EXHIBIT D

 

Republic of Panama

This description of the Republic of Panama is dated as of September 30, 2026 and appears as Exhibit D to the Republic of Panama’s Annual Report on Form 18-K to the U.S. Securities and Exchange Commission for the fiscal year ended December 31, 2025.

TABLE OF CONTENTS

 

		Page
PRESENTATION OF ECONOMIC AND OTHER INFORMATION			D-3
RECENT DEVELOPMENTS			D-4
THE REPUBLIC OF PANAMA			D-26
THE PANAMANIAN ECONOMY			D-31
STRUCTURE OF THE PANAMANIAN ECONOMY			D-43
THE PANAMA CANAL			D-51
THE COLÓN FREE ZONE			D-65
EMPLOYMENT AND LABOR			D-69
PUBLIC FINANCE			D-77
FINANCIAL SYSTEM			D-84
FOREIGN TRADE AND BALANCE OF PAYMENTS			D-97
PUBLIC SECTOR DEBT			D-111
TABLES AND SUPPLEMENTARY INFORMATION			D-124

 

 

The fiscal year of the Government of the Republic of Panama (the “Government”) ends on December 31. The twelve-month period ended December 31, 2025 is referred to in this description of the Republic of Panama as “2025” and other years are referred to in a similar manner unless otherwise indicated. All references to “U.S.$”, “$” or “dollars” are to United States Dollars.

Totals in certain tables in this description of the Republic of Panama may differ from the sum of the respective individual items in such tables due to rounding.

 

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INDEX OF TABLES

 

		Page
TABLE NO. 1 Selected Panamanian Economic Indicators			D-24
TABLE NO. 2 Inflation (percentage change from previous period)			D-40
TABLE NO. 3 Gross Domestic Product			D-40
TABLE NO. 4 Sectoral Origin of Gross Domestic Product (in millions of dollars)			D-41
TABLE NO. 5 Percentage Change from Prior Year for Sectoral Origin of Gross Domestic Product (percentage change)			D-41
TABLE NO. 6 Sectoral Origin of Gross Domestic Product (as percentage of GDP)			D-42
TABLE NO. 7 Selected State-Owned Enterprises 2025 Financial Statistics (in millions of dollars)			D-45
TABLE NO. 8 Panama Canal Principal Statistics			D-52
TABLE NO. 9 Panama Canal Direct Contributions to Central Government			D-57
TABLE NO. 10 Panama Canal Contributions to Gross Domestic Product			D-58
TABLE NO. 11 Labor Force and Employment			D-70
TABLE NO. 12 Average Real Monthly Wages			D-72
TABLE NO. 13 Budgeted Expenditures of the Central Government by Function (in millions)			D-78
TABLE NO. 14 Fiscal Performance—Central Government			D-80
TABLE NO. 15 Fiscal Performance—Consolidated Non-Financial Public Sector			D-81
TABLE NO. 16 Central Government Operations (in millions of dollars)			D-81
TABLE NO. 17 Consolidated Non-Financial Public Sector Operations (in millions of dollars)			D-82
TABLE NO. 18 International Reserves (in millions of dollars)			D-83
TABLE NO. 19 Largest Banking Institutions (assets in millions of dollars)			D-84
TABLE NO. 20 The Banking Sector (in millions of dollars)			D-85
TABLE NO. 21 Banco Nacional de Panamá Balance Sheet (in millions of dollars)			D-94
TABLE NO. 22 Composition of Merchandise Exports, F.O.B. (in millions of dollars)			D-99
TABLE NO. 23 Composition of Merchandise Imports, C.I.F. (in millions of dollars)			D-100
TABLE NO. 24 Direction of Merchandise Trade (as percentage of total)			D-101
TABLE NO. 25 Foreign Direct Investment in Panama by Investor Residence			D-104
TABLE NO. 26 Foreign Direct Investment in Panama by Category of Economic Activity			D-107
TABLE NO. 27 Balance of Payments (in millions of dollars)			D-109
TABLE NO. 28 Public Sector Internal Debt (in millions of dollars)			D-114
TABLE NO. 29 Public Sector External Debt (in millions of dollars)			D-116
TABLE NO. 30 Public Sector External Debt Amortization (in millions of dollars)			D-116
TABLE NO. 31 External Direct Debt of the Republic, Central Government			D-124
TABLE NO. 32 External Debt Guaranteed by the Republic Decentralized Institutions			D-125
TABLE NO. 33 Internal Funded Debt Securities of the Republic			D-125

 

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PRESENTATION OF ECONOMIC AND OTHER INFORMATION

The Office of the Comptroller General has updated the base year used for the System of National Accounts from 2007 to 2018. International best practices call for updating the constant GDP base year at least every 10 years to reflect structural changes in production, consumption and prices, and to ensure that the National Accounts provide an accurate depiction of the economy given its dynamism.

Government financial statistics and related tables are presented in accordance with the IMF Government Finance Statistics Manual 2014 (“GFSM2014”). Real sector statistics are presented in accordance with the UN 2008 System of National Accounts (“SNA 2008”). Balance of payments statistics for 2021 to 2025 were calculated pursuant to the Sixth Edition of the Balance of Payments and International Investment Position Manual published by the International Monetary Fund (“IMF”).

Panama is a member of the IMF. Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with its member countries, usually every year, to assess their economic health. See “Public Sector Debt—External Debt—International Financial Institutions—IMF.”

Open unemployment figures are no longer presented. Unemployment figures are now used.

 

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RECENT DEVELOPMENTS

For recent developments since December 31, 2025, see the material below.

Republic of Panama

Immigration

On March 7, 2026, Panama joined the “Shield of the Americas” initiative, a United States-led regional alliance that spans 12 countries and establishes a coordinated framework to enhance security cooperation, intelligence sharing, and joint operational strategies in combating drug trafficking, transnational criminal organizations, and irregular migration. President José Raúl Mulino attended the ceremony held in Miami alongside other regional leaders.

On May 27, 2026, the U.S. Embassy in Panama announced a U.S.$3 million partnership with the Government to support the environmental restoration of the Darién region, an area heavily affected by the mass transit of irregular migrants in recent years. The initiative, developed in coordination with Panama’s Ministry of Environment and local communities, includes the removal of waste and debris, improvements in wastewater management, and actions to protect public health and enhance the quality of life in the area. The announcement was made during the graduation of 285 border agents and 39 migration inspectors, highlighting that these efforts are part of broader bilateral cooperation to strengthen border security and mitigate the impact of irregular migration.

During the seven-month period ended July 31, 2026, a total of 320 migrants crossed the Darién Gap from Colombia into Panama, representing a decrease of approximately 89% compared to the seven-month period in 2025, where approximately 2,934 migrants crossed the Darién Gap. Forty-nine minors were reported in migration reception centers along the Panamanian border, compared to 474 minors during the same seven-month period in 2025. The countries of origin with the highest number of migrants included Venezuela (51%), Ecuador (16%), Colombia (15%) and Ghana (4%). The significant decline reflects a substantial reduction in irregular migration flows through the Darién region.

On June 17, 2026, the U.S. Embassy in Panama announced U.S.$5 million in assistance to the Ministry of Public Security (MINSEG), including U.S.$2 million to reinforce protection of the Panama Canal and interrupt and dismantle marine operations of transnational criminal organizations, and U.S.$3 million to support migration management, strengthen operational capabilities in the Darién region and help deter irregular migration flows toward the United States. The assistance forms part of ongoing bilateral cooperation between Panama and the United States on border security, migration management and the fight against organized crime.

Social and Economic Situation

On January 8, 2026, Chiquita Panama announced the start of its first banana production after reactivating its operations, reaching around 30,000 boxes destined for the domestic market. On January 22, 2026, the Minister of Labor and Labor Development, Jackeline Muñoz, reported that, following the reactivation of the banana sector in the province of Bocas del Toro, 1,600 employment contracts remained in force and 967 workers had been registered with the Ministry of Labor and Labor Development.

On March 31, 2026, the Government issued Cabinet Resolution No. 24-26, authorizing the Ministry of Economy and Finance to implement a temporary fuel price stabilization program applicable to public passenger transportation, freight transportation, agricultural machinery, and artisanal fishing activities. Under this measure, the price of 91-octane gasoline was set at U.S.$3.33 per gallon (U.S.$0.88 per liter) and the price of low-sulfur diesel was set at U.S.$3.41 per gallon (U.S.$0.90 per liter) for a period of up to ten months and with a maximum aggregate allocation of U.S.$100 million. The program is intended to mitigate the effects of increased international fuel prices on domestic transportation costs and essential economic activities and will be subject to inter-institutional oversight; its duration may be shortened if global energy market conditions improve.

 

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On May 6, 2026, Panama’s Ministry of Commerce and Industries reported that the reactivation of the banana sector in Bocas del Toro had resulted in the recovery of more than 5,000 jobs (5,065 workers rehired) and the reestablishment of operations by Chiquita Panama, including the reactivation of approximately 5,000 hectares of cultivation and the reopening of packing facilities operating at increased capacity. The Government highlighted that these results stem from the implementation of the 2025 Memorandum of Understanding. Exports of bananas began to show signs of recovery, after declining from 17.5% to 7.5% of total exports in 2025, signaling a gradual normalization of the banana sector and its contribution to the national economy.

On July 9, 2026, President Mulino toured Chiquita Panama’s operations in Bocas del Toro, where the company announced the resumption of banana exports to European and United States markets. Chiquita projects exports of approximately 11 million boxes during 2026 and approximately 15 million boxes in 2027, which would restore export volumes to levels recorded before the suspension of its operations. As of that date, approximately 5,000 hectares were in production across approximately 20 plantation zones, supporting approximately 6,000 direct jobs, with weekly processing of approximately 350,000 boxes and 17 farms operating under the company’s new business model. The company reported investments of approximately U.S.$30 million pursuant to its agreements with the Government and monthly payroll disbursements exceeding U.S.$5 million, inclusive of social security contributions. Effective June 1, 2026, packing facilities extended operations from five to six days per week on two daily shifts.

Recent Government Actions

Panama Ports Company — Concession Contract

On January 29, 2026, the Plenary of the Supreme Court declared unconstitutional Law No. 5 of January 16, 1997, and its addenda, which set forth the Government’s concession contract with Panama Ports Company S.A. (“PPC”) relating to the Ports of Balboa and Cristobal.

The ruling became final on February 23, 2026 and is not subject to appeal. Pursuant to Executive Decree No. 23 of 2026, the Government ordered the occupation of both terminals by the Panama Maritime Authority for reasons of urgent social interest, and assumed administrative and operational control of the port assets to ensure operational continuity pending the award of a new concession, expected within 18 months.

Under transitional arrangements of up to 18 months, a subsidiary of A.P. Moller-Maersk (APM Terminals) was designated to operate the Balboa terminal on the Pacific side, and a subsidiary of Mediterranean Shipping Company (Terminal Investment Limited) was designated to operate the Cristóbal terminal on the Atlantic side. The Government expects that the transition will proceed without layoffs while a new long-term concession framework is developed.

On February 3, 2026, PPC initiated an arbitration against Panama, within the framework of the port concession contract and in accordance with the Arbitration Rules of the International Chamber of Commerce. The arbitration seeks an affirmation of the concession contract and money damages. PPC later announced that it had expanded its claims in the arbitration against Panama to more than U.S.$2 billion, alleging damages arising from the Government’s takeover of the Balboa and Cristóbal ports, the occupation of facilities, access to company assets and documentation, and other actions that PPC considers unlawful and in breach of its contractual rights.

On May 15, 2026, the ICC tribunal issued a decision excluding CK Hutchison Holdings Limited, PPC’s parent company, from the arbitration, leaving Panama Ports Company, S.A. and the Republic of Panama as parties. The arbitration proceeding remains pending.

On August 20, 2026, CK Hutchison Holdings Limited initiated an arbitration proceeding against the Republic of Panama, alleging breaches of an investment protection treaty and damage to its port investments in the country, and claiming compensation exceeding U.S.$1.5 billion.

Recent Political Developments

In 2016, Panama began investigating alleged money laundering by construction company Odebrecht, creating a specialized prosecutor’s office, and ultimately charging 25 Panamanians with the crimes of money laundering and corruption of public servants. On January 12, 2026, hearings in the Odebrecht case began. Among the more than twenty defendants were former President Ricardo Martinelli, former Housing Minister and 2014 presidential candidate José Domingo Arias, and former ministers Demetrio Papadimitriu, Federico Suárez, and Frank De Lima.

 

D-5

Former Public Works Minister Jaime Ford, also charged in connection with the Odebrecht investigation, was subject to a separate proceeding before the Supreme Court of Justice due to his status member of the Central American Parliament (PARLACEN).

The Odebrecht trial concluded on February 27, 2026, after 24 days of hearings. The Anti-Corruption Prosecutor’s Office requested convictions for money laundering against 16 of the defendants — including former President Martinelli and five former ministers — and acquittal for five, as well as economic compensation to the Government. Defense counsel requested acquittal of their respective clients and raised procedural objections, including prescription and lack of competence, which the Court indicated would be resolved in the judgment. The judgment has not yet been issued.

On January 15, 2026, the media reported that the Superior Court for the Settlement of Criminal Cases overturned the acquittal of and sentenced former Minister of Public Works Federico Pepe Suárez to eight years in prison for the crime of aggravated embezzlement in a case related to the expansion of the Arraiján-La Chorrera highway. The case arose from alleged irregularities in the contract for the design, construction, rehabilitation, and expansion of the Arraiján-La Chorrera highway, which was carried out between 2010 and 2017. In addition to the prison sentence, the Court imposed on Mr. Suárez a ban from holding public office for eight years after the completion of his prison term.

On January 26, 2026, former Vice President José Gabriel Carrizo Jaén was arrested upon his arrival at Tocumen International Airport, in compliance with a formal arrest and detention order issued by the Anti-Corruption Prosecutor’s Office, within the framework of an investigation for the alleged commission of crimes against public administration in the form of unjust enrichment. Two days later, on January 28, 2026, Judge Oris Medina charged Mr. Carrizo with the crime of unjust enrichment and imposed precautionary measures of house arrest and prohibition from leaving the country.

The investigation into Mr. Carrizo concerns alleged unjust enrichment of approximately U.S.$1.9 million, arising from a report submitted to the Public Ministry by the Comptroller General. According to the report, issued by the National Directorate of Investigations and Forensic Auditing, irregularities were detected in Mr. Carrizo’s assets corresponding to the period during which he simultaneously held the positions of Vice President and Minister of the Presidency between 2019 and 2024. The investigation and criminal proceeding remains ongoing, and Mr. Carrizo remains subject to house arrest and a prohibition on leaving the country.

On May 29, 2026, Luis Oliva, the former director of the Government Innovation Authority (the “AIG”), during the administration of former President Laurentino Cortizo Cohen, was arrested for alleged unjust enrichment. Oliva had been ordered to report periodically to the Anti-Corruption Prosecutor’s Office since September 10, 2025, as a precautionary measure during the investigation. The investigation, led by the Anti-Corruption Prosecutor’s Office, stems from a complaint regarding the improper transfer of exclusive rights to two companies to profit from the Vale Digital platform, a program commissioned by AIG (and later renamed Listo Wallet) in December 2022.

On July 1, 2026, Deputy Shirley Castañeda was elected President of the National Assembly for the 2026-2027 term, after securing 42 votes.

On July 8, 2026, Noriel Antonio Araúz Villarreal, former administrator of the Panama Maritime Authority during the administration of former President Laurentino Cortizo Cohen, was arrested at Tocumen International Airport upon his arrival on a flight from Asunción, Paraguay. The arrest was carried out pursuant to an order issued by the Anti-Corruption Prosecutor’s Office as part of an investigation into the alleged crime of unjust enrichment. An audit report prepared by the Office of the Comptroller General revealed that Araúz recorded investments, financial transactions, disbursements, and bank balances totaling U.S.$2,355,670.77, but his income from identified sources only amounted to U.S.$1,035,686.35.

On August 10, 2026, Publio De Gracia, who previously served as Director General of Revenue for Panama’s Dirección General de Ingresos from 2019 to 2024, was apprehended by Panama’s Anti-Corruption Prosecutor’s Office in connection with an investigation into alleged unjust enrichment and money laundering. The investigation reportedly stems from an audit conducted by the Office of the Comptroller General that identified a purported unexplained increase in wealth and a potential loss to the Government of U.S.$724,682. Authorities also ordered the seizure of assets allegedly linked to the investigation, including real estate properties, high-end vehicles, and bank accounts.

 

D-6

On August 12, 2026, Lucy Molinar resigned as Minister of Education after 25 months in office, and Roberto Sevillano Shin resigned as Administrative Vice Minister of Panama’s Ministry of Education. Two days later, on August 14, 2026, Agnes De León resigned as Academic Deputy of Panama’s Ministry of Education. The Government has not disclosed the reasons for the departures. Their resignations followed other leadership changes within the Ministry, including the departure of Delia Marcela Herrera from her position as Vice Minister of Educational Infrastructure.

On August 13, 2026, President José Raúl Mulino appointed Ventura Vega Osorio as Panama’s new Minister of Education following the resignation of Lucy Molinar. Prior to his appointment, Vega served as Secretary General of the Office of the Comptroller General and previously held senior positions in various public institutions, including the National Transit and Land Transportation Authority and the Ministry of Public Security.

The Economy

Economic Performance

In the three-month period ended March 31, 2026, estimated GDP growth totaled 4.8%, compared to the same period in 2025. Inflation increased by 2.5% in May 2026 compared to May 2025.

The transportation, storage and mail sector grew by an estimated 8.2% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 13.9% of GDP. Growth in the transportation, storage and mail sector was primarily due to increased operations in the Panama Canal as well as increased activity in land and air transportation.

Mining activities increased by an estimated 5.7% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 1.3% of GDP. Growth in mining activities was primarily due to an increase in the consumption of basic materials, especially stone and sand and clay, by the construction sector.

The information and communications sector grew by an estimated 2.7% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 2.0% of GDP. Growth in the information and communications sector was primarily due to an increase in demand for mobile phone, internet and cable TV services.

The construction sector grew by an estimated 6.5% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 21.2% of GDP. Growth in the construction sector was primarily due to an increase in the development of private residential and public infrastructure projects.

The financial and insurance sector contracted by an estimated 0.6% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 5.4% of GDP. Contraction in the financial and insurance sector was attributable mainly to a decline in domestic financial services due to weaker performance in lending to the construction and manufacturing sectors and the public sector.

The manufacturing sector grew by an estimated 3.4% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 4.7% of GDP. Growth in the manufacturing sector was primarily due to an increase in the production of meat products.

The agricultural and fisheries sector contracted by an estimated 4.3% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 2.0% of GDP. Contraction in the agricultural and fisheries sector was primarily due to a decrease in the production of bananas, fresh, chilled, and frozen fish, and shrimp.

The commerce, hotels and restaurants sector grew by 6.3% in the three-month period ended March 31, 2026, compared to the same period in 2025, representing 20.4% of GDP. The growth in the commerce, hotels and restaurants sector was mainly due to an increase in the sales volume of wholesale fuels, construction materials, and machinery and equipment.

 

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Structure of the Panamanian Economy

Principal Sectors of the Economy

Service Sector. The Panamanian economy is based primarily on the service sector. Services include real estate; transportation, storage and mail; commerce, restaurants and hotels; financial intermediation; public administration; the Panama Canal; the Colon Free Zone (the “CFZ”); and public utilities. While the commerce sector, real estate sector and transportation sector represent significant percentages of real GDP (estimated to be 20.4%, 13.2% and 8.7%, respectively, of real GDP in 2025, and 18.7%, 12.9% and 13.9%, respectively, of real GDP in the first quarter of 2026), the Panamanian economy is distinguished by the economic benefits generated by the Panama Canal and the CFZ.

Commerce. Commerce, which includes wholesale and retail activities as well as restaurants and hotels, is the largest component of the service sector. Commerce represented an estimated 22.2% of real GDP in 2025. In 2025, commerce activities increased by 3.6% compared to 2024, mainly due to an increase in the sales volume of personal effects and household goods, car sales and fuels, among others. In 2025, the restaurants and hotels sector increased by 5.9% compared to 2024, mainly due to the performance of restaurant services and the increase in the entry of tourists and visitors to the country. In the first quarter of 2026, commerce represented an estimated 18.7% of real GDP, and commerce activities increased 6.4% compared to the same period in 2025, mainly due to an increase in the sales volume of construction supplies, wholesale food products, beverages, textiles, and car sales.

Real Estate. The second largest component of the service sector is real estate, which consists of rental income and the imputed rental value of real estate that is occupied but not rented. Real estate represented an estimated 8.7% of GDP in chained volume measure in 2025, and an estimated 12.9% of GDP in chained volume measure in the first quarter of 2026.

Transportation, Storage and Mail. The transportation, storage and mail sector, which includes ports, airports and rails, is the third largest component of the service sector and has been an important component of the Panamanian economy in recent years. In 2025, this sector represented an estimated 13.2% of real GDP in chained volume measure, and in the first quarter of 2026, it represented an estimated 13.9% of real GDP in chained volume measure.

Financial Services and Insurance. The financial services and insurance sector represented an estimated 6.0% of GDP in chained volume measure in 2025, and an estimated 5.4% of GDP in chained volume measure in the first quarter of 2026. An important component of the financial services and insurance sector’s contribution to GDP is attributable to the banking sector, which, as of May 31, 2026, consisted of two state-owned banks (BNP and Caja de Ahorros) and 61 private banks, including general license banks, international license banks, and foreign banks with representative offices. As of December 31, 2025, banking sector assets and deposits totaled approximately U.S. $163.0 billion and U.S. $116.8 billion, respectively. As of March 31, 2026, banking sector assets and deposits totaled approximately U.S.$164.2 billion and U.S.$118.5 billion, respectively.

Colón Free Zone. The CFZ has become the largest duty-free zone in the Western Hemisphere in terms of commercial activity. Total imports to the CFZ totaled U.S. $11.7 billion in 2025, a decrease of 8.0% compared to 2024. Total re-exports in 2025 were U.S. $11.0 billion, a decrease of 10.4% compared to 2024. During the four-month period ended April 30, 2026, CFZ value added (implied by the value of re-exports minus the value of imports) increased by an estimated 11.5%, compared to the same period in 2025, mainly due to a 0.8% increase in CIF imports and a 22.6% increase in FOB re-exports.

Industrial Sector. After the service sector, the next largest segment of the economy consists of the industrial activities of manufacturing and construction. The industrial sector collectively represented an estimated 20.2% of GDP in chained volume measure in 2025, and manufacturing represented an estimated 4.5% of GDP in chained volume measure in 2025. The industrial sector collectively represented an estimated 25.8% of GDP in chained volume measure in the first quarter of 2026, and manufacturing represented an estimated 4.7% of GDP in chained volume measure the first quarter of 2026. Manufacturing is principally geared to the production of processed foods and beverages and, to a lesser extent, clothing, chemical products and construction materials for the domestic market.

 

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Construction activity represented an estimated 15.6% of GDP and increased by 2.7% in 2025. Growth in this sector was mainly due to public investment in infrastructure and residential private investment. Construction activity represented an estimated 21.2% of GDP and increased by 6.5% in the first quarter of 2026, compared to the same period in 2025. Growth in the construction sector was primarily due to an increase in the development of private residential projects and public investment in infrastructure such as: repair and construction of roads and highways and work on Line 3 of Metro de Panama.

Agriculture, Fisheries and Mining Sector. The agriculture, fisheries and mining sector accounted for an estimated 3.7% of real GDP in 2025. Agriculture and fisheries activities employ a significant percentage of the Panamanian employed workforce, totaling 12.9% in 2025. Principal agricultural products include bananas, fish, shrimp, sugar, coffee, meat, dairy products, tropical fruits, rice, corn and beans. In 2025, the value of agricultural production (which includes fisheries production) is estimated to have decreased by 1.7%, after having increased by 8.0% in 2024. After a decrease of 60.2% in 2024, mainly due to the cessation of copper ore and concentrate extraction operations, the value of the mining sector is estimated to have increased by 3.3% in 2025, mainly due to the increase in production of construction supplies. The Panamanian agriculture and fisheries sector has been protected by significant tariff and non-tariff barriers.

The agriculture, fisheries and mining sector accounted for an estimated 3.4% of real GDP in the first quarter of 2026. During the first quarter of 2026, the value of agricultural production (which includes fisheries production) is estimated to have decreased by 4.3%, compared to the same period in 2025. During the first quarter of 2026, the value of the mining sector increased by 5.7% compared to the same period in 2025, mainly due to an increase in the consumption of basic materials, especially stone and sand and clay, by the construction sector.

Panama Canal. During the Panama Canal Authority’s (“PCA”) 2025 fiscal year (ending September 30, 2025), canal transits increased to 13,404 transits (from 11,240 transits in 2024), while cargo tonnage increased to 262.3 million long tons (from 210.3 million long tons in 2024). According to the PCA, toll revenues for fiscal year 2025 reached U.S. $4,007.9 million, an increase of 26.1% compared to U.S.$3,179.1 million in fiscal year 2024, representing 4.4% of Panama’s estimated GDP for 2025 measured in nominal dollars.

The Role of the Government in the Economy

General Government current expenditures (including the Government, Caja de Seguro Social and consolidated agencies, but excluding state-owned financial institutions and interest payments) totaled U.S. $12.6 billion in 2025, and totaled U.S.$4.1 billion during the four-month period ended April 30, 2026.

The FAP’s total assets were U.S.$3.2 billion as of March 31, 2026. As of December 31, 2025, audited financial statements by BNP, trustee of the fund, show total FAP assets of U.S. $3.2 billion.

The FAP Technical Secretariat has invested part of the principal of the FAP with Goldman Sachs Asset Management L. P., Morgan Stanley Investment Management Inc., BlackRock Financial Management Inc., Neuberger Berman Investment Adviser LLC, Crestline Direct Lending IV, L.P., StepStone Private Credit Fund SP, StepStone Tactical Growth Fund IV, L.P., Varsity Healthcare Partners Fund IV, L.P., March Capital Partners Fund IV, L.P., AlpInvest Partners (The Carlyle Group), JPM Global Infrastructure Fund IV, and BlackRock Global Infrastructure Fund IV. As of December 31, 2025, the international asset managers had U.S. $3.1 billion under management.

Energy and Electricity

As of December 31, 2025, Panama had an installed generating base of 5,120.2 megawatts (“MW”), of which 1,847.6 MW (36.1%) were hydroelectric, 2,166.0 MW (42.3%) were thermoelectric, 770.6 MW (15.1%) were photovoltaic power and 336.0 MW (6.6%) were wind power. In 2025, total energy generation in Panama remained the same at 13,147.0 GWh, of which 59.8% was hydroelectric, 25.3% was thermoelectric and 14.9% was from renewable sources.

 

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In 2025, the Government received U.S. $120.5 million of dividends from its shares in electricity companies. In 2025, AES Panama, S.A. paid U.S. $50.9 million in dividends, Enel Fortuna paid U.S. $23.4 million in dividends, ESEPSA paid U.S. $4.2 million in dividends, EDEMET- EDECHI paid U.S. $9.8 million in dividends and Elektra Noreste, S.A. paid U.S. $32.3 million in dividends. ETESA, and Bahia Las Minas Corp did not pay dividends in 2025.

As of 2025, the total length of ETESA’s 230 kV lines was 2,885.9 km in double circuit lines and 93.9 km in simple circuit lines, while the total length of 115 kV lines was 272.3 km in double circuit lines and 40.8 km in simple circuit lines. On December 30, 2025, ETESA issued U.S. $75,000,000.00 aggregate principal amount of its 6.5% Bonds due 2030.

Panama currently has high electricity rates. As of December 31, 2025, the electricity rate averaged 23.3 cents per kilowatt-hour, and demand for electricity in 2025 decreased by 0.7% from 2024. As of June 30, 2026, the electricity rate averaged 20.8 cents per kilowatt-hour. Demand for electricity for the five-month period ended May 31, 2026 increased by 3.0% compared to the same period ending May 31, 2025.

Telecommunications

As of December 31, 2025, there were approximately 959,312 operating telephone lines in the country with an estimated line penetration rate of 21.0 lines per 100 inhabitants. As of December 31, 2025, there were approximately 5.1 million active cellular telephone lines. As of July 2, 2026, there were approximately 961,757 operating telephone lines in the country with an estimated line penetration rate of lines per 100 inhabitants of 20.8%. As of July 2, 2026, there were approximately 5.1 million active cellular telephone lines. As of July 2, 2026, the telecommunications market comprised approximately 225 operating companies and 420 companies authorized to operate telecommunication concessions, which has remained unchanged since 2025.

