    Other Manufacturing                         13
Wholesale Trade                                          369
Banking                                                    D
Finance and Insurance                                 10,059
Services                                                 139
Other Industries                                           D

TOTAL ALL INDUSTRIES                                  11,457

(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic

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