For its fiscal year ended December 31, 2025, Cable & Wireless (Panamá) S.A. (“C&W Panama”) did not pay dividends to the Government. In its fiscal year ended December 31, 2025, C&W Panama experienced a 10.0% increase in revenue compared to the same period in 2024, mainly because of the strong performance of business-to-business delivering 24% growth on a rebased basis, due to higher revenue from new government-related projects.

By contrast, during the first quarter of 2026, C&W Panama experienced a 1.0% decrease in revenues compared to the same period in 2025, mainly due to a 47% decrease in business-to-business revenues.

Air Transportation

In 2025, the Tocumen International Airport (Aeropuerto Internacional de Tocumen, S.A. or “AITSA”) handled 21.0 million passengers and had 45 airlines in operation. In 2025, AITSA paid U.S.$54.0 million in dividends to the Government.

During the five-month period ended May 31, 2026, AITSA handled a total of 9.6 million passengers, compared to 8.3 million passengers during the same period in 2025. As of the date hereof, AITSA had 34 airlines in operation.

Ports

In 2025, the Manzanillo International Terminal (“MIT”) handled approximately 2.9 million TEUs of cargo and containers. In 2025, the container port in Colón moved approximately 1.7 million TEUs of cargo and containers. In 2025, Port Balboa handled approximately 2.8 million TEUs of cargo and containers. In 2025, the Port of Cristobal handled approximately 1.2 million TEUs of cargo and containers.

During the first six months of 2026, MIT handled approximately 1.3 million TEUs of cargo and containers, compared to approximately 1.1 million TEUs in the same period of 2025. During the first six months of 2026, the container port in Colón moved approximately 0.8 million TEUs of cargo and containers, compared to approximately 0.7 million TEUs in the same period of 2025. During the first six months of 2026, Port Balboa handled approximately 0.9 million TEUs of cargo and containers, compared to approximately 1.1 million TEUs in the same period of 2025. During the first six months of 2026, the Port of Cristobal handled approximately 0.3 million TEUs of cargo and containers, compared to approximately 0.5 million TEUs in in the same period of 2025.

 

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Banking

Collectively, BNP and Caja de Ahorros had approximately 15.8% of deposits and 14.7% of assets in the national banking system as of December 31, 2025. As of March 31, 2026, the two institutions had 14.6% of deposits and 13.7% of assets in the national banking system. See “Financial System—Public Sector Banking Institutions” for more information on BNP and Caja de Ahorros. The Panamanian public sector includes two other significant financial institutions that are not part of the banking sector: Banco de Desarrollo Agropecuario and Banco Hipotecario Nacional. As of the date hereof, the Government had not announced any plans to privatize these financial institutions.

Panama Canal

Transits through the Panama Canal increased by 22% between October 1 and December 31, 2025 (the first quarter of the Panama Canal’s fiscal year), reaching 3,336 ship crossings (with Neopanamax vessels accounting for 12.5% and Panamax vessels accounting for 23.1% of the crossings) compared to 2,774 ship crossings in the same period in 2024.

During the six-month period ended June 30, 2026, vessel traffic through the Panama Canal increased by 7.1%, compared to the same period in 2025. During the six-month period ended June 30, 2026, the Panama Canal collected U.S.$2.2 billion in toll revenues, an increase of 9.5% compared to U.S.$2.0 billion in the same period in 2025.

On February 24, 2026, the Panama Canal reported that its operations continued to run normally and safely following the Supreme Court of Justice’s declaration that the law governing the administration of the Balboa and Cristóbal ports was unconstitutional. The Canal maintains communication with Central Government entities to coordinate vessel operations at these port terminals and reaffirmed a transparent, technically rigorous management approach to ensure continuous operation.

The Permanent Neutrality Treaty of the Panama Canal is a bilateral treaty between the United States and the Republic of Panama. See “The Panama Canal – The Panama Canal Treaty of 1977”. The Treaty is accompanied by a separate protocol, open to accession by other nations, through which more than 40 countries have already acceded to date. On March 1, 2026, Panama invited 12 additional countries, including Algeria, Australia, Armenia and Vietnam, to accede to the Protocol, as part of a diplomatic effort to strengthen the legal security of global trade and reaffirm international support for the Canal’s neutral operation. The invitation, extended by Foreign Minister Javier Martínez-Acha during meetings in Mexico, also aims to reinforce Panama’s image as a safe and stable nation essential for the smooth functioning of the Panama Canal.

On March 7, 2026, President José Raúl Mulino presented to U.S. officials the progress of the gas pipeline project through the Panama Canal, a strategic megaproject aimed at positioning the country as a regional energy hub by leveraging the Canal’s infrastructure to transport natural gas and strengthen the nation’s energy competitiveness. The gas pipeline is currently in its initial development phase. During the meeting, U.S. Cabinet Secretaries Howard Lutnick (Commerce) and Chris Wright (Energy) expressed the United States’ willingness to collaborate.

On March 10, 2026, the PCA reported fiscal year 2025 results showing earnings above projections, supported by stronger performance in the container and LPG segments. Fiscal year 2025 net income reached U.S.$4.1 billion, exceeding budget projections by U.S.$372 million, while total revenues increased to U.S.$5.7 billion. The PCA highlighted critical progress on long-term infrastructure programs, including the expansion of the Mendoza Water Treatment Plant, which has reached 28% completion and is expected to enter operation in February 2027. Once finalized, this project is expected to add 20 million gallons per day of potable water to the supply system serving Panama West.

On March 12, 2026, the PCA executed a new collective bargaining agreement with the Non-Professional Workers’ Unit (comprising the National Maritime Union, the Panama Canal and Caribbean Union, and the Panama Area Metal Trades Council), with a seven-year term extending through September 2032. The agreement establishes progressive basic salary adjustments of 4.0% in 2026; 3.5% in 2027, 2028, 2029, and 2030; and 3.25% in 2031 and 2032, and includes a one-time extraordinary payment equivalent to 150 hours, scheduled for March 30, 2026.

On March 27, 2026, the PCA announced the launch of the LoTSA 2.5 program, an enhanced version of its long-term slot allocation system, aimed at providing greater certainty, flexibility, and operational efficiency to Canal customers. The new program maintains the overall structure of the previous scheme while introducing key

 

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improvements, including the redistribution of slots by package type and transit direction, sequential competitive processes by service category, and expanded options for date adjustments, slot deferrals, and changes in transit direction, depending on the package purchased. LoTSA 2.5 offers segmented service packages (Fix, Flex, and Flex+) designed to meet different levels of operational flexibility. Implementation began on May 16, 2026, covering transits scheduled between July 5, 2026, and January 2, 2027.

On April 9, 2026, the PCA signed a new collective bargaining agreement with the Union of Captains and Deck Officers (“UCOC”), with validity through 2033. The agreement establishes a progressive basic salary increase of 3.5% annually from 2027 to 2033, along with improvements to collective bargaining processes. It also includes annual increases of 2% in special and piloting compensations from 2029 to 2033 and a 14-hour rest period for FE-15 tugboat captains following high-risk operations.

On April 23, 2026, the PCA reported that, between October 2025 and March 2026, the Panama Canal recorded 6,288 transits and 254 million CP/SUAB tons, driven mainly by strong performance in containerized cargo and energy products. The PCA emphasized that the Canal is operating with optimal water levels and demand-management mechanisms such as advance reservations and auctions, while implementing preventive water-saving measures to ensure service continuity amid potential adverse climate scenarios.

On July 3, 2026, the Panama Canal incorporated five new hybrid tugboats into its operational fleet, further advancing its modernization and sustainability strategy. The vessels (Isla Farallón, Isla Cébaco, Isla Cañas, Isla Coiba, and Isla Boná) are equipped with hybrid propulsion systems that combine diesel engines, electric motors, and battery energy storage systems, improving operational efficiency and environmental performance.

On July 22, 2026, the Panama Canal reported operating results for the first nine months of its 2026 fiscal year (October 2025 - June 2026), recording 10,726 transits and an average of 35 daily transits, representing a 5.2% increase compared to 10,191 transits in the same period of fiscal year 2025. Canal traffic reached 389.96 million CP/SUAB tons, up 7.2% from 363.66 million tons in the prior year, driven primarily by an increase in container ships and LPG carriers. Financial performance also improved, with transit revenues reaching U.S.$4.8 billion, a 17% year-over-year increase, while net income totaled U.S.$3.6 billion, an increase of 19% compared to the prior year. At the same time, the Canal continues advancing strategic projects, including the port terminal, pipeline, Río Indio reservoir, and logistics corridor, while preparing operational measures to address the potential impact of a severe El Niño event expected to affect water availability and transit capacity.

On August 6, 2026, Panama published Resolution No. 190 of July 27, 2026, creating the Joint Command for Security in Specific Areas of the Panama Canal (CCSCP) under the Ministry of Public Security. The initiative supports the safeguarding of critical Canal infrastructure, the watershed, and adjacent areas in response to environmental, cybersecurity, social, and transnational threats. The resolution is part of a broader cooperation framework between the PCA and the Ministry of Public Security aimed at ensuring the safe, continuous, and efficient operation of the Canal.

On August 12, 2026, the PCA reported that strong demand for transit slots has driven a significant increase in the prices paid in last-minute transit slot auctions, with some vessels paying more than U.S.$1 million and, in exceptional cases, up to U.S.$4 million to secure passage through the Canal. The PCA stated that these amounts reflect temporary market conditions, including increased global demand and disruptions affecting international trade, particularly in the energy cargo segment, and clarified that they do not represent changes to the Canal’s official tolls.

On August 25, 2026, a new record was set in the Panama Canal transit slot auction system when South Korean shipping company SK Shipping paid U.S.$5.3 million to secure a transit slot for its LPG carrier G. Spirit. The record bid reflected strong demand for Canal transits amid global energy trade disruptions, capacity constraints, and ongoing water management measures affecting transit availability. The PCA emphasized that the auction results were driven by market conditions and customer demand rather than increases in Canal tariffs.

On September 1, 2026, the PCA presented its fiscal year 2027 budget proposal to the Cabinet Council. The proposed 2027 fiscal year budget contemplates revenues of U.S.$5.6 billion and direct contributions to the National Treasury of U.S.$3.6 billion. The latter represents an increase of U.S.$414 million in direct contributions compared to the U.S.$3.2 billion approved in the fiscal year 2026 budget. . The proposed 2027 fiscal year budget also estimates an additional U.S.$329 million in payments, consisting of income tax, social security, and educational insurance for

 

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Canal employees, made to the Republic. Total contributions to the Republic are expected to reach U.S.$3.9 billion. The budget is based on projections of 10,750 deep-draft vessel transits and 457.3 million CP/SUAB tons, with a focus on operational sustainability and strategic investments. The proposed 2027 fiscal year budget includes U.S.$82 million allocated to the Río Indio Reservoir Project to begin the first resettlement and compensation processes, as well as the tendering process for the project’s design and construction. For more details about the Río Indio Reservoir Project, see “The Panama Canal – Water Conservation and management – Río Indio Reservoir Project”. Following its approval by the Cabinet Council, the budget proposal will continue the process established under the Constitution and the PCA Organic Law and will be submitted to the National Assembly for consideration.

On September 4, 2026, the Board of Directors of the Panama Canal appointed Rubén Gustavo Pérez Pinzón as Acting Deputy Administrator, effective September 7, 2026, following the assumption of office of Ilya Espino de Marotta as Administrator and the resulting vacancy in the Deputy Administrator position. Pérez Pinzón, currently Vice President of Human Capital, brings 35 years of experience at the Panama Canal, having held leadership roles in human resources, transit operations, and maritime operations. The temporary appointment is intended to ensure continuity of management and operations while the Board completes the selection process for a permanent Deputy Administrator.

On September 7, 2026, Ilya Espino de Marotta officially assumed the role of Administrator of the Panama Canal for the 2026-2033 term, becoming the first woman to lead the Canal in its history after more than four decades of service to the institution. Espino de Marotta served as Deputy Administrator of the Panama Canal since 2020 and has more than 40 years of experience with the institution, holding senior engineering, operations, and executive positions and overseeing strategic projects, including the Panama Canal Expansion Program. As Administrator, she will lead the implementation of the Canal’s 2025-2035 Strategic Vision, focusing on water security, operational reliability and resilience, service diversification, and major infrastructure projects, including the Río Indio Reservoir Project, new port terminals, and logistics and energy corridor initiatives aimed at strengthening Panama’s position as a global maritime and logistics hub.

On September 10, 2026, the Board of Directors of the Panama Canal appointed Miguel Antonio Lorenzo Fábrega as Deputy Administrator of the Panama Canal. Lorenzo, who has served the Canal for 28 years, currently holds the position of Vice President for Infrastructure and Engineering and played a key role in the Canal Expansion Program.

On September 14, 2026, the Budget Committee of Panama’s National Assembly approved in its first debate the Panama Canal’s fiscal year 2027 budget, which projects revenues of U.S.$5.6 billion and direct contributions to the National Treasury of U.S.$3.6 billion, representing a 12.9% increase compared with fiscal year 2026. The proposed budget remains subject to the remaining legislative approval process.

Water Conservation and Management

The PCA reported that, as of March 9, 2026, Lake Gatún had reached a level of 88.32 feet (26.92 m), very close to its operational maximum of 88.93 feet (27.10 m). Lake Alajuela, meanwhile, registered a water level of 251.52 feet (76.66 m), just below its maximum operational level of 252 feet (76.81 m). These conditions reflect exceptionally high water levels for the month of March 2026, driven by an unusually rainy February.

Despite these exceptionally high water levels, the PCA continues to maintain monitoring protocols due to the risk of extreme droughts, noting that climate variability remains a threat to the stability of Canal operations.

On March 18, 2026, the PCA announced the completion of the first phase of the dialogue process with the families located in the area of the Río Indio Reservoir Project, which was carried out over a nine-month period, from May 2025 to February 2026. This process included more than 200 meetings, consisting of over 60 community meetings and approximately 150 individual meetings, held across nine geographic zones encompassing 38 communities that will be resettled. As a result of the dialogue, the Canal presented a written commitment outlining compensation and resettlement measures related to housing, land, economic livelihoods, and sociocultural aspects, under uniform criteria applicable to all communities. The process is part of the Resettlement Action Plan and Livelihood Restoration Plan, aligned with IFC Performance Standard 5, and includes parallel local development initiatives related to potable water, education, and environmental sustainability.

 

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On April 20, 2026, the PCA awarded the design and construction of two new roads in the area of the Río Indio Reservoir Project, with a total length of 15.1 kilometers. The project is aimed at improving access, connectivity, and quality of life for local communities. The road project is being developed in coordination with the Ministry of Public Works and will be complemented by a future phase of 10.6 kilometers, bringing the area’s road network to 25.6 kilometers.

On May 18, 2026, the Panama Canal reported that the historically high water levels in Lake Gatún and other complementary water-saving measures implemented since late 2025, allowed it to sustain 38 daily transits and stable operations. The PCA indicated that, based on current projections, no transit restrictions are expected through December 31, 2026.

On June 5, 2026, the PCA announced an adjustment to the maximum draft for Neopanamax vessels to 49.5 feet, effective July 3, 2026, as part of its water management strategy. The measure is expected to impact less than 1.7% of vessels, while daily transit capacity remains unchanged, and responds to projected Lake Gatún levels and potential El Niño conditions (expected in late 2026 to early 2027).

On June 5, 2026, World Environment Day, the Panama Canal reaffirmed its commitment to sustainability as a central focus of its management, promoting actions aimed at protecting the watershed, water security, and resilience to climate change. Through its various programs, the Panama Canal has protected 9,400 hectares of forest, benefited 724 families across 230 communities, and invested more than U.S.$4 million to incentivize forest conservation. Additionally, the PCA is advancing decarbonization efforts through the use of emissions inventories, the addition of 10 hybrid tugboats, and the award of a solar power plant expected to generate 26 GWh per year (approximately 15% of the Canal’s energy consumption).

On August 5, 2026, the PCA announced additional draft adjustments for Neopanamax vessels as part of its water management and operational sustainability strategy. The maximum authorized draft was reduced to 48.0 feet effective August 26, 2026, and will be further reduced to 47.5 feet effective September 3, 2026. The adjustments are based on current and projected Lake Gatún levels and ongoing hydrological monitoring. The PCA indicated that daily transit capacity is expected to remain unchanged, and the measures form part of the water conservation actions implemented since December 2025 in preparation for the 2026 dry season.

On August 5, 2026, the PCA provided an update on the Río Indio Reservoir Project, a strategic infrastructure initiative aimed at enhancing the long-term water security of the Panama Canal and supporting potable water supply for a significant portion of Panama’s population. The PCA indicated that the project has progressed into key implementation phases, including property appraisals, execution of the compensation framework, and evaluation of resettlement sites for affected communities. The first relocations are expected to commence in late 2027, while construction of the reservoir’s primary infrastructure is anticipated to begin in 2028.

On August 20, 2026, the PCA announced temporary operational measures to address reduced rainfall in the Panama Canal Watershed, including a reduction in daily transit slots to nine at the Neopanamax locks and 25 at the Panamax locks effective September 3, 2026, with Panamax slots further reduced to 23 effective September 15, 2026. The PCA also postponed the implementation of the 48.0-foot and 47.5-foot Neopanamax draft restrictions to September 2 and October 1, 2026, respectively, and reorganized Neopanamax auction slots into four market segments to optimize capacity allocation and water usage. The PCA noted that the lower number of available transit slots could result in longer waiting times for vessels without confirmed reservations.

Subsequently, on August 28, 2026, the PCA introduced temporary modifications to its Transit Booking System for Neopanamax vessels. These measures do not alter the previously announced transit capacity limits but are intended to provide greater flexibility in the reservation process, improve the allocation of available capacity, and promote fairer access to booking slots under the reduced-capacity operating environment. Effective August 30, 2026, for booking dates beginning September 13, 2026, customers may secure multiple reservation slots for the same date or for consecutive dates. The revised system provides 63 weekly booking slots for Neopanamax vessels, including slots allocated through the LoTSA and NetZero programs, with minimum allocations of five slots per booking date for full container vessels, three slots per booking date each for LPG and LNG vessels, and three weekly slots for RoRo/car carriers, bulk carriers, and other vessel types.

 

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On September 4, 2026, the PCA announced that it will maintain the current maximum authorized draft of 48 feet for Neopanamax vessels, postponing the previously scheduled reduction to 47.5 feet that was set to take effect on October 1, 2026. The decision was based on the latest assessment of Lake Gatun water levels and updated weather forecasts, providing customers with greater certainty for voyage planning and vessel scheduling. The PCA stated that it will continue monitoring hydrological conditions and will provide advance notice of any future draft changes, reaffirming its commitment to safe, efficient, and reliable operations.

The Fourth Bridge over the Panama Canal

On February 20, 2026, the Fourth Bridge Panama Consortium, announced significant progress in the construction of the fourth bridge over the Panama Canal (the “Fourth Bridge”), highlighting the successful concrete pour of the first vertical segment of the East Main Tower, marking the start of its vertical construction. This segment measures 4.95 meters and includes 190 m³ of concrete and 62 tons of reinforcing steel, along with a temperature-controlled piping system designed to ensure structural quality. The East Main Tower will reach approximately 186 meters in height and, together with the West Main Tower, will support the bridge’s cable-stayed system.

Considered one of the most complex infrastructure projects currently being executed in Panama, the Fourth Bridge will be a cable-stayed steel and concrete bridge and will include six traffic lanes and a dedicated corridor for Metro Line 3.

On July 31, 2026, Panama’s Ministry of Public Works reported that the Fourth Bridge had reached approximately 40% physical completion, with 27 active construction fronts and work progressing on foundations, columns and other key structural elements. Construction of the Fourth Bridge’s main deck is expected to begin in mid-2027.

On August 4, 2026, Panama’s Ministry of Public Works announced a major construction milestone for the Fourth Bridge with the completion of a continuous 30-hour concrete pour totaling 1,600 cubic meters for the pile cap of the West Main Tower. The structure forms part of the foundation of one of the bridge’s two principal towers. The pile cap is supported by 20 piles and a 770-ton steel box, providing the stability required for the cable-stayed bridge.

On September 2, 2026, the Fourth Bridge met a key construction milestone as its East Main Tower reached 53 meters in height, paving the way for the installation of the first crossbeam that will connect the tower’s two columns and mark the start of the next phase of construction. Project officials indicated that installation of the bridge deck could begin in 2027, while deck fabrication is expected to start later in 2026.

Oil Pipeline – Petroterminal de Panamá, S.A.

Petroterminal de Panamá, S.A. (“PTP”) owns and operates a 131-kilometer trans-isthmus crude oil pipeline connecting oil terminals at Chiriquí Grande, on the Atlantic coast, and Puerto Armuelles, on the Pacific coast, together with associated crude oil storage facilities. PTP was established in 1977 under a contract of association approved by Law No. 30 of 1977, as amended (the “Contract of Association”).

By Cabinet Decree No. 9 of July 16, 2026, the Cabinet Council authorized the exercise of the Government’s purchase right pursuant to the Contract of Association, by which the Republic may acquire all shares of PTP held by other shareholders. The notice of the Government’s intention to exercise this option was delivered on July 17, 2026, and the purchase was executed on August 31, 2026. The Republic acquired from the existing shareholders the remaining 82,000 shares of PTP, representing 41% of its outstanding capital, for a total amount of U.S.$191,701,240.00 (or U.S.$2,337.82 per share). This amount was determined pursuant to a formula required by the Contract of Association, based on PTP’s latest audited financial statements and excluding any revaluation of assets. As a result, the Republic now holds 100% of PTP’s outstanding shares. PTP’s operations continue under its existing management contract.

 

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The acquisition of the 41% shareholding in PTP was funded through a credit facility of up to U.S.$200 million, provided by Banco Nacional de Panamá to a trust established for that purpose. No funds were disbursed from the National Treasury, and no assets of the Republic nor shares of PTP were pledged. The funding commitment under the facility constitutes a contingent liability for the Republic.

The Colón Free Zone

During the seven-month period ended July 31, 2026, imports to the CFZ were preliminarily estimated at U.S.$7.0 billion, an increase from U.S.$6.8 billion during the seven-month period ended July 31, 2025. In comparison, during the seven-month period ended July 31, 2026, Panama’s non-CFZ merchandise imports were preliminarily estimated at U.S.$9.5 billion, an increase from U.S.$8.1 billion during the seven-month period ended July 31, 2025.

During the seven-month period ended July 31, 2026, re-exports to the CFZ were preliminarily estimated at U.S.$8.0 billion, an increase from U.S.$6.4 billion during the seven-month period ended July 31, 2025. In comparison, during the seven-month period ended July 31, 2026, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$0.7 billion, a decrease from U.S.$0.9 billion during the seven-month period ended July 31, 2025.

On July 1, 2026, President José Raúl Mulino announced that, as part of the Government’s plan to support Panama’s position as a regional logistics hub, it planned to invest approximately U.S.$250 million in the expansion of the CFZ, including the implementation of a shopping tourism visa system to attract international purchasers to the CFZ. The expansion work is expected to begin in November 2026.

Employment and Labor

SIACAP

Since its inception in July 2000 through August 31, 2026, the Savings and Pension Capitalization System for Public Servants (Sistema de Ahorro y Capitalización de Pensiones de los Servidores Públicos, or “SIACAP”) has managed approximately U.S.$2.3 billion in participant contributions and revenues, a 4.5% increase from the U.S.$2.2 billion in aggregate contributions and revenues administered as of August 31, 2025.

As of August 31, 2026, SIACAP had 617,051 participants, reflecting a 2.5% increase from the 601,837 participants registered as of August 31, 2025. As of August 31, 2026, SIACAP carried a balance of U.S.$1,073.0 million under management in participant contributions, representing an 8.6% increase from U.S.$987.8 million as of August 31, 2025.

Public Finance

Central Government Budget

For the five-month period ended May 31, 2026, Panama’s non-financial public sector balance registered a deficit of approximately U.S.$1.7 billion (1.8% of nominal GDP), a decrease in the deficit of 22.4% compared to a deficit of approximately U.S.$2.2 billion (2.5% of nominal GDP) for the same period in 2025, in part due to a 14.0% increase in CSS current revenues, a 3.0% increase in the Central Government’s current revenues and a 7,593.1% increase in capital revenues. This increase in capital revenues is due to the sale of land from the Government to the PCA in January 2026.

For the five-month period ended May 31, 2026, the Central Government’s overall balance registered a deficit of approximately U.S.$2.4 billion (2.5% of nominal GDP), a decrease of 23.4% in the deficit compared to a deficit of approximately U.S.$3.1 billion (3.4% of nominal GDP) for the same period in 2025, in part due to a 3.6% increase in current revenues, a 6.2% decrease in current expenditures and a 37,522.3% increase in capital revenues. The increase in current revenues was influenced in part by increased direct tax revenues (mainly as a result of higher income tax,

 

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payroll tax and import and sales tax collections). Likewise, selective consumption taxes recorded significant increases, particularly for automobiles and cigarettes. The increase in capital revenues is due to the sale of land from the Government to the PCA in January 2026.

Taxation

For the five-month period ended May 31, 2026, preliminary figures indicate that approximately 81.3% of the Central Government’s current revenues came from various forms of taxation. For the five-month period ended May 31, 2026, Central Government tax revenues were U.S.$2.7 billion, an increase of 6.6% from U.S.$2.6 billion in tax revenues for the same period in 2025. For the five-month period ended May 31, 2026, approximately 54.9% of tax revenues were from direct taxes, compared to 55.9% of tax revenues for the same period in 2025. For the five-month period ended May 31, 2026, direct tax revenues were U.S.$1.5 billion, a 4.7% increase from U.S.$1.4 billion for the same period in 2025.

Revenues and Expenditures

For the five-month period ended May 31, 2026, the Central Government’s total revenues were approximately U.S.$3.6 billion, a 9.7% increase compared to approximately U.S.$3.3 billion for the same period in 2025. For the five-month period ended May 31, 2026, capital expenditures were approximately U.S.$1.2 billion, a 7.5% decrease compared to approximately U.S.$1.3 billion for the same period in 2025. For the five-month period ended May 31, 2026, the Central Government’s current savings registered a deficit of approximately U.S.$1.4 billion, a 24.2% decrease compared to a deficit of approximately U.S.$1.8 billion for the same period in 2025, mainly due to a 24.1% decrease in transfers.

For the five-month period ended May 31, 2026, the non-financial public sector, which includes the Central Government, decentralized agencies (including CSS and principal universities) and non-financial public enterprises, had total revenues of approximately U.S.$6.0 billion, a 9.5% increase compared to approximately U.S.$5.5 billion for the same period in 2025, in part due to a 7.1% increase in the general government’s current revenues. For the five-month period ended May 31, 2026, current savings for the non-financial public sector registered a deficit of approximately U.S.$0.5 billion, a 19.4% decrease in the deficit compared to a deficit of approximately U.S.$0.7 billion for the same period in 2025, mainly due to a 7.1% increase in the general government’s current revenues.

Administration of Public Funds

As of June 30, 2026, the Treasury Single Account (“TSA”) initiative was in phase III, having incorporated over 96.8% of accounts holding public funds. For additional information on the TSA and its implementation, please see “Public Finance—Revenues and Expenditures —Administration of Public Funds”.

International Reserves

As of March 31, 2026, BNP’s foreign assets amounted to U.S.$2.3 billion, a decrease of 12.4% compared to U.S.$2.7 billion as of March 31, 2025, mainly due to an 11.0% decrease in foreign term deposits.

Financial System

The Banking Sector

As of May 31, 2026, two state-owned banks, 37 private sector general license banks, 14 international license banks and 10 representative offices constituted the banking sector. Of the 37 private sector general license banks, 12 were incorporated in Panama and the rest abroad.

As of May 31, 2026, measured by assets, the largest banks based in Panama are Banco General, S.A., with U.S.$19.8 billion in assets; Banco Nacional de Panamá, with U.S.$14.6 billion in assets; BAC International Bank Inc., with U.S.$14.3 billion in assets; and Banco Latinoamericano de Comercio Exterior, S.A. (BLADEX), with U.S.$13.6

 

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billion in assets. The largest international license banks, based on assets, are Bancolombia (Panama), S.A., with U.S.$6.1 billion in assets; GNB Sudameris Bank, S.A., with U.S.$3.2 billion in assets; and Popular Bank Ltd., Inc., with U.S.$1.8 billion in assets.

As of May 31, 2026, total assets of Panama’s Sistema Bancario Nacional (International Banking Center, or the “IBC”) were approximately U.S.$167,440.4 million, 6.8% more than U.S.$156,776.0 million as of May 31, 2025. As of May 31, 2026, deposits in the IBC were approximately U.S.$121,090.3 million, 7.4% higher than U.S.$112,720.5 million as of May 31, 2025.

As of May 31, 2026, the legal liquidity index of the IBC was 60.0% (against a regulatory minimum of 30.0%), and the capital adequacy ratio was 16.0% (against a regulatory minimum of 8.0%). The net credit portfolio of the IBC as of May 31, 2026 totaled U.S.$102,191.2 million, a 3.7% increase from U.S.$98,506.0 million as of May 31, 2025. Asset quality indicators also showed improvement, with the delinquency ratio declining to 1.47% as of May 31, 2026, from 1.58% as of May 31, 2026, and the non-performing loan ratio decreasing to 2.19% as of May 31, 2026, from 2.27% as of May 31, 2025.

As of May 31, 2026, the balance of Panama’s Centro Bancario Nacional (National Banking System) local credit portfolio was approximately U.S.$64,768.7 million, 0.2% higher than U.S.$64,652.4 million as of May 31, 2025.

Public Sector Banking Institutions

Banco Nacional de Panamá. BNP offers a wide range of commercial banking services through its 95 branches and 482 ATMs throughout Panama as of May 31, 2026. In accordance with the law that governs BNP, the Republic of Panama is responsible for the liabilities of BNP. BNP is the largest public sector banking institution in Panama in terms of domestic credit, local deposits and savings deposits. BNP’s total assets as of May 31, 2026, were U.S.$14.6 billion, its total deposits were U.S.$10.5 billion, and its net loans were U.S.$6.8 billion.

As of May 31, 2026, BNP’s capital and reserves represented 5.5% of its bank deposits and 8.1% of its total assets. BNP generated net income of U.S.$102.7 million during the five-month period ended May 31, 2026, compared to net income of U.S.$112.5 million for the same period in 2025. The decrease reflects prevailing market conditions characterized by lower interest rates in international markets, which adversely affected yields on BNP’s investment portfolio and term deposits.

Caja de Ahorros. Caja de Ahorros, the state-owned savings bank, had 60 branches and 314 ATMs throughout Panama as of May 31, 2026. In accordance with the law that governs Caja de Ahorros, the Republic of Panama is responsible for the liabilities of Caja de Ahorros. Caja de Ahorros is primarily a mortgage lender specializing in financing medium-income customers. Due to its liquidity position in recent years, however, Caja de Ahorros has begun to promote personal loans. Total assets of Caja de Ahorros as of May 31, 2026, amounted to U.S.$7.0 billion, and total deposits amounted to U.S.$5.8 billion. Total net loans held by Caja de Ahorros as of May 31, 2026, amounted to U.S.$4.6 billion. Caja de Ahorros had net income of U.S.$24.5 million during the five-month period ended May 31, 2026, compared to net income of U.S.$12.8 million for the same period in 2025.

Other Public Sector Institutions. Panama created Banco de Desarrollo Agropecuario (“BDA”) to provide a source of financing for agricultural development. As of May 31, 2026, BDA had U.S.$219.4 million in net loans and U.S.$485.3 million in total assets. During the five-month period ended May 31, 2026, BDA had a net loss of U.S.$2.5 million.

Banco Hipotecario Nacional (“BHN”) was established in 1973 to provide a source of financing for national housing projects and to foster the development of savings associations. As of June 30, 2026, BHN’s net loan portfolio was U.S.$104.0 million and its total assets amounted to U.S.$339.6 million. During the six-month period ended June 30, 2026, BHN had a net loss of U.S.$0.9 million.

On May 26, 2026, the Cabinet Council approved the submission to the National Assembly of Bill No. 1-26, which would order the total, progressive closure of the operations of BHN, to be completed by December 31, 2027. Under the proposal, the functions of housing policy, subsidies and social-interest housing programs would be transferred to the Ministry of Housing and Territorial Planning, while mortgage financing, credit administration and the migration of BHN’s loan portfolios would be assumed by Caja de Ahorros under a special regime, separate from its regular banking operations. The Government does not intend for these actions to constitute a bank merger. The bill remains subject to approval by the National Assembly.

 

D-18

Private Sector Banking Institutions

As of May 31, 2026, total assets of the private banking sector were approximately U.S.$127,194.3 million, approximately 7.0% higher than U.S.$118,834.0 million as of May 31, 2025. Total net loans of the private banking sector as of May 31, 2026, were U.S.$79,445.9 million (a 3.7% increase compared to U.S.$76,602.9 million as of May 31, 2025). As of May 31, 2026, deposits in the private banking sector were U.S.$88,730.1 million, approximately 7.1% higher than U.S.$82,873.9 million as of May 31, 2025.

Other Financial System Components

While La Bolsa Latinoamericana de Valores (also known as Latinex) has experienced considerable growth, with aggregate trades increasing from U.S.$30.6 million in 1991 to U.S.$5.4 billion during the six-month period ended June 30, 2026, Latinex remains a small portion of the financial services sector. Equity trades represented 14.2% of trading volume during the six-month period ended June 30, 2026. During the five-month period ended May 31, 2026, local secondary market transactions (which include both equity and debt trades) in Panama totaled U.S.$921.0 million.

Interest Rates. During the five-month period ended May 31, 2026, the average interest rate paid by Panamanian banks for one-year deposits was 4.73%, while the interest rate charged for personal credit transactions averaged 8.93%. In general terms, the differential between borrowing and lending interest rates for Panamanian banks was 4.20% during the five-month period ended May 31, 2026.

Insurance. As of May 31, 2026, there were 22 insurance companies and 3,493 insurance brokerages in Panama. The 3,493 brokerages consisted of 2,837 individual brokers, 378 brokerage companies and 278 operating under temporary licenses. As of June 30, 2026, the registered assets of insurance companies totaled U.S.$5.0 billion.

Financial Services. A small non-deposit-taking financial services industry provides leasing, consumer durables financing and other small-scale lending. As of August 15, 2026, there were 217 locally incorporated companies participating in this industry.

Foreign Trade and Balance of Payments

Composition of Foreign Trade

In the seven-month period ended July 31, 2026, Panama’s exports of goods (FOB), excluding the CFZ, recorded a preliminary total of U.S.$654.8 million, a decrease of 30.0% compared to U.S.$935.3 million in the same period of 2025. This decline was mainly driven by reduced exports of copper and copper concentrate and lower exports of fishmeal.

In the seven-month period ended July 31, 2026, Panama’s imports of goods (CIF), excluding the CFZ, recorded a total of U.S.$9.5 billion, an increase of 16.9% compared to U.S.$8.1 billion in the same period of 2025, influenced in particular by an increase in imports of intermediate goods such as raw materials and intermediate products for industry (excluding construction), as well as construction materials.

In the seven-month period ended July 31, 2026, banana and pineapple exports recorded a preliminary total of U.S.$73.7 million, an increase of 14.3% compared to U.S.$64.5 million in the same period of 2025.

In the seven-month period ended July 31, 2026, shrimp exports recorded a preliminary total of U.S.$77.6 million, a 11.5% increase from U.S.$69.6 million in the same period of 2025.

In the seven-month period ended July 31, 2026, exports of fish, including fresh and frozen fish filets, recorded a preliminary total of U.S.$39.1 million, a 24.7% decrease from U.S.$51.9 million in the same period of 2025.

In the seven-month period ended July 31, 2026, fishmeal and fish oil exports recorded a preliminary total of U.S.$37.1 million, a 42.7% increase from U.S.$26.0 million in the same period of 2025.

 

D-19

Foreign Direct Investment

Panama’s foreign direct investment (“FDI”) in the first quarter of 2026 totaled U.S.$213.3 million, an decrease of U.S.$340.6 million, or 61.5%, from U.S.$553.9 million in the first quarter of 2025. In the first quarter of 2026, reinvested earnings were the source of U.S.$41.8 million of FDI, and there was an additional FDI inflow of U.S.$196.2 million from other capital. There was an FDI outflow of U.S.$24.6 million from purchases of shares of domestic companies by non-resident investors. Of gross FDI, U.S.$71.2 million corresponded to capital invested in the CFZ in the first quarter of 2026.

Cobre Panama Copper Mine and Mining Concession Contract

Cobre Panama is a large open-cast copper mine development project in Panama, located 120 km west of Panama City and 20 km from the coast of the Caribbean Sea in Donoso District, Colón province. In 2023, Panama’s renegotiation of the Cobre Panama copper mine concession contract with Minera Panamá, S.A. sparked nationwide protests by teachers’ unions, labor unions, environmentalists, which included strikes, demonstrations, school closures, and roadblocks. After weeks of protests across the country in opposition to the new concession contract for the Cobre Panama mine, on November 3, 2023, the National Assembly approved, and former President Cortizo enacted, Law 407, which established an indefinite moratorium on the exploration, extraction, transportation and profit generation from metallic mining in Panama. Ultimately, on November 27, 2023, the Supreme Court of Justice declared the mining concession contract between the Government and Minera Panamá S.A. unconstitutional. As a result of the Supreme Court’s ruling, President Cortizo announced that a process would begin for an orderly and safe closure of the Cobre Panama mine. On December 8, 2023, the Ministry of Commerce and Industries (“MICI”) notified First Quantum, the majority owner of Minera Panamá S.A., of the termination of its copper extraction and processing operations at the Cobre Panama mine. These actions prompted a number of arbitration requests. See “Foreign Trade and Balance of Payments—Cobre Panama Copper Mine and Mining Concession Contract”.

As of today’s date, the arbitrations initiated by First Quantum and by Franco-Nevada Corporation against Panama in connection with the Cobre Panama mine have been suspended.

In late 2025, Panama’s Ministry of Environment announced the launch of a comprehensive audit of the Cobre Panamá mine project, to be conducted by SGS Panama Control Services Inc., to assess compliance with environmental, legal, labor, and tax obligations under the project’s Category III Environmental Impact Study, reviewing critical areas such as biodiversity, reforestation, water management, waste handling, greenhouse gas emissions, and community relations, while also verifying reports from the construction and operational phases. On June 19, 2026, SGS Panama Control Services Inc. delivered to the Ministry of Environment the final report of the comprehensive audit of the Cobre Panamá mine project. The independent audit assessed the project’s legal, administrative, fiscal, environmental, technical and operational performance, including compliance with the 370 commitments established under the Category III Environmental Impact Assessment and the applicable Environmental Adaptation and Management Programs. The audit found that the project had complied with most of its commitments and identified certain operational strengths, while also highlighting matters requiring additional monitoring or corrective action, particularly in the areas of administrative management, biodiversity, ecological restoration and environmental monitoring. The Government stated that the report does not constitute a decision regarding the future of the project but rather provides technical and independently verified information to support its evaluation of potential next steps within the applicable legal framework.

Balance of Payments

In the first quarter of 2026, Panama registered an estimated overall balance of payments deficit of U.S.$2.0 billion, compared to an overall deficit of U.S$2.4 billion in the first quarter of 2025, mainly due to an increase in exports and an increase of goods, services and rent balance.

In the first quarter of 2026, the current account balance recorded a surplus of U.S.$1.3 billion, an increase of 817.3% compared to a current account deficit of U.S.$179.8 million in the first quarter of 2025. This was in part due to a 12.9% increase in services, which grew to U.S.$4.6 billion in the first quarter of 2026 compared to U.S.$4.1 billion in the first quarter of 2025.

 

D-20

In the first quarter of 2026, the capital and financial account balance recorded a surplus of U.S.$ 821.7 million, an increase of 122.9% compared to a deficit of U.S.$3.6 billion in the first quarter of 2025. The capital and financial account posted a surplus of US$821.7 million in the first quarter of 2026, compared with a deficit of approximately US$3.6 billion in the first quarter of 2025, an improvement of approximately US$4.4 billion year-over-year. This improvement was driven primarily by changes in other financial-account components, while FDI inflows decreased relative to the corresponding period of 2025.

In the first quarter of 2026, foreign direct investment as calculated by the Instituto Nacional de Estadísticas y Censo de Panamá (“INEC”) recorded net outflows of U.S.$12.9 million, a decrease of 103.4% compared to net inflows of U.S.$378.6 million in the first quarter of 2025. In the first quarter of 2026, foreign portfolio investment recorded net inflows of U.S.$81.9 million, compared to net outflows of U.S.$3.8 billion in the first quarter of 2025. In the first quarter of 2026, other capital recorded net inflows of U.S.$751.0 million, compared to net outflows of U.S.$151.6 million in the first quarter of 2025.

Public Debt

As of August 31, 2026, Panama’s public debt totaled U.S.$61,918.4 million, an increase from U.S.$57,816.0 million as of August 31, 2025. As of August 31, 2026, Panama’s internal public debt accounted for 16.2% of total debt (a decrease from 19.0% as of August 31, 2025), while external public debt accounted for 83.8% of total debt (an increase from 81.0% as of August 31, 2025). As of August 31, 2026, the average maturity of the debt portfolio was 11.1 years, with an average duration of 7.2 years. The average maturity of the debt portfolio as of August 31, 2025, was 12.4 years, with an average duration of 7.7 years. During the eight-month period ended August 31, 2026, local secondary market transactions in treasury securities reached U.S.$786.4 million, an increase from U.S.$358.8 million during the eight-month period ended August 31, 2025.

Internal Debt

During the nine-month period ended September 30, 2026, Panama issued U.S.$1,885.4 million in Treasury Bills. Of this amount, U.S.$1,612.3 million was sold through public auctions, while U.S.$273.1 million was sold in direct placements executed on the same day as the corresponding auction, and using the same debt instrument being auctioned.

Through Cabinet Decree No. 34 of August 6, 2024, the Republic authorized the Revolving Treasury Notes Program for an amount of up to U.S.$6,000,000,000, in order to strategically develop the domestic public debt market and partially cover the financing needs of the General State Budget for each fiscal year. As part of the Revolving Treasury Notes Program, on March 27, 2026, Panama issued the first tranche for U.S.$43.9 million of its 5.250% Treasury Notes due 2033. On May 22, 2026, Panama issued the second tranche for U.S.$23.5 million of its 5.250% Treasury Notes due 2033. On August 28, 2026, Panama issued the second tranche for U.S.$38.8 million of its 5.250% Treasury Notes due 2033.

BNP

In January 2026, BNP granted the Government, through the Ministry of Economy and Finance, an interim line of credit for up to U.S.$500.0 million for partial financing of the 2026 budget. The full amount of U.S.$500.0 million was disbursed to the Government on April 1, 2026.

External Debt

On January 20, 2026, the Government entered into a loan agreement to borrow up to JPY 219,478,000,000 from BBVA, to be disbursed in its equivalent in United States dollars, with guarantees provided by the World Bank Group, to partially finance the liquidity needs of the Government’s budget. The loan has an interest rate based on daily compounded TONAR plus a 0.47% margin. On January 26, 2026, the loan was disbursed in full.

Cabinet Decree No. 11, dated February 11, 2025, Government authorized the Ministry of Economy and Finance to issue global bonds in international markets for a maximum amount of U.S.$6.0 billion. Based on this authorization,

 

D-21

in February 2026, the Republic issued U.S.$1.49 billion of its 5.227% Global Bonds due 2034 and U.S.$1.49 billion of its 5.662% Global Bonds due 2038. The proceeds of this global bond issuance were used in a liability management transaction for the partial repurchase of nine previously outstanding global bonds in an aggregate amount of U.S.$2.97 billion.

On April 9, 2026, the Government entered into a loan agreement to borrow up to CHF1,975,000,000 from Citibank, N.A. to partially finance the liquidity needs of the Government’s budget and liability management transactions. The loan has a fixed interest rate of 2.39% per annum and matures on March 20, 2029. On April 14, 2026, the loan was disbursed in full.

On September 10, 2024, Cabinet Decree No. 39 authorized the Ministry of Economy and Finance to enter into certain risk mitigation transactions, such as interest rate swaps.

On April 14, 2026, the Government entered into a fixed-to-fixed rate cross currency swap to exchange the 2.39% interest payments in the Citibank CHF-denominated loan to 2.66% in USD for the purpose of mitigating the currency risk related to the loan. The termination date for this swap is March 20, 2029.

On May 20, 2026, the Government entered into a fixed-to-fixed rate cross-currency swap with Morgan Stanley Capital Group Inc. to exchange USD-denominated interest payments at a fixed rate of 5.227% on a notional amount of U.S.$1,490,000,000 for CHF-denominated interest payments at a fixed rate of 4.565% on a notional amount of CHF1,170,991,000. This transaction was executed in relation to the 2034 Global Bond for the purpose of
reducing interest rate costs. The termination date for this swap is February 23, 2029.

On May 21, 2026, the Government entered into a fixed-to-fixed rate cross-currency swap with Morgan Stanley Capital Group Inc. to exchange USD-denominated interest payments at a fixed rate of 5.662% on a notional amount of U.S.$745,000,000 for CHF-denominated interest payments at a fixed rate of 4.632% on a notional amount of CHF588,885,250. This transaction was executed in relation to the 2038 Global Bond for the purpose of
reducing interest rate costs. The termination date for this swap is February 23, 2029.

On May 26, 2026, the Government entered into a fixed-to-fixed rate cross-currency swap with Morgan Stanley Capital Group Inc. to exchange USD-denominated interest payments at a fixed rate of 5.662% on a notional amount of U.S.$745,000,000 for CHF-denominated interest payments at a fixed rate of 4.6445% on a notional amount of CHF587,656,000. This transaction was executed in relation to the 2038 Global Bond for the purpose of
reducing interest rate costs. The termination date for this swap is February 23, 2029.

On May 28, 2026, the Government entered into a fixed-to-fixed rate cross-currency swap with Merril Lynch International to exchange USD-denominated interest payments at a fixed rate of 9.375% on a notional amount of U.S.$407,335,000 for CHF-denominated interest payments at a fixed rate of 8.8070% on a notional amount of CHF 319,957,161.82. This transaction was executed in relation to the 2029 Global Bond for the purpose of reducing interest rate costs. The termination date for this swap is April 1, 2029.

On July 21, 2026, the Government entered into Amendment No. 1 to the EUR1,200,000,000 loan agreement with Banco Santander, S.A. to mitigate market risks and extend the maturity of the Government’s budget financing facility. Under the amendment, the interest rate was changed from six-month EURIBOR plus 2.45% per annum to a fixed interest rate of 4.83% per annum, and the loan maturity was extended to five years from the amendment date.

On July 21, 2026, the Government entered into a loan agreement to borrow up to EUR1,700,000,000 from Merrill Lynch International. The facility consists of EUR1.2 billion to refinance the outstanding balance of the original loan and an additional EUR500 million in new financing to partially finance the liquidity needs of the Government’s budget. The loan has a fixed interest rate of 4.67% per annum, an additional margin of 0.20% per annum on the outstanding balance, matures five years after the utilization date, and is repayable in equal semiannual installments beginning on the third anniversary of the utilization date. On July 28, 2026, the Government voluntarily prepaid the original loan in the amount of EUR1,224,264,200, including principal, accrued interest and the prepayment premium, and the new facility was disbursed in full.

On September 9, 2026, the Republic of Panama through the Ministry of Economy and Finance as borrower entered into a senior unsecured term loan agreement with Bladex, Inc., as lender. The details of the loan are as follows: (i) total commitment of the loan is for $1,000,000,000; (ii) the loan will mature on September 9, 2027; (iii) interest on the loan will be calculated based on Term SOFR, plus a 1.20% margin; and (iv) the proceeds will be used for general budgetary purposes. An initial disbursement of U.S.$500,000,000 was made on September 11, 2026, and a second disbursement of U.S.$500,000,000 was made on September 24, 2026.

 

D-22

International Financial Institutions

The World Bank

On January 20, 2026, Panama signed a loan agreement with the World Bank for U.S.$500.0 million to finance Panama’s fiscal management and growth development policy.

Subscriptions

CABEI

On May 7, 2026, Panama paid the sixth installment of its CABEI subscription, in the amount of U.S.$3.2 million. As of May 30, 2026, Panama’s total paid-in capital to CABEI was U.S.$358.4 million.

IMF

As of May 31, 2026, Panama’s total subscriptions in the IMF (which correspond to its IMF quota) were SDR 376.8 million.

International Bank for Reconstruction and Development

As of April 16, 2026, Panama’s total paid-in capital to the International Bank for Reconstruction and Development was U.S.$113.8 million.

IFC

As of April 16, 2026, Panama’s total paid-in capital to IFC was U.S.$9.9 million.

CAF

As of May 31, 2026, Panama’s total paid-in capital to CAF was U.S.$796.6 million.

IADB

As of June 30, 2026, Panama’s paid-in capital to the IADB was U.S.$793.1 million.

IIC

As of May 31, 2026, Panama’s total paid-in capital to IIC was U.S.$20.0 million.

 

D-23

TABLE NO. 1

Selected Panamanian Economic Indicators⁽¹⁾

The following table sets forth Panama’s principal economic indicators for the years 2021 through 2025:

 

		2021				2022				2023(P)				2024(E)				2025(E)
Economic Data:
GDP (millions, nominal dollars)		$	67,396			$	76,479			$	83,812			$	86,524			$	90,463
GDP (millions, constant dollars)(2)		$	66,429			$	73,762			$	79,048			$	81,220			$	84,753
GDP (% change, constant dollars)(2)			16.5	%			11.0	%			7.2	%			2.7	%			4.4	%
Service Sector (% change, constant dollars)(2)(3)			11.9	%			10.2	%			6.0	%			4.8	%			5.4	%
Other (% change, constant dollars)(2)(4)			6.1	%			6.4	%			2.9	%			4.1	%			2.1	%
GDP Per Capita (constant dollars)(2)		$	15,315			$	16,782			$	17,752			$	18,011			$	18,431
Population (millions)			4.39				4.44				4.50				4.55				4.60
CPI—Period Average (% change)(8)			1.6	%			2.9	%			1.5	%			0.7	%			(0.1	%)
Unemployment			11.3	%			9.9	%			7.4	%			9.7	%			10.4	%†
Public Finance:
Total Consolidated Non-Financial Public Sector  Revenues (millions)		$	11,661			$	13,282			$	14,652			$	14,605			$	15,614
Total Consolidated Non-Financial Public Sector  Expenditures (millions)(5)		$	16,006			$	16,326			$	17,923			$	19,995			$	18,935
Overall Surplus (Deficit) (millions)		$	(4,345	)		$	(3,045	)		$	(3,271	)		$	(5,390	)		$	(3,321	)
As % of Current GDP			(6.5	%)			(4.0	%)			(4.0	%)			(6.2	%)			(3.7	%)
Central Government Surplus (Deficit) (millions)		$	(4,496	)		$	(3,148	)		$	(3,317	)		$	(6,557	)		$	(4,701	)
As % of Current GDP			(6.7	%)			(4.1	%)			(4.0	%)			(7.6	%)			(5.2	%)
Public Debt (at December 31):
Internal Debt (millions)		$	7,644			$	7,421			$	7,037			$	9,461			$	10,669
External Debt (millions)		$	32,844			$	36,853			$	39,899			$	44,276			$	48,681
Public Debt (as % of Current GDP)
Internal Debt			11.3	%			9.7	%			8.4	%			11.0	%			11.8	%
External Debt			48.7	%			48.2	%			48.0	%			51.3	%			53.8	%
Total Public Debt (millions)		$	40,487.8			$	44,274.0			$	47,025.3			$	53,737.0			$	59,349.3

 

D-24

Trade Data:
Exports (f.o.b.) Goods(6)(7) (millions)		$	15,012			$	17,962			$	17,050			$	16,010			$	15,710
Imports (c.i.f.) Goods(6)(7) (millions)		$	(20,323	)		$	(27,150	)		$	(30,028	)		$	(26,503	)		$	(28,203	)
Goods Trade Balance(7) (millions)		$	(5,311	)		$	(9,188	)		$	(12,977	)		$	(10,493	)		$	(12,493	)
Current Account Surplus(7) (Deficit) (millions)		$	(779	)		$	29			$	(2,677	)		$	568			$	(169.0	)
Overall Balance of Payments Surplus (Deficit)(7) (millions)		$	(2,492	)		$	(1,879	)		$	(630	)		$	86			$	(3,510	)
Total Official Reserves (at December 31) (millions)		$	7,328			$	4,165			$	3,757			$	4,020			$	3,843

Note: Totals may differ due to rounding.

 

(R)		Revised Figures.
(E)		Estimated Figures.
(P)		Preliminary figures.
(1)		All monetary amounts in millions of U.S. dollars at current prices, unless otherwise noted.
(2)		Constant GDP figures are based on 2018 constant dollars in chained volume measure.
(3)		Including real estate, public administration, commerce, restaurants and hotels, financial services, the Colon Free Zone (“CFZ”), the Panama Canal, transportation and communications, public utilities and other services.
(4)		Including mining, manufacturing, agriculture and construction.
(5)		Including interest payments.
(6)		Including the CFZ.
(7)		Figures have been calculated pursuant to the sixth edition of the IMF Balance of Payments Manual.
(8)		Consumer Price Index figures are published using 2024 as the base year (2024 = 100), starting in September 2025.
		† The unemployment rate corresponds to the end of September 2025.
n/a		Figures have not yet been published.

Sources: Directorate of Analysis and Economic Policies, Office of the Comptroller General, Banco Nacional de Panamá (“BNP”) and Ministry of Economy and Finance.

 

D-25

THE REPUBLIC OF PANAMA

Area and Population

Panama is a republic located on the narrowest point of the Central American isthmus, which connects the continents of North America and South America. It has a coastline of approximately 1,868 miles on the Caribbean Sea and Pacific Ocean and is bordered on the east by Colombia and on the west by Costa Rica. Panama has a national territory of approximately 29,157 square miles situated within its coastline and 345 miles of land borders, and includes numerous coastal islands. The Panama Canal, one of the most important commercial waterways in the world, which connects the Atlantic and Pacific Oceans, bisects the country running northwest to southeast. Panama’s climate is primarily tropical.

As of July 2025, Panama had an estimated population of 4.59 million and a population density of 61.7 people per square kilometer. Panama Province, the Republic’s largest province, is estimated to be the home of 35.8% of Panama’s total population, and Colón Province, located at the northern terminus of the Panama Canal, is estimated to be the home of 6.8% of the total population.

During the period from 2021 to 2025, the population increased by an average of 1.2% per annum, primarily driven by positive net migration and increasing life expectancy. Approximately 65.8% of Panama’s population lives in cities and towns with more than 1,500 inhabitants and 34.2% lives in rural areas. Approximately 6.6% of the population is indigenous. Of the Panamanian population, 24.7% is under 15 years of age, 65.3% is between the ages of 15 and 64, and 10.0% is over the age of 65. Average life expectancy in Panama is 79.5 years. The infant mortality rate for 2024 was estimated at 13.4 per 1,000 births. Panama’s official language is Spanish.

Panama’s estimated per capita GDP for 2025, expressed in chained volume measure, was approximately U.S.$18,431. According to the 2023 census, education indicators show that Panama’s literacy rate for people over the age of ten years is approximately 96.3%. Estimates for 2023 show that 21.7% of the population is considered to be living in poverty, of which 9.6% is considered to be living in extreme poverty.

Historical Information

Panama gained independence from Spain in 1821 and subsequently joined the Confederation of Greater Colombia, from which Panama declared its independence on November 3, 1903. Several weeks after gaining independence, Panama signed the Hay/Bunau-Varilla Treaty with the United States, which, among other things, granted the United States the right to occupy a ten-mile wide zone and a concession for the construction, maintenance, operation and protection of the Panama Canal (the “Canal Zone”). See “The Panama Canal—General”.

Panama adopted its first constitution in 1904. Between 1904 and 1968, Panama generally experienced social and political stability and economic growth under a constitutional democracy. During the period immediately following World War II, the Panamanian military interfered with the civilian government, although this interference largely ended by the mid-1950s.

Constitutional government continued until October 1968, when the National Guard mounted a military coup and replaced the civilian government. Although the military made nominal efforts during the late 1970s to return to civilian government, the military generally remained in control of the Government until 1989.

Issues related to control of the Panama Canal and the Canal Zone caused considerable unrest in Panama. In 1977, following 13 years of negotiations, Panama signed treaties with the United States that provided for abolishing the Canal Zone in 1979 and the eventual turnover of the Panama Canal to Panama in 1999. See “The Panama Canal—The Canal Treaty of 1977”.

In 1983, General Manuel Antonio Noriega (“Noriega”) became Commander of the National Guard and assumed effective control of the Government. In the spring of 1987, a political crisis galvanized Noriega opponents and resulted in the formation of a major civilian protest and opposition movement widely supported by civilian organizations, political parties and the business community. This political crisis generated an economic crisis as well.

 

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In response to the ensuing political crisis, in March 1988, the United States suspended its Agency for International Development (“AID”) programs to Panama and blocked preferential sugar quotas, causing further economic disruption. The United States imposed additional economic sanctions that year, including a freeze on all United States payments for the Panama Canal (at that time, approximately U.S.$6 million per month), an order prohibiting American citizens and companies from making payments to the Government and a freeze on all Government accounts (and certain additional assets) in the United States.

In December 1989, relations between Panama and the United States deteriorated, culminating in a United States military intervention that resulted in the removal of Noriega. Guillermo Endara (“Endara”), who had been elected by a significant majority of the popular vote earlier in the year, was subsequently sworn in as President. Since the end of 1989, Panama has enjoyed political and economic stability under democratically elected governments.

Relations with the United States have been fully restored. Endara finished his presidential term and, in the spring of 1994, orderly national elections were held. Ernesto Pérez Balladares, who was elected President with 33% of the vote in May 1994, finished his presidential term in August 1999. Mireya Moscoso, who was elected with 44.8% of the vote in May 1999, took office on September 1, 1999 and completed her presidential term on August 31, 2004. On May 2, 2004, Martín Torrijos was elected President with 47.4% of the vote. He took office on September 1, 2004 and completed his presidential term on June 30, 2009. Ricardo Martinelli, who was elected President with 60.0% of the vote on May 3, 2009, took office on July 1, 2009 and completed his presidential term on June 30, 2014. On May 4, 2014, Juan Carlos Varela was elected President with 39.1% of the vote obtained by the “El Pueblo Primero” alliance composed of the Partido Popular and Partido Panameñista. President Varela took office on July 1, 2014 and completed his presidential term on June 30, 2019. On May 5, 2019, Laurentino Cortizo Cohen was elected President with 33.1% of the vote. He took office on July 1, 2019 and completed his presidential term on June 30, 2024. President José Raúl Mulino, elected on May 5, 2024, succeeded to the presidency on July 1, 2024.

The Panamanian military was disbanded in 1990 and, in 1994, by constitutional amendment, the military was abolished. Costa Rica, Panama’s western neighbor, also does not have a military. If Panama were attacked by a foreign force and the neutrality of the Panama Canal were jeopardized, the United States would have the right under treaties related to the Panama Canal to take measures to protect the neutrality of the Canal. The national police force of Panama also has certain defensive capabilities.

Form of Government and Political Parties

Panama is a republic with a representative form of government. In 1972, the original version of the current Constitution was adopted (the fourth in Panama’s history), setting forth the structure of the Government, individual and collective rights and duties, and the division of powers among the executive, legislative and judicial branches.

Executive power is vested in the President and the presidentially-appointed Ministers, who constitute the Cabinet. The President and the Vice President are each elected by direct, universal suffrage for a term of five years. The President and the Vice President may not be re-elected to the same office within ten years after the expiration of their term. In the event the President is unable to finish a term, the Vice President would succeed to the presidency.

National legislative power is vested in the National Assembly, Panama’s unicameral legislative body. The number of electoral districts, each comprising an average of approximately 60,000 persons, determines the number of legislators; as of December 31, 2025, the National Assembly had 71 seats. The full National Assembly is elected by universal suffrage every five years. Members of the National Assembly are not subject to limits on the number of terms in office to which they may be elected. The National Assembly has, among other powers, the authority to enact legislation, ratify treaties, approve the budget and ratify the appointment of the Comptroller General, the Attorney General and justices of the Supreme Court of Justice (the “Supreme Court”). To be enacted, legislation must be approved after three separate readings by a majority of all legislators or by a majority of legislators present at the session, depending on the substance of the legislation being enacted. The President may veto bills adopted by the National Assembly, but the National Assembly may override presidential vetoes by a vote of two-thirds of its members. Pursuant to the Constitution, the National Assembly may empower the President and the Cabinet to adopt legislation when the National Assembly is not in session.

 

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The National Assembly has the power to amend the Constitution. Amendments to the Constitution may be adopted either by a majority vote of all legislators in two different National Assemblies or by a majority vote of all legislators in two sessions of the same National Assembly and a public referendum.

On May 5, 2024, general elections were held in Panama. In the presidential elections, José Raúl Mulino of the Realizando Metas party was elected president of the Republic with approximately 34.2% of the votes. In the National Assembly elections, independent candidates won 20 seats, Realizando Metas won 14 seats, Partido Revolucionario Democrático won 13 seats, Cambio Democrático Movimiento won 8 seats, Partido Panameñista won 8 seats, Movimiento Otro Camino won 3 seats, Partido Popular won 2 seats, Partido Alianza won 2 seats and Liberal Republicano Nacionalista (MOLIRENA) won 1 seat. The new government took office on July 1, 2024, for a five-year term.

Judicial power is vested in the Supreme Court and various lower tribunals. The President appoints the nine justices of the Supreme Court for staggered ten-year terms, with two justices being selected every two years, subject to ratification by the National Assembly. Lower court judges are appointed by the Supreme Court. The judicial branch prepares its own budget and sends it to the executive branch for inclusion in the general budget presented to the National Assembly for approval. The Supreme Court is the final court of appeal and has the power to declare null and void laws, regulations or other acts of the executive or legislative branches that conflict with the Constitution.

Panama is administratively divided into ten provinces and three territories. In each province, executive power is exercised by a Governor who is appointed by the President. There are no provincial legislative or judicial bodies. Provincial governments do not have their own independent budgets. Within each province are municipalities that are, in turn, divided into precincts. Each municipality has a municipal council and a mayor who exercises executive power. Mayors and members of municipal councils are elected by direct, universal suffrage for five-year terms. Municipalities levy and collect municipal taxes and adopt their own budgets for financing local projects.

Foreign Affairs and International Organizations

Panama maintains diplomatic relations with 165 countries. Panama is a charter member of the United Nations (“U.N.”) and a member of various other international organizations, including the IMF and the Inter-American Development Bank (“IADB”). Panama is a founding member of the Organization of American States (“OAS”) and is also a member of the International Bank for Reconstruction and Development (“World Bank”) and the World Bank affiliates, including the International Finance Corporation (“IFC”) and the Multilateral Investment Guaranty Agency (“MIGA”) (collectively, the “World Bank Group”). On September 6, 1997, Panama acceded to membership in the World Trade Organization (“WTO”).

Panama consults with several international agencies, such as the World Bank Group and the IADB, regarding its economic program, objectives, projections and policies. In recent years, Panama has utilized the IADB and the World Bank Group for significant external financing. See “Public Sector Debt—External Debt”.

In 2010, the National Assembly approved legislation implementing the Corporación Andina de Fomento (“CAF” or “Development Bank of Latin America”) agreement and Panama became a Series A country member. CAF is a development bank created in 1970 and owned by 19 sovereigns, 17 from Latin America and the Caribbean and Spain and Portugal, as well as by 13 private banks in the Latin America region. It promotes sustainable development through loans and grants, and support in the technical and financial structuring of projects in the public and private sectors of Latin America. As of December 31, 2025, the Republic had outstanding borrowings of U.S.$2,449.1 million from CAF. See “Public Sector Debt—External Debt”.

On October 13, 2025, President Mulino enacted Law No. 489, which approves Economic Complementation Agreement No. 76 between the member states of the Southern Common Market (MERCOSUR) and the Republic of Panama, signed on December 6, 2024. Among the agreement’s principal objectives are: to create a free trade area through the progressive elimination of tariffs and restrictions affecting trade in goods, services and investment among the member states; to establish a regulatory framework to promote and protect reciprocal investment; and to promote economic and trade cooperation among the member states.

 

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Social and Economic Situation

National Roundtable for Dialogue

On July 6, 2022, nationwide protests began in Panama over the rise in the prices of fuel and food. Social groups, including teachers, students and construction workers, joined the protests. The protestors also demanded a larger education budget, a general salary increase and the adoption of measures to curb corruption and reduce inequality. The protests, which lasted for approximately one month, shut down roads in major cities in Panama, causing shortages of food, fuel, medicine and other products.

In response, then President Cortizo initiated a National Roundtable for Dialogue to discuss the concerns of the protestors. The National Roundtable for Dialogue moved to the city of Penonomé and included representatives of the United Community Alliance for Life, the National Association for the Rights of the Organized People, leaders of the Ngäbe-Buglé Comarca, the Single Union of Construction and Similar Workers (SUNTRACS), and representatives of the different institutions of the Government. Roundtable discussions, which were facilitated by the Catholic Church’s Archbishop José Domingo Ulloa, centered around eight points: (i) reduction and freezing of prices in the basic consumer basket, (ii) reduction and freezing of fuel prices, (iii) reduction of prices and increase in supply of medicines from the CSS and the Ministry of Health, (iv) the allocation of 6% of GDP towards education, (v) reduction in electricity prices, (vi) reforms to the CSS, (vii) corruption and transparency, and (viii) an intersectoral follow-up roundtable.

As a result of Roundtable negotiations, the Government committed to allocate 5.5% and 6% of the national budget during the years 2023 and 2024, respectively, to improve the infrastructure and equipment of schools, and promulgated (i) Executive Decree No. 16 of July 26, 2022, approving the reduction of the cost of the basic consumer basket by 30%, through the price control of 72 products, with mechanisms to protect small and medium producers; (ii) Cabinet Resolution No. 80 of July 18, 2022, which set the maximum cost of gasoline and diesel at U.S.$3.25 per gallon for a period of three months; (iii) Executive Decree No. 17 of August 10, 2022, which approved a 30% discount on certain medicines for a period of six months, with the possibility of extension; (iv) Cabinet Resolution No. 90 of August 17, 2022, which authorized the Minister of Health to propose a bill which allows the import of certain medicines by pharmacies; and (v) Executive Decree No. 215, creating the National Citizens’ Commission to Fight Corruption.

Although further phases of the National Roundtable for Dialogue were contemplated, they never materialized due to a lack of consensus among the participants.

Immigration

Panama’s National Immigration Service estimates that in 2023, approximately 520,085 migrants moved through the Darién Gap, a stretch of jungle between Colombia and Panama, with the goal of crossing the Panamanian territory and continuing their journey through Central America on their way to reach the U.S. and Canada. In comparison, the number of migrants estimated to have crossed the Darién Gap into Panama was approximately 6,465 in 2020, 133,726 in 2021 and 248,284 in 2022.

In 2024, a total of 302,203 migrants crossed the Darién Gap from Colombia into Panama. Of these, 64,764 were minors, as recorded at migration reception centers along the Panamanian border. The countries of origin with the highest number of migrants included Venezuela (69%), Colombia (6%), Ecuador (5%), and China (4%). This figure represents a 42% decrease in migration flows through the Darién Gap compared to 2023.

In 2025, a total of 3,091 migrants crossed the Darién Gap from Colombia into Panama, compared to 302,203 during 2024, representing a decrease of approximately 99% and returning transit volumes to levels last recorded in 2012 and 2013. Venezuelan nationals remained the largest group of migrants, accounting for approximately 45.6% of total arrivals, while the number of minors declined to 488 (approximately 16% of total arrivals) from 64,764 (approximately 21% of total arrivals) in the prior-year period.

The Government has been working individually and jointly with other countries and organizations to address the flow of migration into Panama through the Darién Gap and other issues stemming from illegal immigration such as environmental degradation, poverty, human trafficking and crime.

 

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Humanitarian Relief

In October 2023, the Ministry of Environment estimated that the cost of environmental restoration for damages associated with migration in the Darien region totaled U.S.$11.9 million. Each migrant is estimated to leave behind approximately 20 pounds of waste during the journey through the Darien Gap.

In December 2023, the Cabinet Council approved the allocation of U.S.$3.3 million for the provision of food to migrants arriving through the Darien Gap. Panama spent approximately U.S.$70.0 million from 2019 to 2023 on the provision of food, healthcare and other services to migrants.

On March 11, 2024, the U.S. Embassy in Panama announced the donation of U.S.$500,000 worth of materials such as camping tents, cots, sheets and mosquito nets to Panama to be used for migrants and communities affected by the migration crisis in the Darien Gap area.

Criminal Organizations and Smuggling

In 2023, the National Border Service rescued 730 migrants from organized crime networks in the province of Darien and the Guna Yala region and apprehended 72 people responsible, including both Panamanians and foreigners. In December 2023, Interpol Colombia announced that, with the support of the United States Office of Homeland Security Investigations, they dismantled a criminal network tied to the Clan del Golfo that had smuggled approximately 294 migrants (including nine minors) through the Darien Gap into Panama, charging such migrants up to U.S.$4,500 for the passage.

On June 11, 2024, the United States government announced that it would offer a reward of up to U.S.$8 million for information leading to the capture of organized criminal group Clan del Golfo members involved in migrant smuggling in the Darien Gap.

International Collaboration

On July 1, 2024, the United States and Panama signed a memorandum of understanding regarding a new migration management program, to be funded by the U.S. Department of State, to assist the Panamanian government with the repatriation of foreign nationals who do not have a legal basis to remain in Panama.

On October 25, 2024, Executive Decree 194, issued by the Ministry of Security, was published in the Official Gazette. The Decree states that persons who enter the country irregularly, through any point of entry or as part of the migratory flow that crosses the Darien Gap, will be sanctioned with fines ranging from U.S.$300 to more than U.S.$1,000, depending on the number of times the infraction is committed.

During 2024, 7,757 migrants were transferred from Panama to Colombia, in coordination with Costa Rica, within a framework of cooperation and order.

In March 2025, Deputy Minister of Public Security Luis Felipe Icaza held a meeting with Costa Rica’s Minister of Public Security, and the countries agreed on a protocol to manage reverse migration flows, including the operation of a Migrant Assistance Center in Costa Rica through which migrants are transferred to Panama for repatriation. During the meeting, it was reported that irregular migration through the Darién toward the north had been reduced by 99%, compared to March 2024.

On May 6, 2025, the U.S. Embassy in Panama reported that, under the memorandum of understanding signed with Panama to manage irregular migration, 48 charter flights and 20 tickets on commercial flights have been financed, enabling the deportation of 1,969 irregular migrants to their countries of origin. The Embassy also highlighted that the U.S. government has contributed approximately U.S.$14 million to cover costs such as transportation, escorts, and logistics, emphasizing that this program has significantly contributed to the reduction of irregular migration in the Darién region. On May 14, 2025, the Government finalized the complete closure of the Lajas Blancas Temporary Migration Reception Station.

On June 24, 2025, in a joint operation between Panama and the United States, Panama’s Minister of Public Security, the U.S. Secretary of Homeland Security, Kristi Noem, and the Director General of Panama’s National Migration Service led the deportation flight of 32 Colombian citizens. This operation is part of the Memorandum of Understanding on Migration between the two countries, a key alliance for regional security, through which Panama has returned 2,044 migrants, including 1,242 Colombians, who have been transported on 51 flights, 49 financed by the United States and two by Panama.

 

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THE PANAMANIAN ECONOMY

General

Panama’s unique geographic position, service economy (including the Panama Canal) and monetary regime anchored on the use of the U.S. dollar as legal tender are major factors in Panama’s economic performance.

Panama has used the U.S. dollar as its legal tender since shortly after gaining its independence in 1903. The national currency, the Balboa, is used primarily as a unit of account linked to the U.S. dollar at a ratio of one dollar per one Balboa. The Government does not print paper currency, although a limited amount of coinage is minted. Panama’s monetary system is based on its Constitution (beginning with the 1904 Constitution, which established the Balboa) and Panamanian laws expressly recognizing the U.S. dollar as legal tender. There are no Panamanian foreign exchange controls or reporting requirements, and capital moves freely in and out of the country, without local currency risk. Under Panama’s unique monetary system, foreign exchange reserves are not needed to support the currency.

The absence of both a national printed currency and a Balboa exchange market diminishes the significance of the balance of payments as an indicator of the Government’s external debt service capacity. Fiscal policy, therefore, is a more relevant indicator of the accumulation and drawdown of Government reserves available for sovereign debt service. Moreover, this monetary system imposes an element of discipline on Panamanian authorities in the areas of monetary and fiscal policy. Panama is limited in its ability to conduct monetary policy to stimulate the economy and can finance public sector deficits only through borrowing.

In 2021, the non-financial public sector deficit fell to 6.4% of GDP. In 2022, the non-financial public sector deficit fell to 4.0% of GDP. In 2023, the non-financial public sector deficit fell to 3.9% of GDP. In 2024, the non-financial public sector deficit increased to 6.2% of GDP. In 2025 the non-financial public sector deficit fell to 3.7% of GDP.

From 2021 to 2025, Panama experienced an average annual rate of inflation, as measured by the average consumer price index (“CPI”), of 1.2%. In 2025, the annual rate of inflation, as measured by the average CPI with a base year of 2024, was estimated at 0.4%.

The Panamanian economy is dominated by a large service sector, which represented 72.0%, 71.5%, 70.7%, 72.2% and 72.8% of GDP in 2021, 2022, 2023, 2024 and 2025 respectively. The manufacturing and the agricultural and fisheries sectors represented far smaller percentages of GDP, 4.5% and 2.5%, respectively, in 2025. Historically, the Panamanian economy has been characterized by an imbalance between the open, internationally-oriented service sector and the relatively closed manufacturing and agricultural sectors, where productivity has been lower and government policies may have affected resource allocation. See “Structure of the Panamanian Economy—Principal Sectors of the Economy”. Ongoing investments are designed to promote Panama as a hub for logistic, maritime and air transport services.

While much of the service sector’s economic activity is represented by public administration, commerce and real estate, the internationally-oriented activities of the service sector, particularly transportation, storage, mail and financial intermediation, distinguish the Panamanian economy. For instance, during the Canal’s 2025 fiscal year (which ended September 30, 2025), commercial ocean traffic totaled 13,404 transits, and the Canal’s toll revenue was U.S.$4,007.9 million, representing 4.4% of Panama’s estimated GDP for 2025 measured in nominal dollars.

 

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As a result of the dollar-based economy, the international trade associated with the Panama Canal and the CFZ, and certain legislative initiatives, Panama has also developed an important financial and insurance sector which represented 5.7% and 5.7% of GDP in 2024 and 2025, respectively. There is no lender of last resort or deposit insurance in Panama. See “Financial System—The Banking Sector”.

Reforms and Development Programs

Social Security. In December 2005, the National Assembly approved Law No. 51, which reformed Panama’s social security system by, among other things, requiring employees to make contributions into the social security system for 20 years (up from the prior 15-year requirement) before becoming eligible to receive benefits and gradually transitioning from a defined benefits system to personal savings accounts. Law No. 51 also established the obligation to support the Disability, Old Age and Death Benefit System (Régimen de Invalidez, Vejez y Muerte (the “IVM system”)) with annual deposits by the Government to an administration and investment trust created for the sustainability of the IVM of U.S.$75 million in each of the years 2007, 2008 and 2009, U.S.$100 million in each of the years 2010, 2011 and 2012, and U.S.$140 million in each of the years 2013 through 2060.

On March 18, 2025, President Mulino enacted Law No. 462, reforming Panama’s Social Security system. The law replaces the former defined-benefit scheme, based on intergenerational solidarity where active workers’ contributions financed current retirees, with an individual capitalization system in which each worker accumulates savings in a personal account to fund his or her own pension. While the reform makes the system primarily individual, it also establishes a solidarity component that guarantees a minimum monthly pension of $144.

Under Law No. 462, effective March 18, 2025, employers will pay a contribution equivalent to 13.25% of their employees’ salaries, and from March 1, 2027, to February 28, 2029, the contribution will be equivalent to 14.25% of their employees’ salaries. The contribution paid by self-employed workers will be 9.36% of their taxable income to cover benefits under the IVM system, and 8.5% of their taxable income for voluntary contributions to cover illness and maternity risks. Likewise, the Government will provide a $20.5 million annual subsidy to offset fluctuations or decreases in interest rates on bonds or other securities held by the Social Security Fund, in addition to a $25 million annual contribution to the Sickness and Maternity Risk Fund. To cover the actuarial deficit, the Government will contribute $966 million annually, which will be adjusted annually based on an actuarial analysis.

Trade Liberalization. Trade liberalization advanced with Panama’s accession to the WTO, which became effective September 6, 1997. Panama has also negotiated free trade agreements with many of its trading partners, such as the United States, Canada, the European Free Trade Association, Mexico, Colombia, Chile and Central American countries. See “Foreign Trade and Balance of Payments—Tariffs and Other Trade Restrictions”.

Government Procurement. On May 10, 2011, Law No. 22 of 2006, which established a system for government procurement in Panama, was modified by Law No. 48 of 2011. The modification grants the Dirección General de Contrataciones Públicas (“Public Contracting Authority”) the power to impose fines. In addition, it expanded the scope of the law to include regulation of acquisitions by the Caja de Seguro Social (the “Social Security Fund” or “CSS”) of pharmaceutical products as well as contracts with funding supplied by foreign governments.

Export Processing Zones & Free Zones. During 2007, the first two export processing zones (“EPZs”) were created in Panama. EPZs are well-defined areas for establishing industrial, commercial and service facilities for operation in a free trade system. As of August 31, 2026, there were 18 active EPZs in Panama.

Fiscal Reforms. On June 5, 2008, Law No. 34 of 2008 was ratified, establishing a Social and Fiscal Responsibility Regime to promote sound fiscal policies and management. This law came into effect on January 1, 2009. The Social and Fiscal Responsibility Regime requires any new government to present, during the first six months of its administration, a multi-year social strategy, a five-year financial plan and the macroeconomic criteria to manage public expenditures and to incentivize current savings.

On December 27, 2024, the Mulino administration published its Plan Estratégico de Gobierno 2025-2029 (the “PEG”), which, among other things, presented a five-year financial plan and macroeconomic criteria for managing public expenditures. The PEG identifies four strategic pillars for the 2025-2029 period: (i) growth-oriented investment

 

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in the logistics and Canal corridor, agro-industrial and tourism sectors, and technology adoption; (ii) expanded access to early childhood, technical, and vocational education, potable water, sanitation, and electricity coverage, and targeted poverty-reduction and housing programs; (iii) fiscal, governance, and institutional strengthening; and (iv) environmental sustainability and natural resource management. See “Public Finance—Central Government Budget” and “Republic of Panama—Social and Economic Situation”.

In addition to creating the Fondo de Ahorro de Panamá (Panama Saving Fund, or the “FAP”), Law No. 38 of June 5, 2012 amended the Social and Fiscal Responsibility Law to set a ceiling on the annual non-financial public sector adjusted deficit. The amendment also allows a temporary suspension of the fiscal deficit ceiling in cases of emergency or a deceleration in economic activity. For example, during fiscal years 2019 and 2024, the Government modified the Social and Fiscal Responsibility Regime before year-end to account for a higher than projected deficit.

On November 25, 2020, then President Cortizo enacted Law No. 185, which allowed an increase in the maximum ceiling of the Republic’s fiscal deficit for the following five years. Under Law No. 185, the Republic’s permitted fiscal deficit was increased to 9.0-10.5% of GDP in 2020, 7.0-7.5% of GDP in 2021, 4.0% of GDP in 2022, 3.0% of GDP in 2023, 2.0% of GDP in 2024 and 1.5% of GDP in 2025. On October 28, 2024, President Mulino enacted a reform of the Social and Fiscal Responsibility Regime. The amended law established a non-financial public deficit limit of 4.0% of GDP for 2025, 3.5% of GDP for 2026, 3.0% of GDP for 2027, 2.5% of GDP for 2028, 2.0% of GDP for 2029, and 1.5% of GDP for 2030 onwards.

In 2021, the non-financial public sector deficit was U.S.$4,345.2 million, equivalent to 6.4% of GDP. The non-financial public sector deficit for 2022 was U.S.$3,044.7 million, equivalent to 4.0% of GDP. The non-financial public sector deficit for 2023 was U.S.$3,270.6 million, equivalent to 3.9% of GDP. The non-financial public sector deficit for 2024 was U.S.$5,390.3 million, equivalent to 6.2% of GDP. The non-financial public sector deficit for 2025 was U.S.$3,320.8 million, equivalent to 3.7% of GDP.

Social Developments. Panama’s social spending generally focuses on spending in the social sectors of health, education and housing. In 2024 and 2025, social spending represented approximately 44.3% and 46.4% of the Government’s budget, respectively.

In June 2012, the Government created the FAP pursuant to Law No. 38 of 2012. The initial capital of the FAP came from the Development Trust Fund, which has now ceased to exist. The FAP was capitalized and began operations on June 7, 2012. According to the FAP’s accumulation rule, amended by Law No. 51 of 2018, every year, 50% of the contributions from the Panama Canal to the Treasury exceeding 2.5% of GDP for 2018 and 2019 and 2.25% from 2020 onwards will be transferred to the FAP. On October 28, 2024, the National Assembly approved modifications to the FAP’s accumulation rule, suspending the Canal’s contributions during 2024, 2025 and 2026, while maintaining the rest of the contributions established by law, in order to allow the Government to honor commitments to suppliers. The FAP has two main objectives: (1) macroeconomic stability in cases of national emergencies and (2) long-term national savings. Once the size of the FAP reaches 5.0% of GDP, it may also repurchase and retire Panamanian sovereign debt. The FAP Secretary reports to the Ministry of Economy and Finance, which establishes investment guidelines for the FAP. In addition, Law No. 38 provides for the BNP to serve as the FAP’s Trustee and for an independent Board of Directors to safeguard FAP assets. In 2025, the FAP generated interest and dividends totaling U.S.$68.1 million compared to U.S.$52.3 million in 2024 and had net assets of U.S.$3,084.8 million, an increase of 100.0% from U.S.$1,542.1 million in 2024.

In August 2009, Law No. 44 of 2009 was ratified, establishing a Special Program of Economic Assistance under the Ministry of Social Development. The program consists of issuing a monthly payment of U.S.$100 to all Panamanians who are 70 years or older and who do not receive retirement or pension benefits. With this program, the Government seeks to improve the quality of life for the elderly living in poverty. Law No. 15 of 2010 decreased the eligible age for the program to 65 years. In August 2013, Cabinet Resolution No. 147 authorized the Minister of Social Development to modify Law No. 86 of November 2010 to raise the monthly payment amount by U.S.$20 to U.S.$120, beginning in fiscal year 2014. Since January 2014, the Ministry of Social Development has been paying U.S.$120 monthly to the program’s beneficiaries.

 

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In August 2009, Executive Decree No. 55 created the Fondo Solidario de Vivienda under the Ministry of Housing. This fund gives low-income families up to U.S.$5,000 per family to use on the purchase of a home not to exceed U.S.$30,000. This contribution was given to families that have an income of less than U.S.$800 a month. In 2011, Executive Decree No. 55 was modified to increase the maximum purchase price of a property to U.S.$35,000. Through Executive Decree No. 393 of December 16, 2014, the contribution from the Fondo Solidario de Vivienda was increased to U.S.$10,000 per family to use on the purchase of a home not to exceed U.S.$50,000. This contribution is made available to families that have an income of less than U.S.$1,200 per month. On July 24, 2018, the maximum value of a property was increased to U.S.$60,000 and the contribution was made available to families that have an income of less than U.S.$1,500 per month.

On May 23, 2017, the Government enacted Law No. 25, which promotes the competitive development of the industrial and agro-industrial sectors of the economy by granting certain tax benefits and incentives.

On March 15, 2024, Panama signed a loan with the Inter-American Development Bank in the amount of U.S.$150.0 million in order to finance the creation and development of the Panama’s Guarantee Fund, which aims to increase financing for micro, small and medium-sized companies in Panama by guaranteeing loans issued to such companies. Through Cabinet Decree No 38 of September 3, 2024, a trust was created, with the Ministry of Economy and Finance as trustor and the National Bank of Panama as trustee, to administer the loan funding for the Guarantee Fund.

Environmental Law. During 2008 and 2009, numerous executive decrees were enacted concerning environmental policies, including decrees relating to the protection of whale sharks, establishing a national committee on climate change and changing the general environmental law. In addition, many resolutions were enacted in 2009, including resolutions for protection of specific regions, for a management plan for a national park and for wildlife preservation. Through Law No. 8 of March 25, 2015, the Ministerio de Ambiente (the “Ministry of Environment”) was created to direct matters related to the protection, conservation, preservation and restoration of the environment and the sustainable use of natural resources, to promote compliance with laws and with the National Environment Policy. This new Ministry replaced the former Autoridad Nacional del Ambiente (National Authority of Environment). On April 22, 2016, Panama signed the Paris Agreement on climate change. Upon signing, Panama became one of 175 initial signatories committed to the reduction of greenhouse gases and to environmental management.

Infrastructure. Since 2007, Panama has experienced a significant increase in infrastructure development spending. In July 2009, Executive Decree No. 150 created the Secretariat of the Metro for Panama, which is part of the Ministry of the Presidency and is responsible for the organization and execution of all necessary actions with respect to the design, execution, administration, operation and maintenance of the metro transportation system project, known as “El Metro de Panamá”. The first line, Metro Line 1, was constructed by a consortium, “Consorcio Linea Uno”, that consisted of Odebrecht, S.A. (a Brazilian company) and FCC (a Spanish company). Construction started in 2011 and concluded in 2014, and Metro Line 1 was inaugurated on April 5, 2014. The cost of Metro Line 1 was approximately U.S.$1.88 billion, which the Government financed through central government borrowings from multilateral and bilateral lending institutions. See “Public Sector Debt—External Debt.”

Law No. 109 of November 25, 2013 created Metro de Panama, S.A., a public company in charge of planning, promoting, managing and executing the Metro system. The company’s stock is 100% owned by the Government. Metro de Panama S.A. announced the public procurement process for Metro Line 2 on September 15, 2014, and construction began in October 2015. In April 2019, former President Varela inaugurated Metro Line 2. Metro Line 2 is 21 kilometers long and has a capacity of 40,000 passengers per direction per hour. In February 2020, Panama’s cabinet approved the construction of the two-kilometer extension of Metro Line 2 to Tocumen International Airport. On March 16, 2023, the extension of Line 2 of the Metro de Panama, which connects to Tocumen International Airport, was inaugurated. This extension connects the Superior Specialized Technical Institute (ITSE) and Tocumen Airport stations.

In April 2016, a loan agreement between Metro de Panama S.A. and the Japan International Cooperation Agency (“JICA”) was signed for a total amount up to U.S.$2.6 billion for the construction of Line 3 of the Metro de Panama. The agreement includes U.S.$35 million of non-reimbursable technical cooperation funds for the hiring of a project manager. On May 26, 2016, JICA hired a consortium, consisting of Nippon Koei Co. Ltd., Tonichi Engineering Consultant Inc. and Nippon Koei Latin America – Caribbean Co. Ltd., to serve as project manager. On September 5,

 

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2018, representatives of Metro de Panama signed a memorandum of understanding with Hitachi Ansaldo STS and Mitsubishi Corporation to provide the equipment and train cars for the monorail system for Metro Line 3. Plans for Metro Line 3 call for an elevated metro system with 14 stations connecting Albrook with Ciudad Futuro. Metro Line 3 is expected to have a total length of 25 kilometers with the capacity to transport up to 20,000 passengers during peak hours. As of June 25, 2026, the Metro Line 3 project had reached 77% overall progress, with the elevated section 85% completed, the underground section 66% completed, and the tunnel beneath the Panama Canal 90% completed. The line is expected to become operational in 2028.

On March 14, 2022, Metro de Panama awarded the design and construction of the tunnel that will pass under the Panama Canal to the HPH joint venture formed by Hyundai Engineering & Construction Co., Ltd. and Posco Engineering Construction, which is also in charge of constructing the rest of Metro Line 3. On November 22, 2022, through Cabinet Resolution 132, the Government of Panama, approved a new contract with the PMTS Line 3 Consortium, comprising Nippon Koei Latin America Caribbean, Nippon Koei LAC Inc., and Nippon Koei Co., Ltd., for project management interface coordination, and technical assistance, specifically for the underground section beneath the Canal, for an amount of U.S.$13,729,073.75. HPH Joint Venture, the contractor awarded the contract for the construction of Metro Line 3, signed an agreement with China Railway Tunnel Group, which will serve as a sub-contractor operating the tunnel boring machine during the construction of the tunnel. In March 2023, Metro de Panama submitted for approval the environmental impact study for the building of a construction area for the tunnel-boring machine to be used for Metro Line 3.

The construction of the Metro Line 3 tunnel, which is expected to have a total length of 6.1 kilometers, will be divided into two sections, East and West. The West section would pass through Balboa Station, cross the Panama Canal underground, and then ascend through similar transition structures to join the elevated viaduct and reach the Panama Pacifico Station.

On December 23, 2023, Metro de Panama announced that the tunnel boring machine to be used to excavate the Metro Line 3 tunnel would begin to be assembled in 2024. The tunnel boring machine, which cost approximately U.S.$45 million, comprises 99 pieces and will be 93 meters long with an external diameter of 13.50 meters. The tunnel boring machine is expected to extract more than one million cubic meters of excavated material at a rate of 220 cubic meters per month. Work on the tunnel boring machine began on September 18, 2024 with President Mulino in attendance. On February 2, 2026, the tunnel boring machine reached its first point in Balboa after completing 3.1 kilometers of excavation, an area near the port, and continue its excavation for a kilometer and a half until it reaches an area near the Albrook station. It is estimated that the tunnel boring machine will reach Albrook during the last quarter of 2026.

In September 2012, Odebrecht, a Brazilian construction company, won a bid to build a second terminal for Tocumen International Airport that would be called Terminal No. 2. Construction of Terminal No. 2 started in March 2013. In April 2019, former President Varela inaugurated Terminal No. 2. The expansion provides Tocumen International Airport the capacity to handle more than 20 million passengers per year. The airport expansion represented a total investment of approximately U.S.$1.2 billion. On May 13, 2016, Tocumen International Airport, a state-owned enterprise, issued U.S.$575 million of 5.625% Senior Secured Notes due 2036. The proceeds were used for the construction of Terminal No. 2. On May 11, 2017, Tocumen International Airport issued U.S.$225 million of 6.000% Senior Secured Notes due 2048. The proceeds were used for the construction of a third runway, as well as for the upkeep of existing facilities and other complementary projects. On August 6, 2021, Tocumen International Airport issued U.S.$555 million of 4.000% Senior Secured Notes due 2041 and U.S.$1,300 million of 5.125% Senior Secured Notes due 2061. The proceeds were used to increase liquidity and fund a liability management transaction to redeem of all of its 5.625% Senior Secured Notes due 2036 and 6.000% Senior Secured Notes due 2048. On October 3, 2022, Tocumen International Airport (“Tocumen”) filed a lawsuit against CNO, S.A. (previously known as Constructora Norberto Odebrecht, S.A., or Odebrecht) claiming damages of at least U.S.$20 million, for alleged losses caused by Terminal No. 2 not being delivered as agreed to in the contractual terms and conditions. Tocumen sustained a part of its claim based on costs incurred and costs to be incurred, which included, among others, fines for delays, supervision costs, security costs and personnel expenses. On June 22, 2022, the new Terminal No. 2 of Tocumen International Airport began operations. On August 23, 2024, the arbitral tribunal hearing Tocumen’s case against CNO, S.A. issued its award, ordering CNO, S.A. to pay Tocumen U.S.$29.1 million in lost profits and U.S.$1.6 million in damages. As of May 5, 2026, CNO, S.A. had not paid Tocumen the award amount.

 

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Law No. 93 of September 19, 2019 created the Public-Private Partnership (“PPP”) Regime for Development as an incentive for private investment, social development and job creation. The law seeks to attract capital from private investors who provide experience, knowledge, equipment, technology, and technical and financial capabilities. The law establishes a maximum duration of 30 years for PPP contracts, a period that can be extended up to 10 additional years. On January 4, 2021, the Government promulgated regulations pursuant to Law No. 93 of September 19, 2019, which clarify technical concepts in the Law, expand on the procedures for the evaluation of projects (including cost-benefit, socioeconomic impact, risk distribution and environmental sustainability analyses), and provide a guide for the efficient structuring, bidding and monitoring of projects.

As of August 31, 2026, there were five active PPP projects in different stages. The Rehabilitation, Improvement and Maintenance of the West Pan-American Highway is in the execution stage, ETESA’s fourth 500kV transmission line is in the feasibility stage, the Rehabilitation, Improvement and Maintenance of the East Pan-American Highway is in the execution stage, the Rehabilitation, Improvement and Maintenance of the Centenario Highway is in the bidding stage, and the Maximum-Security Correctional Facility is in the feasibility stage. See “Structure of the Panamanian Economy–Public Sector Enterprises” for information about the fourth transmission line.

On July 3, 2024, the Cabinet Council approved the creation of the National Railway Secretariat. The National Railway Secretariat is affiliated with the Ministry of the Presidency and will oversee the study, planning and the construction of a railway transportation system for goods and passengers, which will be called “Panama-David Railway.” The National Railway Secretariat signed a technical advisory contract in the amount of U.S.$4.2 million with American company AECOM USA for an update of the Panama-David-Frontera Railway Master Plan (“Master Plan”); the Cabinet Council authorized the contract through Resolution No. 145-25 on January 13, 2026. The contract establishes three phases of the Master Plan: (i) evaluation of criteria and preliminary analysis; (ii) development of the Master Plan with demand studies, conceptual designs, and budget estimates; and (iii) an optional pre-feasibility study for a specific portion of the track. On May 5, 2025, President Mulino officially announced the planned route for the Panama-David Railway, which comprises 475 kilometers of railway track between Panamá Pacífico and David, along with stations located at Ciudad de la Salud, Albrook, Panamá Pacífico, La Chorrera, Chame/Coronado, Río Hato, Penonomé, Divisa, Santiago, Soná, San Félix, David, Bugaba, and Paso Canoas-Border. The project contemplates an express route between Panama City and David with a travel time of three hours or less, featuring a maximum design speed of 180 km/hour for passenger trains and 100 km/hour for freight trains. . On January 13, 2026, the National Railway Secretariat reported that a portion of the track for Phase 1 was 20% complete, and that procurement was underway for an environmental impact assessment, target population and market analysis, and financial, economic, and social evaluations.

The first electricity generation plant in Central America based on liquefied natural gas was inaugurated on August 17, 2018 on Telfers Island, in the province of Colón. The project represented an investment of U.S.$1,150 million, added 381 MW to the country’s energy matrix as part of the National Energy Plan 2015-2050 and includes a regasification terminal with a storage capacity of 180,000 m³.

Economic Performance—2021 through 2025

Economic Performance in 2021. In 2021, real GDP growth was 16.5%, compared to a 17.8% contraction in 2020, mainly due to the progressive lifting of the COVID-19 quarantine measures. Inflation, as measured by the average CPI with base year 2013, was 1.6% in 2021, compared to (1.6%) in 2020. The unemployment rate decreased from 18.5% in 2020 to 11.3% in 2021.

The transportation, storage and mail sector grew by 19.0% in 2021 compared to 2020, representing 11.2% of GDP in 2021. Growth in the transportation, storage and mail sector was primarily due to increased operations in the Panama Canal as well as increased activity in ports and in air and ground transportation. Mining activities increased by 104.7% in 2021 compared to 2020, representing 4.2% of GDP in 2021. Growth in mining activities was primarily due to increased exports of copper concentrate.

The construction sector grew by 28.7% in 2021 compared to 2020, representing 13.2% of GDP. Growth in the construction sector was primarily due to the execution of public and private projects. The financial and insurance sector grew by 6.0% in 2021 compared to 2020, representing 6.7% of GDP.

 

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The manufacturing sector grew by 11.0% in 2021 compared to 2020, representing 5.1% of GDP in 2021. Growth in the manufacturing sector was primarily due to an increase in the production of meat and poultry products and in dairy products. The agricultural and fisheries sector grew by 4.7% in 2021 compared to 2020, representing 2.8% of GDP in 2021. Growth in the agricultural and fisheries sector was primarily due to an increase in the production of rice and corn and an increase in the export of shrimp. The commerce, hotels and restaurants sector grew by 19.7% in 2021 compared to 2020, representing 20.2% of GDP in 2021. The growth in the commerce, hotels and restaurants sector was primarily due to an increase in sales of fuel, food, beverages and tobacco and also due to an increase in the income of restaurants which were partially or totally closed during 2020.

The Central Government’s current savings in 2021 registered a deficit of U.S.$1,124.4 million (1.7% of nominal GDP) compared to a deficit of U.S.$1,391.7 million in 2020 (2.4% of nominal GDP). The Government’s overall deficit decreased to U.S.$4,495.5 million in 2021 (6.7% of nominal GDP) from U.S.$4,928.8 million in 2020 (8.6% of nominal GDP). In 2021, Panama’s non-financial public sector balance registered a deficit of U.S.$4,345.2 million (6.4% of nominal GDP), a decrease from a deficit of U.S.$5,521.5 million (9.7% of nominal GDP) in 2020.

Economic Performance in 2022. In 2022, preliminary GDP growth was 10.8%, compared to 16.5% GDP growth in 2021, mainly due to continued recovery of all economic activities due to the control of the COVID-19 pandemic, which allowed the full opening of the economy. Inflation was 2.9% in 2022 compared to 1.6% in 2021. The unemployment rate decreased from 11.3% in 2021 to 9.9% in 2022.

The transportation, storage and mail sector grew by 16.7% in 2022 compared to 2021, representing 11.8% of GDP in 2022. Growth in the transportation, storage and mail sector was primarily due to increased operations in the Panama Canal as well as increased activity in ports and in air and ground transportation. Mining activities increased by 5.4% in 2022 compared to 2021, representing 4.0% of GDP in 2022. Growth in mining activities was primarily due to increased demand for basic materials such as stone, sand and clay. The information and communications sector contracted by 1.1% in 2022 compared to 2021, representing 2.3% of GDP in 2022.

The construction sector grew by 17.7% in 2022 compared to 2021, representing 14.0% of GDP in 2022. Growth in the construction sector was primarily due to public investment in infrastructure and construction of residential and non-residential projects. The financial and insurance sector grew by 2.8% in 2022 compared to 2021, representing 6.2% of GDP in 2022. Growth in the financial and insurance sector was attributable mainly to higher performance of the banking sector.

The manufacturing sector grew by 7.0% in 2022 compared to 2021, representing 4.9% of GDP in 2022. Growth in the manufacturing sector was primarily due to an increase in the production of meat and meat products. The agricultural and fisheries sector grew by 3.0% in 2022 compared to 2021, representing 2.6% of GDP in 2022. Growth in the agricultural and fisheries sector was primarily due to an increase in the production of rice. The commerce, hotels and restaurants sector grew by 17.8% in 2022 compared to 2021, representing 21.5% of GDP in 2022. The growth in the commerce, hotels and restaurants sector was mainly due to an increase in the sales volume of wholesale food products, beverages, textiles, clothing, construction materials and fuel.

The Central Government’s current savings in 2022 registered a surplus of U.S.$618.2 million (0.8% of nominal GDP) compared to a deficit of U.S.$1,124.4 million in 2021 (1.7% of nominal GDP). The Government’s overall deficit decreased to U.S.$3,147.6 million in 2022 (4.1% of nominal GDP) from U.S.$4,495.5 million in 2021 (6.7% of nominal GDP). In 2022, Panama’s non-financial public sector balance registered a deficit of U.S.$3,044.7 million (4.0% of nominal GDP), a decrease from a deficit of U.S.$4,345.2 million (6.4% of nominal GDP) in 2021.

Economic Performance in 2023. In 2023, estimated GDP growth was 7.2%, compared to 11.0% GDP growth in 2022. Inflation was 1.5% in 2023 compared to 2.9% in 2022. The unemployment rate decreased from 9.9% in 2022 to 7.4% in 2023.

The transportation, storage and mail sector grew by 8.2% in 2023 compared to 2022, representing 11.8% of GDP in 2023. Growth in the transportation, storage and mail sector was primarily due to increased activity in ground and air transportation as well as increased operations in the Panama Canal. Mining activities contracted by 11.8% in 2023 compared to 2022, representing 3.3% of GDP in 2023. The contraction in mining activities was primarily due to the cessation of mining operations. The information and communications sector grew by 6.3% in 2023 compared to 2022, representing 2.3% of GDP in 2023. Growth in the information and communications sector was primarily due to an increase in demand for mobile phone and internet services.

 

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The construction sector grew by 19.3% in 2023 compared to 2022, representing 15.6% of GDP in 2023. Growth in the construction sector was primarily due to public investment in infrastructure and construction of residential and non-residential projects. The financial and insurance sector grew by 1.3% in 2023 compared to 2022, representing 5.8% of GDP in 2023. Growth in the financial and insurance sector was attributable mainly to higher performance of the banking sector.

The manufacturing sector grew by 2.8% in 2023 compared to 2022, representing 4.7% of GDP in 2023. Growth in the manufacturing sector was primarily due to an increase in the production of meat and meat products. The agricultural and fisheries sector grew by 3.0% in 2023 compared to 2022, representing 2.5% of GDP in 2023. Growth in the agricultural and fisheries sector was primarily due to an increase in the production of rice and corn. The commerce, hotels and restaurants sector grew by 8.4% in 2023 compared to 2022, representing 21.7% of GDP in 2023. The growth in the commerce, hotels and restaurants sector was mainly due to an increase in the sales volume of wholesale food products, beverages, tobacco, personal effects and household goods.

The Central Government’s current savings in 2023 registered a deficit of U.S.$330.4 million (0.4% of nominal GDP) compared to a surplus of U.S.$618.2 million in 2022 (0.8% of nominal GDP). The Government’s overall deficit increased to U.S.$3,316.6 million in 2023 (4.0% of nominal GDP) from U.S.$3,147.6 million in 2022 (4.1% of nominal GDP). In 2023, Panama’s non-financial public sector balance registered a deficit of U.S.$3,270.6 million (3.9% of nominal GDP), an improvement from a deficit of U.S.$3,044.7 million (4.0% of nominal GDP) in 2022.

Economic Performance in 2024. In 2024, estimated GDP growth was 2.7%, compared to 7.4% GDP growth in 2023. Inflation was 0.7% in 2024 compared to 1.5% in 2023. The unemployment rate increased from 7.4% in August 2023 to 9.5% in October 2024.

The transportation, storage and mail sector grew by 4.6% in 2024 compared to 2023, representing 12.0% of GDP in 2024. Growth in the transportation, storage and mail sector was primarily due to increased operations in the Panama Canal as well as increased activity in port services and ground transportation. Mining activities contracted by 60.2% in 2024 compared to 2023, representing 1.3% of GDP in 2024. Contraction in mining activities was primarily due to the cessation of copper ore and concentrate extraction operations. The information and communications sector grew by 6.3% in 2024 compared to 2023, representing 2.4% of GDP in 2024. Growth in the information and communications sector was primarily due to an increase in demand for mobile phone and internet and cable TV services.

The construction sector grew by 4.6% in 2024 compared to 2023, representing 15.9% of GDP in 2024. Growth in the construction sector was primarily due to public investment in infrastructure and construction of residential and non-residential projects. The financial and insurance sector grew by 4.7% in 2024 compared to 2023, representing 5.9% of GDP in 2024. Growth in the financial and insurance sector was attributable mainly to higher performance of the banking sector.

The manufacturing sector grew by 2.0% in 2024 compared to 2023, representing 4.7% of GDP in 2024. The agricultural and fisheries sector grew by 8.0% in 2024 compared to 2023, representing 2.6% of GDP in 2024. Growth in the agricultural and fisheries sector was primarily due to an increase in the production of rice and corn. The commerce, hotels and restaurants sector grew by 5.9% in 2024 compared to 2023, representing 22.3% of GDP in 2024. The growth in the commerce, hotels and restaurants sector was mainly due to an increase in the sales volume of personal effects and household goods and fuels, as well as an increase in restaurant services and in the number of tourists and visitors to the country.

The Central Government’s current savings in 2024 registered a deficit of U.S.$2,849.6 million (3.3% of nominal GDP) compared to a deficit of U.S.$330.4 million in 2023 (0.4% of nominal GDP). The Government’s overall deficit increased to U.S.$6,557.2 million in 2024 (7.6% of nominal GDP) from U.S.$3,316.6 million in 2023 (4.0% of nominal GDP). The increase in Panama’s overall deficit was largely due to an increase of U.S.$1,113.1 million in transfers (a 34.0% increase compared to 2023), a decrease of U.S.$539.6 million in direct tax revenue (a 14.2% decrease compared to 2023), and an increase of U.S.$372.4 million in interest on debts paid (a 17.3% increase

 

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compared to 2023). In 2024, Panama’s non-financial public sector balance registered a deficit of U.S.$5,390.3 million (6.2% of nominal GDP), an increase from a deficit of U.S.$3,270.6 million (3.9% of nominal GDP) in 2023. The increase in Panama’s non-financial public sector deficit was largely due an increase of U.S.$1,904.2 million in current expenditures (a 14.1% increase compared to 2023), and an increase of U.S.$372.4 million in interest paid on debt (a 17.3% increase compared to 2023), as part of the Government’s plan to pay off accumulated debts and other liabilities, settle obligations to suppliers, and increase liquidity in the business sector.

Economic Performance in 2025. In 2025, estimated GDP growth was 4.4%, compared to 2.7% GDP growth in 2024. Inflation increased by 0.4% in 2025 compared to 2024. The unemployment rate increased from 9.7% in September 2024 to 10.4% in September 2025.

The transportation, storage and mail sector grew by 14.5% in 2025 compared to 2024, representing 13.2% of GDP in 2025. Growth in the transportation, storage and mail sector was primarily due to increased operations in the Panama Canal as well as increased activity in ground and air transportation.

Mining activities grew by 3.3% in 2025 compared to 2024, representing 1.3% of GDP in 2025. Growth in mining activities was primarily due to an increase in the consumption of basic materials, especially stone, sand and clay, by the construction sector.

The information and communications sector grew by 1.4% in 2025 compared to 2024, representing 2.3% of GDP in 2025. Growth in the information and communications sector was primarily due to an increase in demand for mobile phone, internet and cable TV services.

The construction sector grew by 2.7% in 2025 compared to 2024, representing 15.6% of GDP in 2025. Growth in the construction sector was primarily due to public infrastructure works and construction of private residential projects.

The financial and insurance sector grew by 5.2% in 2025 compared to 2024, representing 6.0% of GDP in 2025. Growth in the financial and insurance sector was driven primarily by financial services for the external sector and commissions earned on intermediation services. The local loan portfolio balance showed positive performance, driven primarily by an increase in personal consumer loans, mortgage loans, and trade financing, among others.

The manufacturing sector grew by 1.1% in 2025 compared to 2024, representing 4.5% of GDP in 2025. Growth in the manufacturing sector was primarily due to an increase in the production of meat and meat products. The agricultural and fisheries sector contracted by 1.7% in 2025 compared to 2024, representing 2.5% of GDP in 2025. Contraction in the agricultural and fisheries sector was primarily due to a decrease in exports of bananas and of fresh, chilled, and frozen fish. The commerce, hotels and restaurants sector grew by 3.8% in 2025 compared to 2024, representing 22.2% of GDP in 2025. The growth in the commerce, hotels and restaurants sector was mainly due to an increase in the sales volume of food, textiles, clothing and automobiles, as well as an increase in restaurant services and in the number of tourists and visitors to the country.

The Central Government’s current savings in 2025 registered a deficit of U.S.$2,001.5 million (2.2% of nominal GDP) compared to a deficit of U.S.$2,849.6 million in 2024 (3.3% of nominal GDP). The Government’s overall deficit decreased to U.S.$4,701.2 million in 2025 (5.2% of nominal GDP) from U.S.$6,557.2 million in 2024 (7.6% of nominal GDP). The decrease in Panama’s overall deficit was in part due to an increase of U.S.$910.3 million in current revenues (a 9.4% increase compared to 2024), an increase of U.S.$532.2. million in tax revenues (a 9.0% increase compared to 2024). In 2025, Panama’s non-financial public sector balance registered a deficit of U.S.$3,320.8 million (3.7% of nominal GDP), a decrease from a deficit of U.S.$5,390.3 million (6.3% of nominal GDP) in 2024. The decrease in Panama’s non-financial public sector deficit was in part due an increase of U.S.$933.5 million in General Government current revenues (a 6.5% increase compared to 2024), and a decrease of U.S.$931.8 million in capital expenditures (a 20.4% decrease compared to 2024).

The Government has entered into various turnkey and deferred payment contracts with multiyear completion and payment schedules. Under Panamanian law, the contracts must receive priority over other capital expenditures in the preparation of the budget. The contracts include certain infrastructure projects, such as highways, hospitals,

 

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national security infrastructure and sports facilities. According to Panamanian law, the amount of the Government’s total commitments under these contracts must be included in the Republic’s budget for the year in which each payment is due, and they are not categorized as debt instruments. As of December 31, 2025, the total estimated amount of payments scheduled under outstanding turnkey and deferred payment contracts from 2026 to 2029 was approximately U.S.$3,581.7 million, up from U.S.$3,098.7 million as of December 31, 2024.

The following table sets forth Panama’s principal price indicators for each of the years 2021 through 2025:

TABLE NO. 2

Inflation

(percentage change from previous period) ⁽¹⁾

 

		2021				2022				2023				2024				2025
Annual Percentage Change:
Consumer Price Index			1.6	%			2.9	%			1.5	%			(0.2	)%			0.4	%

 

(1)	The CPI inflation base year is 2013 for years 2021 to 2023. The CPI inflation base year is 2024 for years 2024 and 2025.

Note: Totals may differ due to rounding.

Source: Office of the Comptroller General.

The following tables set forth Panama’s GDP, including sectoral origin (in dollars and as a percentage of GDP) and percentage change from 2021 to 2025:

TABLE NO. 3

Gross Domestic Product

 

		2021				2022				2023 (P)				2024 (E)				2025 (E)
Gross Domestic Product in chained volume measure (millions of dollars)(1)		$	66,428.7			$	73,761.5			$	79,047.5			$	81,219.5			$	84,752.9
% Change over Previous Year			16.5	%			11.0	%			7.2	%			2.7	%			4.4	%
Gross Domestic Product in nominal prices (millions of dollars)		$	67,396.4			$	76,479.3			$	83,812.2			$	86,524.0			$	90,462.6
% Change over Previous Year			18.1	%			13.5	%			9.6	%			3.2	%			4.6	%

Note: Totals may differ due to rounding.

 

(R)	Revised figures.

(E)	Estimated figures.

(1)	Figures are based on 2018 constant dollars.

Source: Office of the Comptroller General.

 

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TABLE NO. 4

Sectoral Origin of Gross Domestic Product

(in millions of dollars)⁽¹⁾

 

		2021				2022				2023 (P)				2024 (E)				2025 (E)
Primary Activities:
Agriculture and Fisheries		$	1,863.8			$	1,920.5			$	1,979.0			$	2,136.6			$	2,100.5
Mining			2,778.2				2,927.8				2,583.1				1,027.3				1,061.5
Total		$	4,641.9			$	4,848.3			$	4,562.2			$	3,163.9			$	3,162.0
Industrial Activities:
Manufacturing		$	3,393.2			$	3,632.9			$	3,734.9			$	3,810.6			$	3,852.8
Construction			8,775.2				10,329.4				12,319.1				12,882.9				13,229.1
Total		$	12,168.4			$	13,962.4			$	16,054.0			$	16,693.5			$	17,081.9
Services:
Public utilities		$	1,609.0			$	1,682.3			$	1,797.1			$	1,886.3			$	1,953.5
Commerce, restaurants and hotels			13,406.8				15,817.7				17,139.8				18,142.6				18,832.1
Information and communications			1,723.8				1,706.4				1,832.0				1,948.3				1,976.3
Transportation, storage and mail			7,418.9				8,640.4				9,347.3				9,774.5				11,189.1
Financial and insurance			4,426.5				4,550.9				4,608.5				4,823.6				5,073.4
Real estate activities			6,380.5				6,645.8				6,861.3				7,137.3				7,397.9
Public administration			3,682.6				3,736.2				3,883.7				3,975.8				4,033.5
Other services			9,173.7				9,969.1				10,424.7				10,918.6				11,232.2
Total		$	47,821.8			$	52,748.8			$	55,894.4			$	58,607.0			$	61,688.1
Plus Import Taxes(2)			1,775.2				2,070.8				2,180.2				2,253.5				2,330.2
Less Imputed Banking Services			—				—				—				—				—
Gross Domestic Product in chained volume measure(3)		$	66,428.7			$	73,761.5			$	79,047.5			$	81,219.6			$	84,752.9

Note: Totals may differ due to rounding.

 

(R)	Revised figures.

(E)	Estimated figures.

(1)	Figures are based on 2018 constant dollars and include the Central Government, CSS and consolidated agencies. Figures do not include the PCA or CFZ.

(2)	Including value-added tax.

(3)	The discrepancy between each total and the sum of its components is due to statistical differences originating from utilization of moving base price structures, in accordance with the suggested methodology from the SNA 1993.

Source: Office of the Comptroller General.

TABLE NO. 5

Percentage Change from Prior Year for

Sectoral Origin of Gross Domestic Product (percentage change)⁽¹⁾

 

		2021				2022				2023 (P)				2024 (E)				2025 (E)
Primary Activities:
Agriculture and Fisheries			4.7	%			3.0	%			3.0	%			8.0	%			(1.7	)%
Mining			104.7	%			5.4	%			(11.8	)%			(60.2	)%			3.3	%
Total			47.9	%			4.4	%			(5.9	)%			(30.6	)%			(0.1	)%
Industrial Activities:
Manufacturing			11.0	%			7.1	%			2.8	%			2.0	%			1.1	%
Construction			28.7	%			17.7	%			19.3	%			4.6	%			2.7	%
Total			23.2	%			14.7	%			15.0	%			4.0	%			2.3	%
Services:(2)
Public utilities			10.0	%			4.6	%			6.8	%			5.0	%			3.6	%
Commerce, restaurants and hotels			19.7	%			18.0	%			8.4	%			5.9	%			3.8	%
Information and communications			6.0	%			(1.0	)%			7.4	%			6.3	%			1.4	%
Transportation, storage and mail			19.0	%			16.5	%			8.2	%			4.6	%			14.5	%
Financial and insurance			6.0	%			2.8	%			1.3	%			4.7	%			5.2	%
Real estate activities			3.8	%			4.2	%			3.2	%			4.0	%			3.7	%

 

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Public administration			7.6	%			1.5	%			3.9	%			2.4	%			1.5	%
Other services			10.2	%			8.7	%			4.6	%			4.7	%			2.9	%
Total			12.3	%			10.3	%			6.0	%			4.9	%			5.3	%
Plus Import Taxes(3)			21.8	%			16.7	%			5.3	%			3.4	%			3.4	%
Less Imputed Banking Services			—				—				—				—				—
Gross Domestic Product in chained volume measure			16.5	%			11.0	%			7.2	%			2.7	%			4.4	%

Note: Totals may differ due to rounding.

 

(R)	Revised figures.

(E)	Estimated figures.

(1)	Figures are based on 2018 constant dollars.

(2)	Panama Canal and CFZ figures are not based on 2018 constant dollars and are therefore not included in this table.

(3)	Including value-added tax.

Source: Office of the Comptroller General

TABLE NO. 6

Sectoral Origin of Gross Domestic Product

(as percentage of GDP)⁽¹⁾

 

		2021				2022				2023 (P)				2024 (E)				2025 (E)
Primary Activities:
Agriculture and fisheries			2.8	%			2.6	%			2.5	%			2.6	%			2.5	%
Mining			4.2	%			4.0	%			3.3	%			1.3	%			1.3	%
Total			7.0	%			6.6	%			5.8	%			3.9	%			3.7	%
Industrial Activities:
Manufacturing			5.1	%			4.9	%			4.7	%			4.7	%			4.5	%
Construction			13.2	%			14.0	%			15.6	%			15.9	%			15.6	%
Total			18.3	%			18.9	%			20.3	%			20.6	%			20.2	%
Services (2)
Public utilities			2.4	%			2.3	%			2.3	%			2.3	%			2.3	%
Commerce, restaurants and hotels			20.2	%			21.4	%			21.7	%			22.3	%			22.2	%
Information and communications			2.6	%			2.3	%			2.3	%			2.4	%			2.3	%
Transportation, storage and mail			11.2	%			11.7	%			11.8	%			12.0	%			13.2	%
Financial and insurance			6.7	%			6.2	%			5.8	%			5.9	%			6.0	%
Real estate activities			9.6	%			9.0	%			8.7	%			8.8	%			8.7	%
Public administration			5.5	%			5.1	%			4.9	%			4.9	%			4.8	%
Other services			13.8	%			13.5	%			13.2	%			13.4	%			13.3	%
Total			72.0	%			71.5	%			70.7	%			72.2	%			72.8	%
Plus Import Taxes(3)			2.7	%			2.8	%			2.8	%			2.8	%			2.7	%
Less Imputed Banking Services			—	%			—	%			—	%			—	%			—	%
Gross Domestic Product in chained volume measure(4)			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%

Note: Totals may differ due to rounding.

 

(R)	Revised figures.

(P)	Preliminary figures.

(E)	Estimated figures.

(1)	Figures are based on 2018 constant dollars.

(2)	Including value-added tax.

(3)	Panama Canal and CFZ figures are not based on 2018 constant dollars, thus are not included in this table.

(4)	The discrepancy between each total and the sum of its components is due to statistical differences originating from utilization of moving base price structures, in accordance with the suggested methodology from the SNA 1993.

Source: Office of the Comptroller General.

 

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STRUCTURE OF THE PANAMANIAN ECONOMY

Principal Sectors of the Economy

Service Sector. The Panamanian economy is based primarily on the service sector, which accounted for an average of 71.8% of GDP in chained volume measure from 2021 to 2025. Services include real estate; transportation, storage and mail; information and communications; commerce, restaurants and hotels; financial and insurance; public administration; the Panama Canal; the CFZ; and public utilities. While the commerce sector, transportation, storage and mail sector and real estate sector represent significant percentages of real GDP (estimated to be 22.2%, 8.7% and 13.2%, respectively, of real GDP in 2025), the Panamanian economy is distinguished by the economic benefits generated by the Panama Canal and the CFZ.

Commerce. Commerce, which includes wholesale and retail activities as well as restaurants and hotels, is the largest component of the service sector and represented an estimated 22.2% of real GDP in 2025, 22.4% of real GDP in 2024, 21.7% of real GDP in 2023, 21.5% of real GDP in 2022, and 20.2% of real GDP in 2021. In 2025, commerce activities increased by 3.6% compared to 2024, mainly due to an increase in the sales volume of food, textiles, clothing and automobiles. In 2025, the restaurants and hotels sector increased by 5.9% compared to 2024, mainly due to the positive performance of restaurant services and the increase in the entry of tourists and visitors to the country.

Transportation, Storage and Mail. The transportation, storage and mail sector, which includes ports, airports and rails, is the second largest component of the service sector and has been an important component of the Panamanian economy in recent years. It represented an estimated 13.2% of real GDP in chained volume measure in 2025, 11.8% of real GDP in 2024, 11.6% of real GDP in 2023, 11.8% of real GDP in 2022, and 11.2% of real GDP in 2021.

Real Estate. The third largest component of the service sector is real estate, which consists of rental income and the imputed rental value of real estate that is occupied but not rented. Real estate activities represented an estimated 8.7% of GDP in chained volume measure in 2025, 8.8% of GDP in 2024, 8.7% of GDP in 2023, 9.0% of GDP in 2022, and 9.6% of GDP in 2021.

Financial Services and Insurance. The financial services and insurance sector represented an estimated 6.0% of GDP in chained volume measure in 2025, 6.1% of GDP in 2024, 5.8% of GDP in 2023, 6.2% of GDP in 2022, and 6.7% of GDP in 2021. An important component of the sector’s contribution to GDP is attributable to the banking sector, which, as of December 31, 2025, consisted of two state-owned banks (BNP and Caja de Ahorros) and 61 private banks. The banking sector includes general license banks, international license banks, and foreign banks with representative offices. As of December 31, 2025, banking sector assets and deposits totaled approximately U.S.$163.0 billion and U.S.$116.8 billion, respectively. See “Financial System”.

Colón Free Zone. The CFZ has become the largest duty-free zone in the Western Hemisphere in terms of commercial activity. As of December 31, 2025, approximately 2,650 companies used the CFZ service facilities for a variety of trading activities. Total imports to the CFZ totaled U.S.$11.9 billion in 2025, a decrease of 6.0% compared to 2024. Total re-exports in 2025 were U.S.$11.2 billion, a decrease of 8.3% compared to 2024.

Panama Canal. In the PCA’s 2025 fiscal year, canal transits increased to 13,404 transits from 11,240 transits in 2024, while cargo tonnage increased to 262.3 million long tons from 210.3 million long tons in 2024. According to the PCA, toll revenues for fiscal year 2025 reached U.S.$4,007.9 million, an increase of 26.1% compared to U.S.$3,179.1 million in fiscal year 2024, representing 4.7% of Panama’s estimated GDP for 2025 measured in nominal dollars. See “Recent Developments — Panama Canal”.

 

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Industrial Sector. After the service sector, the next largest segment of the economy consists of the industrial activities of manufacturing and construction, collectively representing an estimated 20.2% of GDP in chained volume measure in 2025, 20.4% of GDP in 2024, 20.3% of GDP in 2023, 19.0% of GDP in 2022, and 18.3% of GDP in 2021.

Manufacturing represented an estimated 4.5% of GDP in chained volume measure in 2025, 4.6% of GDP in 2024, 4.7% of GDP in 2023, 4.9% of GDP in 2022, and 5.1% of GDP in 2021.Manufacturing is principally geared to the production of processed foods and beverages and, to a lesser extent, clothing, chemical products and construction materials for the domestic market. Traditionally, manufacturing industries have been protected by high tariffs and fiscal incentives. In connection with Panama’s accession to the WTO and conclusion of other trade agreements, such protections have decreased significantly. See “Foreign Trade and Balance of Payments—Tariffs and Other Trade Restrictions.” Manufacturing facilities are primarily located in the Panama City and Colón areas, although agricultural processing facilities tend to be located closer to raw materials.

Construction activity increased by 28.7% in 2021 and represented an estimated 13.2% of GDP. This was due to the execution of private residential projects and public investment in infrastructure projects and single-family social housing programs. Construction activity increased by 17.7% in 2022 and represented an estimated 14.0% of GDP. This was mainly due to the development of public investment in infrastructure works, as well as the construction of residential and non-residential projects. Construction activity increased by 19.1% in 2023 and represented an estimated 15.6% of GDP. This was mainly due to the development of public investment in infrastructure works, as well as the construction of residential and non-residential projects. Construction activity increased by 4.7% in 2024 and represented an estimated 15.8% of GDP. This was mainly due to public investment in infrastructure, such as the construction of Line 3 of the Metro de Panama and the construction and rehabilitiation of roads, highways, streets, and sidewalks. Construction activity increased by 2.7% in 2025 and represented an estimated 15.6% of GDP. This was mainly due to public investment in infrastructure and residential private investment.

Agriculture, Fisheries and Mining Sector. The agriculture, fisheries and mining sector accounted for an estimated 3.7% of real GDP in 2025, 4.5% of real GDP in 2024, 6.3% of real GDP in 2023, 6.6% of real GDP in 2022, and 7.0% of GDP in 2021. Agriculture and fisheries activities employ a significant percentage of the Panamanian employed workforce, 12.9% in 2025. Principal agricultural products include bananas, fish, shrimp, sugar, coffee, meat, dairy products, tropical fruits, rice, corn and beans. In 2025, the value of agricultural production (which includes fisheries production) is estimated to have decreased by 1.7%, after having increased by 8.0% in 2024. In 2025, the value of the mining sector is estimated to have increased by 3.3%, mainly due to the increase in production of construction supplies, after having decreased by 60.2% in 2024, mainly due to the closure of copper ore and concentrate extraction operations. .The Panamanian agriculture and fisheries sector has been protected by significant tariff and non-tariff barriers.Agricultural products are controlled principally by the Ministry of Agriculture and the Agricultural Marketing Institute. See “Foreign Trade and Balance of Payments—Tariffs and Other Trade Restrictions.”

The Role of the Government in the Economy

The Government plays a significant role in the economy through, among other means, its ownership of certain public utilities and other enterprises. General Government current expenditures (including the Central Government, Caja de Seguro Social and consolidated agencies, but excluding state-owned financial institutions and interest payments) totaled U.S. $12.6 billion in 2025. The Government also has a significant impact on the economy through various statutory and other governmental initiatives, including enforcement of a labor code, subsidies and tariff policies.

 

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The following table sets forth summary financial information on principal public sector businesses for fiscal year 2025:

TABLE NO. 7

Selected State-Owned Enterprises⁽¹⁾

2025 Financial Statistics⁽²⁾

(in millions of dollars)

 

		Total Assets				Capital and Reserves				Gross Revenues				Net Income				Dividends Paid to the Government
Banco Nacional de Panamá (banking)		$	14,482.0				1,516.4				743.3				248.7				122.5
Empresa Nacional de Autopistas (“ENA”) (highway)		$	971.8				395.9				177.0				59.0				0.0
Empresa de Transmisión Eléctrica (“ETESA”) (electric transmission)		$	1,393.2				389.8				139.6				13.3				0.0
Metro de Panama, S.A. (railway)		$	7,427.0				4,832.0				53.4				(180.0	)			0.0
Aeropuerto Internacional de Tocumen (“AITSA”) (airport)		$	2,228.0				343.7				315.1				12.1				54.0	(3)
Caja de Ahorros (banking)		$	6,910.8				425.2				410.4				41.1				10.0

Note: Totals may differ due to rounding.

 

(1)	All enterprises are 100% owned by the Government.

(2)	For fiscal year ended December 31, 2025.

(3)	The U.S.$54.0 million in dividends paid to the Government by AITSA in 2025 were paid out of funds set aside for dividends declared but not distributed in 2023 and 2024, as approved by AITSA’s board of directors.

Sources: BNP, ENA, ETESA, Metro de Panama, AITSA and Caja de Ahorros.

In June 2012, the Government created the FAP pursuant to Law No. 38 of 2012. As of December 31, 2025, audited financial statements by BNP, trustee of the fund, show total assets of the fund totaling U.S. $3.2 billion. As of December 31, 2024, audited financial statements showed total assets of the fund totaling U.S. $1.6 billion. Audited financial statements show total assets of the fund as U.S. $1.5 billion and U.S. $1.5 billion as of December 31, 2023 and December 31, 2022, respectively. As of December 31, 2021, audited financial statements showed total assets of the fund totaling U.S. $1.5 billion, compared to total assets of U.S. $1.5 billion as of December 31, 2020. The FAP Technical Secretariat has invested part of the principal of the FAP with Goldman Sachs Asset Management L. P., Morgan Stanley Investment Management Inc., BlackRock Financial Management Inc., Neuberger Berman Investment Adviser LLC, Crestline Direct Lending IV, L.P., StepStone Private Credit Fund SP, StepStone Tactical Growth Fund IV, L.P., Varsity Healthcare Fund IV, L.P., March Capital Partners Fund IV, L.P., AlpInvest Partners (The Carlyle Group), JPM Global Infrastructure Fund IV, and BlackRock Global Infraestructure Fund IV. As of December 31, 2025, the international asset managers had U.S. $3.1 billion under management. See “The Panamanian Economy —Reforms and Development Programs —Social Development” for more information regarding the FAP.

Public Sector Enterprises

Electric Power. Created in 1969, Instituto de Recursos Hidráulicos y de Electrificación (“IRHE”) was the autonomous state entity having exclusive control of the electricity sector in Panama. Since the privatization of IRHE in 1998, the successors to the assets and liabilities of IRHE have set their own rates, which are subject to review by the Autoridad Nacional de los Servicios Públicos (“ASEP”).

Pursuant to legislation authorizing the restructuring and privatization of IRHE, the company was split into nine corporate entities with 100% of the stock of each entity owned initially by the Government. These entities included three hydroelectric generating companies, one thermoelectric generating company, four distribution companies and a transmission company, as successors to the assets and liabilities of IRHE under the privatization scheme. Following completion of the restructuring, a public bidding process commenced to sell 51% (or more) of the stock in each of the thermoelectric and distribution companies and up to 49% of the hydroelectric companies. The law provided that up to 10% of the stock of each company would be made available for the benefit of employees. In 1998 and 1999, 51% of the stock of three IRHE distribution companies, 49% of the stock of the hydroelectric generating companies and 51% of the stock of the thermoelectric generating company were sold. Pursuant to Panamanian law, the transmission company, Empresa de Transmisión Eléctrica, S.A. (“ETESA”), remains 100% state-owned. In 2025, the Government received U.S.$120.5 million of dividends from its shares in electricity companies. In 2025, AES Panama, S.A. paid

 

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U.S. $50.9 million in dividends, Enel Fortuna paid U.S. $23.4 million in dividends, ESEPSA paid U.S. $4.2 million in dividends, EDEMET- EDECHI paid U.S. $9.8 million in dividends and Elektra Noreste, S.A. paid U.S. $32.3 million in dividends. ETESA, and Bahia Las Minas Corp did not pay dividends in 2025.

ETESA is authorized by ASEP to provide high-tension electric energy transmission service to the public under a concession contract that was valid until 2025 and was extended through 2049. ETESA offers use of the transmission network with open access and regulated fees. ETESA’s electric transmission system consists of transmission lines of 230 kV and 115 kV. As of 2025, the total length of the 230 kV lines was 2,885.9 km in double circuit lines and 93.9 km in simple circuit lines, while the total length of the 115 kV lines was 272.3 km in double circuit lines and 40.8 km in simple circuit lines. On May 2, 2019, ETESA issued U.S. $500,000,000 aggregate principal amount of its 5.125% Global Bonds due 2049, the net proceeds of which were used to repay short-term debt. On July 14, 2022, ETESA issued U.S. $120,000,000 aggregate principal amount of its 4.850% Bonds due 2027 and U.S. $55,000,000 aggregate principal amount of its 5.400% Bonds due 2032, in order to finance projects pertaining to the Expansion Plan for the National Interconnected System in the following years. On December 30, 2025, ETESA issued U.S. $75,000,000.00 aggregate principal amount of its 6.5% Bonds due 2030.

With the aim of increasing the high voltage power transmission capacity, reducing system losses, increasing security and offering support to the National Interconnected System, ETESA is overseeing the construction of the fourth transmission line coming from the west of the country, in Bocas del Toro, from a new substation called Chiriquí Grande, to the new Panama III substation in Panama City. This new line will run through the Atlantic sector of the country. The construction of the fourth transmission line is part of the Expansion Plan for the National Interconnected System, which was approved by ASEP through Resolution AN No. 16062-Elec of April 28, 2020. The project has an estimated construction period of three years and is expected to yield a 500 kV double circuit line with an approximate length of 330 km. The new line is expected to have a transmission capacity at the 230kV stage of 589MW under normal operating conditions and 797MW in emergency conditions, and a transmission capacity at the 500kV stage of 1280MW under normal operating conditions and 1,856MW in emergency conditions. In July 2025, ETESA delivered to ASEP the Expansion Plan for the National Interconnected System (“PESIN”) 2024-2025, which includes as a long-term project the Fourth Transmission Line Chiriquí Grande – Panama. ETESA is performing feasibility studies with respect to the project.

Panama currently has high electricity rates (an average of 23.3 cents per kilowatt-hour as of December 31, 2025), and demand for electricity in 2025 decreased by 0.7% from 2024. As of December 31, 2025, Panama had an installed generating base of 5,120.2 megawatts (“MW”), of which 1,847.6 MW (36.1%) were hydroelectric, 2,166.0 MW (42.3%) were thermoelectric, 770.7 MW (15.1%) were photovoltaic power and 336.0 MW (6.6%) were wind power. In 2021, total energy generation in Panama increased by 5.1% to 11,439.0 GWh, of which 71.3% was hydroelectric, 19.0% thermoelectric and 9.8% from renewable sources. In 2022, total energy generation in Panama increased by 3.6% to 11,845.9 GWh, of which 68.7% was hydroelectric, 20.6% was thermoelectric and 10.7% was from renewable sources. In 2023, total energy generation in Panama increased by 20.6% to 14,285.6 GWh, of which 42.8% was hydroelectric, 45.7% was thermoelectric and 11.5% was from renewable sources. In 2024, total energy generation in Panama decreased by 8.0% to 13,147.0 GWh, of which 60.1% was hydroelectric, 27.1% was thermoelectric and 12.9% was from renewable sources. In 2025, total energy generation in Panama remained the same at 13,147.0 GWh, of which 59.8% was hydroelectric, 25.3% was thermoelectric and 14.9% was from renewable sources. This was in part due to a redistribution of electricity generation among the different power plants following the significant incorporation of photovoltaic power into the Panamanian power generation system.

Liquefied Natural Gas. On August 17, 2018, a liquefied natural gas (“LNG”) terminal was inaugurated on Telfers Island, in the province of Colón. The project represents an investment of U.S. $1,150 million and added 381 MW to the country’s energy matrix as part of the National Energy Plan 2015-2050. The project also includes a regasification terminal with a storage capacity of 180,000 m3.

Gatun Generating Plant. On October 1, 2024 Generadora Gatún, a natural-gas-fired power plant located on Telfers Island, in the province of Colón, began commercial operations. The project represents an investment of U.S. $1.2 billion and is being developed by Grupo Energético Gas Panamá, with InterEnergy Group and AES Panama contributing 51% and 49% of the investment amount, respectively.

 

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The plant currently has a total capacity to 670 MW to the Panamanian electricity system. With its total installed capacity, the plant seeks to strengthen the sustainability and reliability of Panama’s electricity system, reducing costs and improving supply. A 20-year contract with local distributors Ensa and Naturgy would allow for lower rates, and its scale opens up the possibility of exporting energy to the region.

Telecommunications. INTEL, S.A. (“INTEL”) was the state-owned telecommunications company with a monopoly over local and long distance landline service. In 1997, the then Ministry of the Treasury auctioned 49% of INTEL’s stock. Cable & Wireless of the United Kingdom won the public auction by bidding U.S. $652 million for the shares. INTEL was subsequently renamed Cable & Wireless (Panamá) S.A. (“C&W Panama”). Although Cable & Wireless Communications plc, is not a majority owner of C&W Panama, it has operational and managerial control of C&W Panama. The Republic retains 49% of the shares of C&W Panama, and the remaining 2% of the shares of C&W Panama are held in a trust fund for C&W Panama’s unionized employees. INTEL was historically profitable and regularly paid dividends in the pre-1996 period, but dividends decreased significantly following privatization, in part because Panama holds only 49% of the shares of C&W Panama. On May 16, 2016, Liberty Global plc completed its acquisition of Cable & Wireless Communications plc. Cable & Wireless Communications plc was delisted from the London Stock Exchange on that date and subsequently re-registered as a private limited company. On May 20, 2016, Cable & Wireless Communications plc converted into Cable & Wireless Communications Limited. To conform with the accounting procedures of Liberty Global plc, C&W Panama changed its fiscal year end from March 31 to December 31, effective for the fiscal year 2016. On January 2, 2018, Liberty Latin America Ltd. announced the completion of its spin-off from Liberty Global plc and its launch as an independent company with publicly traded shares on the NASDAQ Global Select Market, including Cable & Wireless Communications Limited among its group of companies.

On July 1, 2022, C&W Panama announced that it had completed the acquisition of the Panamanian operations of América Móvil S.A.B. through a purchase of the shares of Claro Panamá, S.A. for U.S. $200.0 million.

For the company’s fiscal year ended December 31, 2021, C&W Panama paid U.S.$18.0 million in dividends to the Central Government. For the company’s fiscal year ended December 31, 2022, C&W Panama did not pay dividends to the Central Government. For the company’s fiscal year ended December 31, 2023, C&W Panama paid U.S. $44.9 million in dividends to the Central Government. For the company’s fiscal year ended December 31, 2024, C&W Panama paid U.S. $34.9 million in dividends to the Central Government. For the company’s fiscal year ended December 31, 2025, C&W Panama did not pay dividends to the Central Government.

In its fiscal year ended December 31, 2021, C&W Panama experienced a 9.0% increase in revenue compared to the same period in 2020, mainly due to increased non-recurring revenue from long-term government-related projects, some of which were put on hold during 2020 due to the impact of COVID-19. In its fiscal year ended December 31, 2023, C&W Panama experienced a 2.0% increase in revenue compared to the same period in 2022, mainly to lower debt expense and value capture activities related to the Claro Panamá acquisition, partly offset by higher direct costs in connection with government-related projects. In its fiscal year ended December 31, 2024, C&W Panama experienced a 1.0% increase in revenue compared to the same period in 2023, mainly by the combination of products and synergies from the acquisition of Claro Panamá. In its fiscal year ended December 31, 2025, C&W Panama experienced a 3.0% increase in revenue compared to the same period in 2024, mainly supported by strong performance in the business-to-business and business-to-government lines.

As of December 31, 2025, the telecommunications market comprised approximately 225 operating companies and another 424 companies authorized to operate telecommunication concessions. As of December 31, 2025, there were approximately 959,312 operating telephone lines in the country with an estimated line penetration rate of 21 lines per 100 inhabitants. As of December 31, 2025, there were approximately 5.1 million active cellular telephone lines.

Water. The national water and sewage utility is IDAAN, which, as of 2024, serves approximately 73% of the population for which it is responsible (which constitutes 75% of the total population) through its 54 water purification plants, 2 filtration galleries, 201 pumping stations, and 604 underground wells. Inefficiency in IDAAN’s operations and management, combined with leakage, has led to an estimated unaccounted-for water rate of 37%. Unlike INTEL and IRHE, which had generally paid dividends to the Central Government on an annual basis prior to privatization and required no Central Government funding, IDAAN has required periodic transfer payments from the Central Government to meet its operating and capital expenses.

 

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Air Transportation. Law No. 23 of January 29, 2003 prescribes the regulatory framework for the administration of Panama’s airports and airdromes and establishes that the companies covered by it will be autonomous, but 100% of shares shall be owned by the state and non-transferable.

AITSA, which was inaugurated in 1947, was under the administration of the Civil Aviation Authority until 2003. After the implementation of Law No. 23 of 2003, the new administrative structure led to the creation of AITSA, an autonomous company whose shares are 100% owned by the state. AITSA plays a fundamental role within the national airport system and the logistics network of the country. In 2021, AITSA handled 9.2 million passengers and had 36 airlines in operation. In 2021, AITSA did not declare dividends to the Central Government mainly due to a loss on the modification of bonded indebtedness. In 2023, AITSA handled 17.8 million passengers and had 31 airlines in operation. In 2023, AITSA paid U.S. $18.5 million in dividends to the Central Government. In 2024, AITSA handled 19.3 million passengers and had 42 airlines in operation. In 2024, AITSA did not pay dividends to the Central Government. In 2025, AITSA handled 21.0 million passengers and had 45 airlines in operation. In 2025, AITSA paid U.S. $54.0 million in dividends to the Central Government.

On August 6, 2021, AITSA issued U.S.$1,855,000,000 aggregate principal amount of its Senior Secured Notes due 2041 and 2061. The proceeds from the issuance were used to increase liquidity, service debt and repurchase its 5.625% Senior Secured Notes due 2036 (the “2036 Notes”) and 6.000% Senior Secured Notes due 2048 (the “2048 Notes”) by means of a tender offer. After the tender offer, AITSA redeemed all of the remaining 2036 Notes and 2048 Notes that were not tendered.

On June 22, 2022, AITSA’s new Terminal 2 began operations. The new terminal has 20 boarding gates and the installed capacity to handle up to 10 million additional passengers per year. The new terminal increases the airport’s total operational capacity to 54 boarding gates and 12 remote aircraft parking positions.

Road Transportation. The national highway company is ENA, which was created by Law No. 76 of November 15, 2010, as a Panamanian corporationy whose shares are 100% owned by the Government. ENA’s main activity is the acquisition of shares from companies to which the Government has granted concessions for the construction, conservation, maintenance and management of roads and highways. Through ENA’s subsidiaries ENA Sur, S.A., ENA Norte, S.A., and ENA Este, S.A., the company operates the Corredor Norte, Corredor Sur and Corredor Este toll roads.

On November 19, 2020, ENA Master Trust issued U.S.$400,000,000 aggregate principal amount of its 4.000% Senior Secured Notes due 2048, which proceeds were used (i) to redeem in full ENA Sur Trust’s 5.750% Series 2011 Class A Notes Due 2025, ENA Sur Trust’s 5.250% 2011 Class B Series Notes Due 2025 and ENA Este Trust’s 6.000% Notes Due 2024; (ii) to fund certain accounts of ENA Master Trust; (iii) to invest in capital projects of ENA Sur and ENA Este; (iv) to pay certain expenses; and (v) for other general corporate purposes.

Ports. The Panama Maritime Authority owns and controls most of Panama’s ports. A number of Panama’s ports have been privatized through the grant of concessions.

The Manzanillo International Terminal (“MIT”) is a container port located at the former United States military base at Coco Solo and is managed and operated by a joint venture formed between Stevedoring Services of America and Motores Internacionales, S.A. In 2021, MIT handled approximately 2.8 million TEUs of cargo and containers. In 2022, MIT handled approximately 2.7 million TEUs of cargo and containers. In 2023, MIT handled approximately 2.6 million TEUs of cargo and containers. In 2024, MIT handled approximately 2.7 million TEUs of cargo and containers. In 2025, MIT handled approximately 2.9 million TEUs of cargo and containers.

Evergreen International, S.A. (“Evergreen”), a subsidiary of the Evergreen Group of Taiwan, manages and operates the container port in Colón. The initial investment was U.S. $80 million, and Evergreen began operations in the fourth quarter of 1997. In 2021, the container port in Colón moved approximately 1.1 million TEUs of cargo and containers. In 2022, the container port in Colón moved approximately 1.4 million TEUs of cargo and containers. In

 

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2023, the container port in Colón moved approximately 1.4 million TEUs of cargo and containers. In 2024, the container port in Colón moved approximately 1.6 million TEUs of cargo and containers. In 2025, the container port in Colón moved approximately 1.7 million TEUs of cargo and containers.

Through Law No. 5 of 1997, the Government granted the Panama Ports Company (“PPC”), a subsidiary of Hutchinson Whampoa, Ltd. of Hong Kong, a renewable 25-year concession to operate the existing ports at Balboa and Cristobal at the entrances to the Panama Canal. Pursuant to the concession contract, annual payments to the Government were set at approximately U.S.$22.2 million plus 10.0% of revenues. In addition, an initial upfront grant to the Government of 10.0% of the shares in the operating company was required under the concession. In June 2002, Panama agreed to forego the U.S.$22.2 million annual rental payments in view of Hutchinson Whampoa’s investments in terminal expansion, but in September 2005, the Torrijos administration overturned the decision. On October 18, 2005, PPC paid the Central Government U.S.$102 million in back fees and initiated an expansion of the Port of Cristobal, which is part of its U.S.$1.0 billion ports expansion program. PPC has already invested approximately U.S.$500 million in the expansion of maritime operations of both ports. In 2021, through Resolution J.D. No. 043-2021 , the Panama Maritime Authority authorized the automatic extension of concession rights granted to PPC for an additional period of 25 years (until January 31, 2047). In addition, the resolution instructed the Government to subscribe to the Shareholders Agreement that guarantees a minimum annual payment of dividends in favor of the Government, in the amount of U.S.$7.0 million.

However, on January 29, 2026, the Plenary of the Supreme Court declared unconstitutional Law No. 5 of January 16, 1997, and its addenda, which set forth the Government’s concession contract with PPC relating to the Ports of Balboa and Cristobal. The ruling became final on February 23, 2026 and was not subject to appeal. Pursuant to Executive Decree No. 23 of 2026, the Government ordered the occupation of both terminals by the Panama Maritime Authority for reasons of urgent social interest, and assumed administrative and operational control of the port assets to ensure operational continuity pending the award of a new concession, expected within 18 months. Under transitional arrangements of up to 18 months, a subsidiary of A.P. Moller-Maersk (APM Terminals) was designated to operate the Balboa terminal on the Pacific side, and a subsidiary of Mediterranean Shipping Company (Terminal Investment Limited) was designated to operate the Cristóbal terminal on the Atlantic side. These changes have resulted in certain legal disputes. See “Recent Developments—Recent Government Actions”.

As of December 31, 2021, the container terminal at Port Balboa spanned 182 hectares and had 108 cranes (25 quay cranes and 83 rubber-tired gantry (“RTG”) cranes), while the Port of Cristobal spanned 142 hectares and had 60 cranes (13 quay cranes and 47 RTG cranes). As of December 31, 2022, the container terminal at Port Balboa spanned 182 hectares and had 108 cranes (25 quay cranes and 83 RTG cranes), while the Port of Cristobal spanned 142 hectares and had 60 cranes (13 quay cranes and 47 RTG cranes). As of December 31, 2023, the container terminal at Port Balboa spanned 182 hectares and had 108 cranes (25 quay cranes and 83 RTG cranes), while the Port of Cristobal spanned 142 hectares and had 60 cranes (13 quay cranes and 47 RTG cranes). As of December 31, 2024, the container terminal at Port Balboa spanned 182 hectares and had 73 cranes (25 quay cranes and 48 RTG cranes), while the Port of Cristobal spanned 142 hectares and had 42 cranes (13 quay cranes and 29 RTG cranes). As of December 31, 2025, the container terminal at Port Balboa spanned 179 hectares and 6,136 square meters, and had 150 cranes (50 quay cranes and 100 RTG cranes), while the Port of Cristobal spanned 146 hectares and 8,462 square meters and had 81 cranes (26 quay cranes and 55 RTG cranes),

In 2021, Port Balboa handled approximately 2.3 million TEUs of cargo and containers. In 2022, Port Balboa handled approximately 2.2 million TEUs of cargo and containers. In 2023, Port Balboa handled approximately 2.3 million TEUs of cargo and containers. In 2024, Port Balboa handled approximately 2.6 million TEUs of cargo and containers. In 2025, Port Balboa handled approximately 2.7 million TEUs of cargo and containers.

In 2021, the Port of Cristobal handled approximately 1.1 million TEUs of cargo and containers. In 2022, the Port of Cristobal handled approximately 913,911 TEUs of cargo and containers. In 2023, the Port of Cristobal handled approximately 888,306 TEUs of cargo and containers. In 2024, the Port of Cristobal handled approximately 1.1 million TEUs of cargo and containers. In 2025, the Port of Cristobal handled approximately 1.2 million TEUs of cargo and containers.

Banking. The public banking sector consists of two institutions: BNP and Caja de Ahorros (a savings bank). By law, the Government is responsible for the liabilities of these institutions. BNP is the country’s largest deposit-taking

 

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financial institution and Caja de Ahorros is among the largest deposit-taking financial institutions. Collectively, the two institutions had approximately 15.8% of deposits and 14.7% of assets in the national banking system as of December 31, 2025. As of December 31, 2025, the Government had not announced any plans to privatize these financial institutions. The Panamanian public sector includes two other significant financial institutions that are not part of the banking sector: Banco de Desarrollo Agropecuario and Banco Hipotecario Nacional. See “Financial System—the Banking System—Public Sector Banking Institutions”.

Other Privatizations

Under a privatization law that governs the privatization program for various state-owned entities other than the ports, IRHE, IDAAN and INTEL, the privatization of public enterprises may be effected by any of the following means: (i) transforming state enterprises into regular stock corporations and subsequently selling all of their shares to the private sector; (ii) transforming state enterprises into mixed capital companies whose capital is divided between the Government and the private sector, and in which the Government retains a minority participation; (iii) selling operating concessions; or (iv) leasing or selling the assets of the public enterprises. Such privatization provides the Republic with non-tax revenue. In 2009, ASEP carried out a public bid to award two concessions to provide personal communications services in Panama. On May 14, 2008, in Cabinet Resolutions No. 66 and No. 67, ASEP awarded Claro Panamá S.A. and Digicel Panamá S.A contracts to provide personal communications services in the Republic. Claro Panamá S.A.’s contract was awarded for U.S.$73.1 million, and Digicel Panamá S.A.’s contract was awarded for U.S.$86.0 million. On June 22, 2022, through Cabinet Resolution No. 69, C&W Panama was authorized to substitute Radiomovil Dipsa, S.A. de C.V. as operator of Claro Panamá, S.A. within the concession granted through Concession Contract No.11-2008 of May 27, 2008, and ASEP was authorized to unify the concession contracts of C&W Panama and Claro Panamá, S.A.

In August 2013, Law No. 48 was approved, which modified Law No. 38 of 2012, which created the FAP. The amendment establishes that funds resulting from future sales of government-owned companies will be accumulated in the FAP and may only be used to finance reconstruction efforts for damage caused by natural disasters when such damage represents at least 0.5% of nominal GDP or more. According to the FAP’s accumulation rule, amended by Law 51 of 2018, every year, 50% of the contributions from the Panama Canal to the National Treasury exceeding 2.25% of GDP from 2020 onwards will be transferred to the FAP.

 

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THE PANAMA CANAL

General

Following Panama’s declaration of independence from Colombia, Panama ratified the Hay/Bunau-Varilla Treaty with the United States on December 2, 1903. Under the terms of the treaty, Panama ceded to the United States the Canal Zone, a ten-mile wide strip of Panama’s territory, to build, operate, maintain and protect an interoceanic canal across the isthmus, in return for annual payments. The Panama Canal is approximately 50 miles from the Atlantic Ocean to the Pacific Ocean. The former Canal Zone encompassed a land area of 94,385 hectares (364 square miles) and a water surface of 45,594 hectares (176 square miles) and included military bases, ports, airports, schools, hospitals and housing units.

The Panama Canal plays a significant role in the Panamanian economy. In the Panama Canal Authority’s (“PCA”) fiscal year ending on September 30, 2025, Canal transits increased to 13,404 from 11,240 in fiscal year ending on September 30, 2024, while cargo tonnage in fiscal year 2025 increased to 262.3 million long tons from 210.3 million long tons in fiscal year 2024. Increases in transits and cargo tonnage were mainly due to strong demand, improved slot management, and the restoration of operational capacity as hydrological conditions normalized following drought conditions during fiscal year 2024. According to the PCA, toll revenues for fiscal year 2025 amounted to U.S.$4,007.9 million, an increase of 26.1% compared to U.S.$3,179.1 million in fiscal year 2024. In fiscal year 2024, Canal transits decreased to 11,240 from 14,080 in fiscal year ending September 30, 2023, while cargo tonnage in fiscal year 2024 decreased to 210.3 million long tons from 285.8 million long tons in fiscal year 2023. According to the PCA, toll revenues for fiscal year 2024 reached U.S.$3,179.1 million, a decrease of 5.1% compared to U.S.$3,348.4 million in fiscal year 2023. In fiscal year 2023, Canal transits decreased to 14,080 from 14,239 in fiscal year ending September 30, 2022, while cargo tonnage in fiscal year 2023 decreased to 285.8 million long tons

 

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from 294.1 million long tons in fiscal year 2022. According to the PCA, toll revenues for fiscal year 2023 reached U.S.$3,348.4 million, an increase of 10.6% compared to U.S.$3,028.0 million in fiscal year 2022. In fiscal year 2022, Canal transits increased to 14,239 from 13,342 in fiscal year ending September 30, 2021, while cargo tonnage in fiscal year 2022 increased to 294.1 million long tons from 291.7 million long tons in fiscal year 2021. According to the PCA, toll revenues for fiscal year 2022 reached U.S.$3,028.0 million, an increase of 2.0% compared to U.S.$2,968.2 million in fiscal year 2021. In fiscal year 2021, Canal transits decreased to 13,342 from 13,368 in fiscal year ending September 30, 2020, while cargo tonnage in fiscal year 2021 increased to 291.7 million long tons from 255.7 million long tons in fiscal year 2020. According to the PCA, toll revenues for fiscal year 2021 reached U.S.$2,968.2 million, an increase of 11.5% compared to U.S.$2,663.2 million in fiscal year 2020.

On average, from fiscal year 2021 through fiscal year 2025, transits through the Canal increased by 0.9% and cargo tonnage increased by 2.1% per annum. The increase in Canal transits and cargo tonnage over the five-year period was driven by the recovery in global trade flows, continued operational measures to optimize capacity utilization, and effective management of water resources; however, results were also constrained by external factors, particularly climatic conditions On average, from fiscal year 2021 to fiscal year 2025, toll revenues increased by 9.0% per annum, primarily attributable to a higher transit volume of bulk carriers, tankers and chemical tankers.

As of September 30, 2025, the Canal’s total work force (which includes temporary and permanent workers) was 9,014. Of the 2025 total work force, 7,892 were men (88%) and 1,122 were women (12%).

The following table sets forth the Canal’s statistical and financial information for fiscal year 2021 through fiscal year 2025 (each ended on September 30):

TABLE NO. 8

Panama Canal Principal Statistics

 

Fiscal Year		Number of Transits				Tolls (millions of U.S. dollars)				Long Tons of Cargo (millions)
2021			13,342			$	2,968			$	291.7
2022			14,239			$	3,028			$	294.0
2023			14,080			$	3,348			$	285.8
2024			11,240			$	3,179			$	210.3
2025			13,404			$	4,007			$	262.3

Source: Panama Canal Authority.

The Panama Canal Treaty of 1977

In September 1977, the governments of Panama and the United States signed two treaties with regard to the Canal, both effective as of October 1, 1979. The first treaty, known as the Panama Canal Treaty of 1977, terminated all prior treaties between the United States and Panama concerning the Canal and abolished the Canal Zone. The Panama Canal Treaty of 1977 also granted the United States the right to continue to manage, operate and maintain the Canal until the expiration of the treaty on December 31, 1999, at which time Panama assumed full responsibility for the Canal and its facilities. The second treaty, known as the 1977 Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, committed Panama and the United States to continue to protect the Canal and to ensure its permanent neutrality beyond the expiration of the Panama Canal Treaty of 1977. Pursuant to the Panama Canal Treaty of 1977, the United States gradually transferred former Canal Zone land and facilities to Panama beginning in 1979. On December 31, 1999, Panama acquired full title to the former Canal Zone from the United States.

 

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The Panama Canal Commission, Panama Canal Expansion Project and Panama Canal Authority

The Panama Canal Commission

The Panama Canal Treaty of 1977 dissolved the former Panama Canal Company and established the Panama Canal Commission (“PCC”), a bi-national agency of the executive branch of the United States government responsible for managing and operating the Canal until the expiration of the Panama Canal Treaty on December 31, 1999, when Panama assumed full responsibility for the Canal. The PCC was supervised by a nine-member Board of Directors. Five members were nationals of the United States and four were Panamanian citizens nominated by the Panamanian Government and approved by the United States government. From 1990 to 1999, the Administrator of the PCC was a Panamanian. The PCC’s primary mission was to service world shipping by operating the Canal in an efficient and orderly manner, while also ensuring the smooth and orderly transfer of the Canal to Panama on December 31, 1999. Following the transfer of the Canal to Panama on December 31, 1999, the PCC was closed.

Pursuant to the Panama Canal Treaty of 1977, the Canal was expected to be operated by the PCC on a not-for-profit basis, with its income not to exceed its costs. The PCC was expected to recover through tolls and other revenues all costs of operations, maintenance and Canal improvements. The PCC’s operation of the Canal was conducted on a self-financing basis. The PCC independently set the Canal’s tolls.

The PCC’s long-term investment planning was designed to ensure that a reliable and efficient service would be continually provided and would be based primarily on future traffic projections. Investment was financed with PCC’s resources derived from toll and other revenues. In the 1980s, the Canal typically operated at close to capacity in terms of numbers of transits, and the PCC decided to increase capacity to avoid backlog and permit overhaul work. Hence, the PCC (and later, the PCA, which assumed management of the Canal from the PCC on December 31, 1999) planned and undertook several major Canal improvement projects, including the widening of the Canal’s Atlantic entrance; the widening of the Gaillard Cut (the narrowest point in the Canal) to permit two-way traffic; and the overhaul of the Gatun, Miraflores, and Pedro Miguel locks. In November 2001, the PCA completed the widening of the Gaillard Cut, a project that the PCC had begun in 1992 and which cost approximately U.S.$232.3 million. Other major maintenance programs, such as the overhaul of the locks, were successfully completed. The PCA initiated the deepening of Lake Gatun and the Gaillard Cut in 2002, and completed the project in September 2009 for approximately U.S.$113.6 million.

The Panama Canal Expansion Project

The National Assembly approved a canal expansion plan on July 14, 2006, which was approved in a national referendum on October 22, 2006. The expansion plan included Pacific locks, water supply improvements, Atlantic locks, waterway improvements, and improvement of access channels for new locks and existing navigational channels. The plan provided that the project would be funded entirely by the PCA, either with its own resources or from borrowing to be repaid with its own resources and not with resources of the Republic. The PCA would obtain a portion of these resources through an increase in tolls. Water-saving basins would be built alongside the new locks, which would reuse 60% of the water from each transit.

On June 26, 2016, a third set of canal locks, which resulted from the Panama Canal expansion project, started operations. These locks are located at the Atlantic Ocean (the locks of Agua Clara) and Pacific Ocean (the locks of Cocolí) entrances to the Canal. Each of the new complexes of locks consists of three chambers, nine water reutilization basins, a side filling and emptying system and a redundant system with eight rolling gates. The chambers measure 55 meters wide, 427 meters long and 18.3 meters deep. The third set of locks allows for the passage of larger vessels with beams of 32.6 meters or greater, lengths of 294.4 meters or greater, or cargo capacities of approximately 14,000 TEU (“Neopanamax vessels”) which cannot cross through the Canal’s smaller locks.

In contrast, the Canal’s smaller Miraflores, Pedro Miguel and Gatun locks measure 33.5 meters wide and 304.8 meters long, and the largest vessels that can be accommodated in these locks are known as “Panamax” vessels. Vessels of “Panamax” dimensions, but which require a draft larger than 39.5 feet are known as “Panamax plus” vessels. “Regular” vessels (with beams of less than 27.7 meters) and “super” vessels (with beams between 27.7 and 32.62 meters, lengths up to 294.4 meters, and drafts up to 39.5 feet) also transit the Canal’s locks.

During fiscal year 2021, approximately 516.7 million tons of cargo transited the locks of Cocolí, on the Pacific side of the Canal, and Agua Clara, on the Atlantic side of the Canal. Of the total, approximately 273.0 million tons (53%) transited in Neopanamax vessels, 210.6 million tons (41%) transited in supertankers, 22.0 million tons (4%) transited in regular ships and 11.1 million tons (2%) transited in Panamax plus ships.

 

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During fiscal year 2022, approximately 518.8 million tons of cargo transited the locks of Cocolí, on the Pacific side of the Canal, and Agua Clara, on the Atlantic side of the Canal. Of the total, approximately 265.3 million tons (51%) transited in Neopanamax vessels, 220.0 million tons (42%) transited in supertankers, 23.7 million tons (5%) transited in regular ships and 9.9 million tons (2%) transited in Panamax plus ships. During fiscal year 2023, approximately 511.1 million tons of cargo transited the locks of Cocolí, on the Pacific side of the Canal, and Agua Clara, on the Atlantic side of the Canal. Of the total, approximately 267.1 million tons (52%) transited in Neopanamax vessels, 210.8 million tons (41%) transited in supertankers, 25.9 million tons (5%) transited in regular ships and 7.3 million tons (2%) transited in Panamax plus ships.

During fiscal year 2024, approximately 423.1 million tons of cargo transited through the locks of Cocolí, on the Pacific side of the Canal, and Agua Clara, on the Atlantic side of the Canal. Of the total, approximately 227.0 million tons (54%) transited on Neopanamax vessels, 175.7 million tons (41%) transited in supertankers, 20.2 million tons (5%) transited in regular ships, and 0.2 million tons (0.1%) transited on Panamax plus ships. During fiscal year 2025, approximately 489.2 million tons of cargo transited the locks of Cocolí, on the Pacific side of the Canal, and Agua Clara, on the Atlantic side of the Canal. Of the total, approximately 252.3 million tons (52%) transited on Neopanamax vessels, 212.2 million tons (43%) transited on supertankers, 23.3 million tons (5%) transited on regular ships, and 1.3 million tons (0.3%) transited in Panamax plus ships.

In December 2008, the PCA signed a U.S.$2.3 billion agreement with five multilateral and development organizations to finance the Canal’s expansion project, which was estimated to cost approximately U.S.$5.25 billion. The Japan Bank for International Cooperation (“JBIC”), the European Investment Bank (“EIB”), the IADB, CAF and the International Finance Corporation (“IFC”) agreed to provide approximately U.S.$800 million, U.S.$500 million, U.S.$400 million, U.S.$300 million and U.S.$300 million, respectively, in financing to the PCA. By September 2014, the PCA had received the full U.S.$2.3 billion disbursement. The remaining funds for the expansion project derived from capital market transactions and the Canal’s regular business operations, including the implementation of toll increases. To reduce the risk of a toll increase causing lower demand, the PCA employed a three-year phase-in period designed to generate the appropriate cash flows needed to finance a significant portion of the expansion project. On September 24, 2015, the PCA issued U.S.$450 million of bonds due 2035 to contribute to the financing of the construction of the Atlantic bridge.

In July 2009, the construction of the third set of locks was awarded to the Grupo Unidos por el Canal (“GUPCSA”) consortium, composed of Sacyr Vallehermoso, S.A. (“Sacyr”), Impregilo S.p.A., Jan de Nul n.v., and Constructora Urbana, S.A., for a total base price of approximately U.S.$3.1 billion.

On June 24, 2019, GUPCSA completed a three-year maintenance contract with the PCA in the Expanded Canal. Maintenance activity has since been taken over by the PCA’s internal locks management division.

Disputes Related to the Construction of the Third Set of Locks

The Panama Canal expansion project was originally scheduled to start operations by year-end 2014, with the third set of locks to be completed by November 2014. However, many issues arose during construction of the third set of locks, including cost overruns and construction delays.

Pursuant to the contract for construction of the third set of locks, disputes could be submitted to a Dispute Adjudication Board (“DAB”), whose determinations could be challenged in an arbitration conducted pursuant to the International Chamber of Commerce (“ICC”) Rules of Arbitration. Both the PCA and GUPCSA filed a large number of claims with the DAB. The DAB claims were eventually challenged and consolidated into five ICC arbitrations:

 

1.

The first, known as the arbitration concerning the cofferdam (the “Cofferdam Arbitration”), involved a claim by GUPCSA for U.S.$194 million in alleged added costs and for a 247-day extension due to allegedly unanticipated and unforeseeable ground conditions in the area of the cofferdam at the Pacific entrance to the Canal which required additional dredging work and a re-design of the cofferdam. GUPCSA’s claim was denied by the ICC tribunal. The Cofferdam Arbitration concluded in July 2017 with an award denying compensation and the 247- day extension and awarding the PCA over U.S.$22 million to cover legal fees in connection with the arbitration, as well as U.S.$900,000 towards arbitration costs.

 

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2.

The second, known as the “Concrete Aggregate Arbitration”, involved claims by GUPCSA related to cost overruns as a result of (a) unforeseen foundation conditions, (b) the alleged unsuitability of the concrete aggregates onsite, (c) the PCA’s refusal to accept noncompliant concrete mix designs, and (d) the PCA’s requirement that onsite testing laboratories be run by third parties, among other issues. In September 2020, the arbitral tribunal issued a partial award, dismissing GUPCSA’s claims related to the concrete aggregate suitability and the concrete mix designs, but accepting that certain of the foundation conditions resulted in additional expenses for GUPCSA and that the requirement to have onsite laboratories run by third party organizations was a variance from the contract for which GUPCSA was entitled to compensation. The tribunal also dismissed GUPCSA’s claim for a time extension and the PCA’s counterclaim for delay damages. On November 25, 2020, GUPCSA filed with the United States District Court for the Southern District of Florida a motion to vacate the tribunal’s partial award. In February 2021, the arbitral tribunal issued a final award, ordering GUPCSA to pay U.S.$271.8 million to the PCA. The PCA submitted a motion in opposition and a cross-motion to the District Court for the Southern District of Florida to confirm and enforce the award. On November 18, 2021, the District Court issued an order denying GUPCSA’s motion to vacate and granting the PCA’s motion to confirm and enforce the arbitral award. On December 17, 2021, GUPCSA filed a notice of appeal as to the District Court’s order. After considering the appeal, on August 18, 2023, the United States Court of Appeals for the Eleventh Circuit affirmed the District Court’s order, confirming the arbitral award in favor of the PCA. GUPCSA sought to appeal the Eleventh Circuit’s decision, but the United States Supreme Court denied certiorari, effectively upholding the arbitral award in favor of the PCA.

 

3.

The third, known as the arbitration concerning the Lock Gates, involved a claim by GUPCSA against the PCA, seeking to obtain approximately U.S.$671 million for additional costs incurred during construction of the lock gates, increased labor costs and shareholder claims for return on investment. The final hearing was held between July 27, 2022 and July 28, 2022. In 2023, the ICC arbitral tribunal issued its final award, rejecting all of GUPCSA’s claims related to additional construction costs and shareholder claims, but concluding that GUPCSA could be entitled to receive partial compensation of approximately U.S.$34 million for increased labor costs, subject to the final conclusion of the so-called “Disruptions Arbitration” (described below). Finally, the tribunal ordered GUPCSA to pay the PCA approximately U.S.$20.6 million for legal costs and expenses.

 

4.

The fourth, known as the arbitration concerning the Advance Payments, involved claims by the PCA to recover advance payments it had made to GUPCSA during the construction of the third set of locks. In 2018, the arbitral tribunal issued its final award, ordering GUPCSA to repay the advance payments to the PCA totaling approximately U.S.$847 million, and allowing the PCA to draw on over U.S.$13 million pursuant to an additional guarantee for interest on delayed payment of the initial advance. GUPCSA was also ordered to pay most of the PCA’s legal fees and costs, amounting to approximately U.S.$6 million.

 

5.

The fifth, known as the “Disruptions Arbitration”, involves disruptions which allegedly affected GUPCSA’s performance of the contract. On October 15, 2021, GUPCSA presented a consolidated claim for payment of U.S.$3,586 million from the PCA in connection with this arbitration. The claim is detailed as the sum of U.S.$2,435 million owed to GUPC; U.S.$615.2 million owed to Sacyr; U.S.$469.5 million owed to Webuild S.p.A (formerly Impregilo S.p.A.); and U.S.$67.1 million owed to Jan De Nul n.v. This is the only arbitration by GUPCSA against the PCA that remains ongoing. The first hearing on the merits was held from January 19 to February 6, 2026, and the second hearing on the merits was held from March 9 to March 31, 2026. Following the completion of the merits hearings, the parties are currently awaiting the tribunal’s final award.

Individual shareholders of the GUPCSA consortium have also filed arbitrations against the Republic of Panama pursuant to bilateral investment treaties:

 

1.

In August 2018, Sacyr filed a request for arbitration against the Republic of Panama pursuant to the UNCITRAL Arbitration Rules and the bilateral investment treaty between Spain and Panama. Sacyr, without specifying a claim amount, alleged that the Republic violated several of the treaty’s provisions, thereby failing to protect Sacyr’s investment with respect to the Canal expansion project. In February 2022, the arbitral tribunal rejected Panama’s preliminary arguments that the PCA’s actions could not be attributed to the Republic. After bifurcating the merits and damages phases of the arbitration in early 2024, the tribunal held a hearing on the merits in June 2024. On October 31, 2025, the tribunal dismissed Sacyr’s claim in full, finding that Sacyr failed to prove its allegations and that the grievances were fundamentally commercial and contractual risks, rather than actionable breaches of an international treaty. The tribunal ordered Sacyr to pay U.S.$6.39 million to Panama to cover legal fees and arbitration costs, a sum which Sacyr paid in full in the fall of 2025.

 

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2.

In 2020, Salini-Impregilo S.p.A., now known as Webuild S.p.A., filed a formal request for arbitration against the Republic of Panama at the International Centre for Settlement of Investment Disputes pursuant to the bilateral investment treaty between Italy and Panama. Webuild claimed that actions and omissions of the Republic had affected its rights under the investment treaty with respect to the design and construction of the third set of locks of the Panama Canal, and that it should be compensated for damages that it estimated to exceed U.S.$2.2 billion. The tribunal held a hearing on preliminary objections and the merits in October 2025, and its decision is pending.

The aforementioned arbitrations are against the Republic of Panama, and are therefore being managed, by the Ministry of Economy and Finance, which legally represents the Republic of Panama in all arbitrations brought against it.

The Panama Canal Authority

Recognizing the importance of the Canal to Panama, the Government took a number of actions to ensure that the Canal would continue to operate efficiently following its reversion to Panama in 1999. A 1994 Constitutional amendment created the PCA, an autonomous public entity which assumed management of the Canal from the PCC on December 31, 1999. The PCA’s annual budget must be prepared in accordance with a three-year financial plan and submitted for approval by the Cabinet and the National Assembly. Under the terms of the 1994 amendment, this budget is not included in the budget of the Central Government. The revised public-sector accounting practices used to calculate the non-financial public sector results do not consolidate the net financial results of the PCA with the Government’s own non-financial public-sector results.

As was the case with the PCC, the PCA makes annual payments to the Central Government based upon the amount of tonnage that transits the Canal. By law, the rate (as measured on a per ton basis) for such payments may not be set at a level that will generate lower payments than those paid to Panama by the PCC on December 31, 1999. In addition, the PCA transfers to the Central Government any net surpluses generated by the Canal after covering the funds for its investment program and necessary reserves. The PCA is exempt from paying any tax, duty, fee, charge or contribution, of a national or municipal nature, with the exception of social security, educational insurance, professional risks and fees for public services.

In fiscal year 2021, the PCA had a surplus of U.S.$2,136.0 million, an increase of 24.9% compared to U.S.$1,710.1 million in 2020. In 2021, the PCA transferred U.S.$2,080.6 million to the Central Government. In fiscal year 2022, the PCA had a surplus of U.S.$2,411.6 million, an increase of 12.9% compared to U.S.$2,136.0 million in 2021. In 2022, the PCA transferred U.S.$2,494.4 million to the Central Government. In fiscal year 2023, the PCA had a surplus of U.S.$3,205.7 million, an increase of 32.9% compared to U.S.$2,411.6 million in 2022. In 2023, the PCA transferred U.S.$2,544.5 million to the Central Government. In fiscal year 2024, the PCA had a surplus of U.S.$3,438.6 million, an increase of 7.3% compared to U.S.$3,205.7 million in 2023. In 2024, the PCA transferred U.S.$2,470.8 million to the Central Government. In fiscal year 2025, the PCA had a surplus of U.S.$4,093.1 million, an increase of 19.0% compared to U.S.$3,438.6 million in 2024. In 2025, the PCA transferred U.S.$2,964.6 to the Central Government.

On August 27, 2024, the plenary session of the National Assembly approved the PCA’s Budget for fiscal year 2025, which estimated revenues of U.S.$5,623.5 million for the fiscal period running from October 1, 2024 to September 30, 2025. The budget projected dividends to the Central Government of U.S.$2,789.5 million, a 12.9% increase over U.S.$2,470.8 million in dividends projected for 2024. On September 25, 2025, the plenary session of the National Assembly approved the PCA’s Budget for fiscal year 2026, which estimated revenues of U.S.$5,207.2 million for the fiscal period running from October 1, 2025 to September 30, 2026. The budget projects dividends to the Central Government of U.S.$3,193.8 million, a 14.5% increase over U.S.$2,789.5 million in dividends projected for 2025.

 

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The following table sets forth the Canal’s financial contributions to the Government for PCA fiscal year 2021 through fiscal year 2025 (each ended on September 30):

TABLE NO. 9

Panama Canal Direct Contributions to Central Government

 

Fiscal Year		Fiscal Surplus Transferred				Portion of Revenues from Tolls and Public Services Transferred				Total Transferred to National Treasury
		(in millions of U.S. Dollars)
2021		$	1,487.8			$	592.8			$	2,080.6
2022		$	1,894.0			$	600.4			$	2,494.4
2023		$	1,942.7			$	601.9			$	2,544.5
2024		$	1,952.4			$	518.4			$	2,470.8
2025		$	2,371.6			$	593.0			$	2,964.6

Source: Panama Canal Authority.

For fiscal year 2025, the PCA paid the Central Government U.S.$2,964.6 million in dividends, an increase of 20.0% compared to U.S.$2,470.8 million in dividends the PCA paid to the Central Government in fiscal year 2024. For fiscal year 2024, the PCA paid the Central Government U.S.$2,470.8 million in dividends, a decrease of 2.9% compared to U.S.$2,544.6 million in dividends the PCA paid to the Central Government in fiscal year 2023. For fiscal year 2023, the PCA paid the Central Government U.S.$2,544.5 million in dividends, an increase of 2.0% compared to U.S.$2,494.4 million in dividends the PCA paid to the Central Government in fiscal year 2022. For fiscal year 2022, the PCA paid the Central Government U.S.$2,494.4 million in dividends, an increase of 19.9% compared to U.S.$2,080.6 million in dividends the PCA paid to the Central Government in fiscal year 2021. For fiscal year 2021, the PCA paid the Central Government U.S.$2,080.6 million in dividends, an increase of 14.0% compared to U.S.$1,824.1 million in dividends the PCA paid to the Central Government in fiscal year 2020.

Of the total dividends paid to the Central Government for fiscal year 2025, the PCA paid U.S.$593.0 million from tolls and services, an increase of 14.4% compared to U.S.$518.4 million for fiscal year 2024. Of the total dividends paid to the Central Government for fiscal year 2024, the PCA paid U.S.$518.4 million from tolls and services, a decrease of 13.9% compared to U.S.$601.9 million for the 2023 fiscal year. Of the total dividends paid to the Central Government for fiscal year 2023, the PCA paid U.S.$601.9 million from tolls and services, an increase of 0.2% compared to U.S.$600.4 million for fiscal year 2022. Of the total dividends paid to the Central Government for fiscal year 2022, the PCA paid U.S.$600.4 million from tolls and services, an increase of 1.2% compared to U.S.$592.8 million for fiscal year 2021. Of the total dividends paid to the Central Government for fiscal year 2021, the PCA paid U.S.$592.8 million from tolls and services, an increase of 9.2% compared to U.S.$542.7 million for fiscal year 2020.

On August 15, 2025, the Panama Canal celebrated 111 years of operations. Over the past 25 years under Panamanian administration, the Canal contributed U.S.$28.3 billion in direct contributions to the National Treasury. In addition, it has contributed U.S.$15 billion to the economy of Panama in investments in capital projects, operational maintenance, and watershed management.

The following table sets forth the Panama Canal’s contribution’s to Panama’s GDP, both in the form of direct contributions to the Government and in the form of indirect contributions to the economy, including the provision of salaries to workers, payment of taxes, and spending on goods and services:

 

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TABLE NO. 10

Panama Canal Contributions to Gross Domestic Product

 

Fiscal Year		Direct Contributions (Surpluses, Services and Tolls)				Total Contributions (Direct and indirect contributions to the economy)
		(as a percentage of GDP)
2021			4.0	%			5.3	%
2022			3.7	%			5.1	%
2023			3.1	%			4.5	%
2024(E)			2.9	%			4.2	%
2025(E)			3.4	%			4.9	%

 

(E)	Estimated Figures

Source: Panama Canal Authority.

Water Conservation and Management

The lakes surrounding the Panama Canal, in addition to supplying water to the Canal for its operations, also supply water for more than 50% of the country’s population. The water consumed by more than 2 million people living in the provinces of Panama, Panama Oeste, and Colón comes from Lake Gatún and Lake Alajuela, created in 1913 and 1935, respectively. Further, eight water treatment plants obtain water from Lake Gatun, while Lake Alahuela supplies water to the Federico Guardia Conte water treatment plant in Chilibre, the largest water treatment plant in the country.

In view of the climatic changes that impact the availability of water in and around the Panama Canal (including levels of rainfall, the El Niño phenomenon, drought, and flooding), in 2020, the PCA began implementing a series of water conservation and protection measures with the purpose of ensuring sufficient water for use by the surrounding population as well as the Canal.

In 2020, the PCA began imposing a variable surcharge fee for the use of potable water due to climate change and drought. The surcharge varied between 1% and 10% of the cost of the transit toll depending on the water levels of Lake Gatun, and generated revenues of U.S.$457 million from February 2020 to September 2022. Later, in October 2023, the PCA reduced the variable surcharge fee by 50% given the rising water levels of Lake Gatun.

In 2022, the Panama Canal began implementing its Flood Control Plan. The Flood Control Plan is executed annually during the period of the highest rainfall in the Panama Canal Watershed. The Flood Control Plan includes adjusting floodgates and hydraulic structures and the constant monitoring of the Panama Canal Watershed’s hydro-meteorological conditions by a team of meteorologists and hydrologists with the objective of identifying, preventing, and responding to any flood threat to the surrounding communities, workers and canal structures. As of September 2022, the Panama Canal Watershed had received 1,579 millimeters of rain, 25% above the historical average, as a result of the La Niña phenomenon.

In 2023, the Panama Canal Watershed faced an extensive and severe dry season due to the El Niño phenomenon, recording the third driest year in history, with 30% less rainfall than usual. The PCA began to implement measures to address these conditions, including (i) the use of a cross-locking process in the Panamax locks to combine water from one side of a lock with the other; (ii) the scheduling of transits to be able to reuse the same amount of water for multiple vessel transits; and (iii) draft reductions in the locks.

In April 2023, the PCA reduced the draft in the Neopanamax locks from the maximum allowed of 50 feet to 47.5 feet, which also reduced the volume of cargo that ships could carry during transit. In July 2023, the PCA again lowered the draft to 44 feet, which allowed an average of 32 vessels to pass through the Canal per day. In August 2023, the PCA announced that the draft would remain low for up to one year, allowing a maximum of 32 vessels per day to transit the Canal. The reduction of the draft and the resulting decrease in the maximum number of daily transits through the Canal increased wait times.

Despite the drought conditions prevailing in late 2023 and the first half of 2024, the Panama Canal was able to continue supplying water to over 50% of the country’s population, including drinking water and treated water, due to its water conservation measures.

 

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In light of the water conservation measures adopted in 2023, the slight increase in rainfall in 2024, and higher water levels in the Canal and surrounding lakes, the PCA was able to gradually increase daily transits through the Canal in 2024. On March 11, 2024, the PCA increased the number of daily transits from 24 to 27, with two additional slots to be offered by auction, to accommodate the growing demand for transits. On April 15, 2024, the PCA announced that the number of daily transits would increase to 32 as of June 1, 2024, and the maximum permitted draft for vessels transiting the Neopanamax locks would increase from 44 feet to 45 feet as of June 15, 2024. On June 26, 2024, the number of daily transits increased to 35, and the PCA announced that the maximum permitted draft was increased to 47 feet, with a further increase to 48 feet on July 11, 2024. As of September 1, 2024, the number of vessels able to cross through the Panama Canal each day returned to 36, which was the normal daily crossing limit in place prior to the transit limitations imposed in 2023 due to extended drought.

The PCA is preparing a 50-year plan to address lower levels of rainfall. The PCA board of directors has considered various projects for inclusion in the plan, such as relocating the water intake for the Miraflores water treatment plant 14 kilometers in the direction of Gamboa, where the water has a lower concentration of salt. Another project, which was recommended by the U.S. Army Corps of Engineers, consists of dredging the navigation channel. While this project would likely have the greatest impact, its execution would be costly and complex because the work must be done during the transit of vessels.

As an additional sustainability measure, the PCA created a U.S.$8.5 billion investment program with the purpose of modernizing the Canal infrastructure, improving water management and adopting greener technologies between 2024 and 2030. Of these funds, U.S.$3.5 billion are expected to be invested in infrastructure and equipment, including the installation of a photovoltaic (solar) power plant and the acquisition of electric vehicles and hybrid tugboats, and U.S.$2.0 billion are expected to be invested in water projects to promote a stable water supply, which is crucial for Canal operations.

On January 17, 2024, the Panama Canal Administrator, Ricaurte Vásquez Morales, announced that two proposals had been presented to the Executive Branch to help mitigate the lack of water resources: (i) eliminating an existing legal restriction on the construction of new reservoirs, and (ii) redefining the limits of the Panama Canal Watershed to include the contiguous basin of the Río Indio.

On January 18, 2024, a lawsuit was filed before the Supreme Court challenging the constitutionality of Law 20 of June 21, 2006, which modified the limits of the Panama Canal Watershed. The lawsuit alleged that Law 20 of June 21, 2006 was unconstitutional because it was approved by the National Assembly without consultation with the PCA, and that it has caused serious damage to the Panama Canal by limiting the availability of vital water resources for its operation. On July 3, 2024, the Supreme Court declared Law 20 of June 21, 2006 unconstitutional. The new redefined limits of the Panama Canal Watershed include the Western Watershed, the area in which the Río Indio is located.

Rio Indio Reservoir Project

Over the past 30 years, the PCA has evaluated more than 28 alternatives to ensure future water availability. The creation of a reservoir on the Río Indio is considered to be the most efficient and reliable solution.

On September 12, 2023, the Panama Canal Administrator announced at a press conference that a study by the U.S. Army Corps of Engineers confirmed that building a dam and water reservoir on the Río Indio (the “Rio Indio Reservoir Project”) would be the most viable way to manage water availability in the long term. Therefore, the PCA began evaluating the modifications which would need to be made to Law No. 28 of July 17, 2006, which provides that no reservoirs will be built for the operation of the third set of locks.

The Panama Canal Water Projects Office announced that the Rio Indio Reservoir is expected to store a volume of water similar to that stored by Lake Gatún. The Rio Indio Reservoir Project involves the construction of a roller-compacted concrete dam, with operating levels ranging from 40 to 80 meters above sea level, and also includes a nine-kilometer tunnel with a diameter of five meters that will allow water to be transported by gravity directly to Lake Gatún, without the need for pumping or electricity consumption. During the construction phase of the Rio Indio Reservoir Project, which will involve a projected investment of U.S.$1.6 billion, the PCA estimates that between 1,000 and 1,500 direct jobs will be created, in addition to thousands of indirect jobs that will boost sectors such as

 

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commerce, transportation, food, accommodation, construction, and services. The Rio Indio Reservoir Project is expected to take approximately six years to complete and is expected to be one of Panama’s most important public investments of the decade.

From September 2023 to September 2024, the PCA held some 40 community meetings with residents of Río Indio, attended by around 2,000 people, with the aim of addressing residents’ concerns. In addition, five community relations offices were set up, home visits were made, and a helpline was established with the aim of achieving greater outreach to the community.

In August 2024, the PCA initiated a census in the Río Indio Basin to determine the number of people residing in the area. It is estimated that around 2,264 people live in the area to be affected by the Río Indio Reservoir Project. With the census results, the PCA plans to formulate a resettlement plan and to implement compensation measures for the communities that will be affected.

On February 21, 2025, the Panama Canal Board of Directors approved, through Resolution No. ACP-JD-RM 25-1542, the necessary resources within the investment budget for the Rio Indio Reservoir Project.

On August 19, 2025, the Cabinet Council approved a resolution declaring the Río Indio Reservoir Project a project of public interest, thereby accelerating the requirement that all state institutions actively collaborate in the orderly development of the project and address the needs of the community to ensure efficient and coordinated support.

On September 2, 2025, the Panama Canal and the Technological University of Panama (“UTP”) ratified a framework cooperation agreement to reinforce the technical viability of the Río Indio Reservoir Project. The project opens up opportunities for participation by UTP students and faculty, integrating academia into a process of high social, environmental, and engineering relevance.

The Fourth Bridge over the Panama Canal

The Fourth Bridge over the Panama Canal is a landmark infrastructure project designed to ease congestion and improve transit and mobility between the city of Panama and Panama Oeste. The Fourth Bridge will be a cable-stayed bridge with a length of 965 meters, a width of 363.87 meters and a central span of 485 meters.This project contemplates an extension of 3.6 kilometers, including east and west access, with six lanes of traffic.

The Fourth Bridge is expected to impact the lives of more than 1.7 million Panamanians and expedite the daily movement of more than 70,000 vehicles from the western area of the country to the capital. Construction of the Fourth Bridge is expected to take four and a half years. The Government estimates that the work will generate more than 5,000 jobs and will cost U.S.$1,372 million in design, construction and tax payments, plus approximately U.S.$676 million in financing costs.

On March 29, 2023, the Ministry of Public Works and the Fourth Bridge Panama Consortium (composed of China Communications Construction Company Ltd. (“CCCC”) and China Harbour Engineering Company Ltd.) signed an addendum to the original contract for the construction of the Fourth Bridge over the Panama Canal. The initial construction contract, with a value of approximately U.S.$1.5 billion, entered into force on November 29, 2018. The addendum incorporates modifications to the design and construction of the project and reduces the cost of the work to approximately U.S.$1.4 billion, after separating its construction from Line 3 of the Metro de Panama. The addendum was approved by the Contraloria on April 20, 2023.

CCCC, a member of the Fourth Bridge Panama Consortium, is currently designated by the U.S. government as a “Non-SDN Chinese Military-Industrial Complex Company” (“NS-CMIC”). The NS-CMIC list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) identifies certain private Chinese companies that support the People’s Republic of China in connection with its military, intelligence, and security development and modernization and fund such support by selling securities to United States investors. On December 18, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) also included CCCC on its entity list for its role in helping the Chinese military construct and militarize artificial islands in the South China Sea. This list is a tool utilized by BIS to restrict the export, re-export, and transfer (in-country) of items subject to the Export Administration Regulations to persons (individuals, organizations, companies) reasonably believed to

 

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be involved, or to pose a significant risk of becoming involved, in activities contrary to the national security or foreign policy interests of the United States. In consequence of the above, the Ministry of Public Works has developed methodologies and processes so that the project complies with applicable U.S. export controls.

On February 14, 2024, the Minister of Public Works confirmed that Mizuho Bank and Banistmo had agreed to finance the construction of the Fourth Bridge. On March 12, 2024, the Minister of Public Works announced the start of construction of the Fourth Bridge. On August 27, 2024, excavation began on the viaduct that gives access to the east side of the Fourth Bridge. Soil improvement also began on the west side of the bridge.

On October 21, 2024, the project superintendent of the Fourth Bridge Panama Consortium reported that the initial work had progressed as planned. The excavation of four of the 10 surface foundations that will support the main bridge span was completed, and drilling for the anchorages had begun. This drilling work were subsequently completed and the project has since advanced to the construction of major foundation and structural elements.

On January 2, 2025, the Minister of Public Works, José Luis Andrade, reported that work on the Fourth Bridge was 17% to 18% complete. The most complex works include the construction of the first permanent pilaster of one of the two main towers, known as tower H, which began on December 12, 2024 in the east area. This structure is key, as it will support the cables that will support the cable-stayed bridge. In total, two H towers will be built: one on the east (Arenera) and one on the west side of the project (Veracruz). The load of the 965 meters of the main bridge will be distributed between the two H-towers, with each tower distributing the load on its two legs.

On July 1, 2025, the Minister of Public Works reported that the Fourth Bridge over the Canal was 21% complete. The Minister also announced that the Fourth Bridge would have a permanent toll. The toll level has not yet been determined and will depend on technical studies that are currently underway.

On December 18, 2025, the Fourth Bridge reached approximately 30% completion, with significant progress in deep foundations and structural works. Key milestones included the installation of 360 bridge piling, the completion of a major concrete pour for the East main tower (M3), and substantial progress in the construction of the eastern access viaduct. The project continues to scale up construction activities with multiple active fronts and is progressing toward full structural development.

Other Panama Canal Initiatives

On August 2, 2019, the Atlantic Bridge, the third bridge over the Canal, located at the North entrance of the Agua Clara Locks in the Expanded Canal, was inaugurated. The Atlantic Bridge is, 4.6 kilometers long and holds a world record as the longest four-lane concrete cable-stayed bridge with the longest spacing between central columns in the world. The cost of the Atlantic Bridge was more than U.S.$500 million.

Line 3 of the Metro de Panama, which is currently under construction, includes a tunnel which will pass under the Panama Canal. See “The Panamanian Economy—Reforms and Development Programs—Infrastructure”.

On January 1, 2023, a new toll system for transiting the Panama Canal went into effect. Approximately 430 different toll rates were consolidated into 60 toll rates, with overall higher effective rates.

On January 16, 2023, the Panama Canal celebrated 21 years of reforestation efforts through the Panama Canal Economic Incentives Program, during which five million trees have been planted in the Canal Watershed with the purpose of protecting the environment and water resources. This figure has great significance and symbolism because it represents one tree for each Panamanian. The Program has allowed the reforestation of 10,846 hectares, of which 3,650 correspond to agroforestry (coffee, cocoa and fruit trees) and 4,776 correspond to silvopasture (on cattle farms). The remaining 2,420 hectares have been dedicated to conservation and commercial reforestation with the aim of enriching scrublands to establish new forest plantations, mainly within national parks, river courses, Canal heritage areas and other strategic zones.

In January 2024, the Panama Canal announced that Engineer Ilya Espino de Marotta, Deputy Administrator of the Canal, will also serve as the Canal’s first Sustainability Officer. This new position at the Panama Canal will promote the creation of a more robust sustainability strategy and lead to the development of a comprehensive sustainability strategy focused on decarbonization, adaptation, and the corresponding transition.

 

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On August 1, 2024, the PCA announced the introduction of a long-term reservation allocation method for Neopanamax vessels as part of the transit reservation system, with the objective of increasing transit certainty and flexibility for customers. The PCA will auction annual packages consisting of a specific number of weekly or monthly transit reservations. The auctions began on September 6, 2024 for transit dates beginning in January 2025.

On January 1, 2025, the PCA began to auction exclusive transit slots for Neopanamax vessels that meet the criteria for the PCA’s green vessel classification. The PCA’s green vessel classification considers energy efficient design, type of fuel used, and strength of the vessel’s displacement. The purpose of this pilot program is to encourage the transit of vessels equipped with energy efficient technologies or alternative fuels, thus contributing to the reduction of greenhouse gas emissions.

On March 25, 2025, the PCA announced the launch of the “NetZero Slot” initiative, through which transit spaces will be reserved for low-carbon vessels, with the aim of meeting the PCA’s goal of achieving net zero emissions by 2050. On October 5, 2025, the first phase of the NetZero Slot initiative began with a weekly slot for Neopanamax vessels. This first phase will recognize ships equipped with dual-fuel engines that use, at a minimum, fuel with a carbon intensity of less than 75 grams of CO2(e) per megajoule of energy produced, from extraction to combustion. The vessels selected for the NetZero Slot will be eligible for: (i) choice of transit date within the week offered, (ii) a guaranteed transit time of 24 hours, and (iii) just-in-time service, which allows vessels to arrive at the Panama Canal closer to their scheduled transit time.

Reversion of Former Canal Zone Properties

In 1993, the Government established the Interoceanic Region Authority (“ARI”) to assist with the orderly transfer of the Canal and the former Canal Zone. ARI was an autonomous Government agency charged with integrating the former Canal Zone properties and resources into the Panamanian economy to enhance the country’s economic and social development. To this end, ARI was responsible for administering and managing the former Canal Zone areas (other than the Canal itself) after their reversion to Panamanian control. On December 27, 2005, the Cabinet issued Cabinet Resolution No. 108 transferring ARI’s functions and responsibilities to the Ministry of Economy and Finance. On January 1, 2006, the Ministry of Economy and Finance began overseeing the integration of former Canal Zone properties and resources into the Panamanian economy. In May 2006, ARI’s name was changed to the Administrative Unit of Reverted Properties (Unidad Administrativa de Bienes Revertidos, or “UABR”) by Executive Decree No. 67 dated May 25, 2006. Proceeds from the sale of the reverted properties are to be transferred to the Development Trust Fund. From September 2004 to June 2012, contributions to the Development Trust Fund from the UABR amounted to approximately U.S.$144.0 million. However, once the FAP was created in June 2012, through Law 38 of June 5, 2012, all the assets of the Development Trust Fund, and the income of the UABR became part of the FAP. In September 2013, the Treasury System and the Single Treasury Account were created by Law 56 of September 17, 2013, and the contributions of the UABR were transferred to the National Treasury Account. For fiscal year 2024, the UABR contributed U.S.$9.4 million to the Government from commercial and housing leases, real estate concessions, and sale of assets, among others sources. For fiscal year 2025, the UABR contributed U.S.$25.6 million to the Government from commercial and housing leases, real estate concessions, and sale of assets, among others sources. See “The Panamanian Economy—Reforms and Development Programs—Social Developments”.

Other Trans-Isthmus Transportation

The dimensions of the expanded Canal permit much of the world’s commercial maritime fleet to transit. However, certain classes of ships, principally the largest capacity tankers and container ships, are too large to transit the expanded Canal. This limitation, combined with the fact that the Canal has generally operated at capacity in terms of units, has caused the exploration of other trans-isthmus modes of transportation as a means of connecting the Atlantic and Pacific. For instance, a railway was constructed in the former Canal Zone, an oil pipeline was constructed outside the former Canal Zone, and toll highways were constructed to connect Panama City and Colón.

 

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Railway. In February 1998, Panama granted a renewable 25-year concession to the Panama Canal Railway Co., a joint venture between two United States corporations, Kansas City Southern Industries, Inc. and MI-JACK Products, Inc., to renovate and reopen the trans-isthmus railway, principally to connect the container ship ports on both coasts. Under the terms of this concession, the Panama Canal Railway Co. is required to pay to the Government 5.0% of its gross revenue until it recovers its initial investment; after recovery of its initial investment, the Panama Canal Railway Co. will be required to pay the Government 10.0% of its gross revenue. Since 2014, the Government has been entitled to receive a 5.0% payment of the railway’s gross revenue. In 2021, 2022, 2023, 2024 and 2025, Panama Canal Railway Co. contributed U.S.$6.5 million, U.S.$4.7 million, U.S.$6.2 million, U.S.$6.3 million and U.S.$5.8 million, respectively, to the Government.

Due to the temporary reduction of the draft and the resulting decrease in the maximum number of daily transits through the Panama Canal, shipping lines increased their use of road and rail cargo transportation, opting to unload containers in the Atlantic and Pacific ports to reduce the weight of the vessels continuing through the Canal. For example, since the imposition of transit restrictions at the Panama Canal, the Port of Balboa has handled 42 additional ship arrivals and moved more than 20,000 containers, which have then been transported by land to the Panamanian Atlantic ports. The increased use of land transportation has increased the volume of cargo transported by land transportation companies by 40% to 50%, while the volume of cargo transported by railroad has increased by 20%.

Oil Pipeline. The trans-isthmus oil pipeline, completed in 1982, was constructed because the world’s largest oil tankers could not transit the Panama Canal. The pipeline operated in an eastward direction, in large part to service the market for Alaskan crude oil shipments to oil refineries on the east coast of the United States. On November 28, 1995, the United States Congress rescinded the ban on the exportation of Alaskan crude oil, thereby allowing the export of Alaskan crude oil to Asia and eliminating the need to transport Alaskan crude oil to the east coast of the United States by means of the trans-isthmus oil pipeline. In June 1995, the Government signed a contract with Petroterminales de Panamá S.A. (a joint venture between the Government and Northville Industries Corp.) allowing Petroterminales de Panamá S.A. to expand the pipeline’s terminal ports at Chiriquí Grande on the Caribbean and Puerto Armuelles on the Pacific into general cargo ports until 2016. On March 9, 2016, the Cabinet issued Cabinet Resolution No. 29 authorizing a 20-year extension of the contract. The Pacific and Atlantic terminals are connected by a 131-kilometer (approximately 81-mile) pipeline. Since the completion of a pipeline reversal project in August 2009, oil has been pumped from the Atlantic to the Pacific Terminal. The pipeline has a pumping capacity of approximately 800,000 barrels per day.

Toll Road. During the first quarter of 2011, the Government created ENA to provide the financing for, and to acquire ownership of, the Corredor Sur and Corredor Norte toll highways in Panama. In August 2011, ENA acquired Corredor Sur and issued U.S.$395.0 million in bonds to finance the acquisition of the toll road. The Government contributed U.S.$50 million to ENA in connection with the purchase. In 2012, ENA entered into agreements for the acquisition of Phases I and IIA and the Panama-Madden segments of Corredor Norte, for a purchase price of U.S.$647 million. ENA issued U.S.$600 million in bonds, and the Government contributed approximately U.S.$76.2 million in connection with the purchase. In February 2013, ENA Este S.A., a subsidiary of ENA, acquired the concessions for Phase IIB, also referred to as ENA Este. ENA Este is an expansion of Corredor Norte that connects with the Panamerican Highway, itself a continuation of Corredor Sur, and is intended mainly for purposes of commuting, with an expectation that 90% of the traffic will consist of automobiles. Construction began in March 2012 and was completed in November 2015. The Government did not contribute directly to the construction of the road. In October 2012, the concession was transferred from ENA Este to the ENA Este Trust, which issued U.S.$212.0 million in senior secured notes in March 2014 as part of the financing for construction of the road. See “Structure of the Panamanian Economy—Public Sector Enterprises—Road Transportation” for more information about ENA.

Liquefied Natural Gas. On August 17, 2018, a liquefied natural gas (LNG) terminal was inaugurated on Telfers Island, in the province of Colón. The project represents an investment of U.S.$1,150 million and added 381 MW to the country’s energy matrix as part of the National Energy Plan 2015-2050. The project also includes a regasification terminal with a storage capacity of 180,000 m3.

Gatun Generating Plant. The largest natural gas-fired power plant in Central America, the Gatun Generating Plant, began operating on October 1, 2024. The project is located on Telfers Island, in the province of Colon, and represents an investment of U.S.$1,200 million, and has a total production capacity of 670 MW. Initially, it will supply the Panamanian electricity system with around 440 MW.

 

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Dry Canal. On March 13, 2024, the Cabinet Council approved the creation of a multimodal dry canal, integrated by rail, roads, airports, special zones and ports, with the objective of expediting the shipment of goods and easing traffic through the Panama Canal. Although this system was already being used, its formal support by the Government is expected to result in a greater integration of railroad operations and land transportation to move merchandise between the Pacific and Atlantic ports and vice versa. In addition, the Government aims to modernize the logistics platform, streamline customs procedures, and maintain competitiveness in the transportation sector.

Gas Pipeline. On September 18, 2025, the PCA announced plans for a trans-isthmus gas pipeline as part of a broader energy corridor initiative. The project calls for a pipeline approximately 76 km long, with an estimated capacity of up to 2.5 million barrels per day, supported by terminal infrastructure on both the Atlantic and Pacific coasts. The pipeline will primarily transport liquefied petroleum gas (LPG) products and ethane between the U.S. Gulf Coast and Asian markets, bypassing the Canal’s transit constraints. The project aims to strengthen Panama’s competitiveness and address a strategic need in the global energy market. It is expected to be developed under a concession model, with an estimated investment ranging from U.S.$4 billion to U.S.$8 billion. The concession award process is underway, and the PCA is expected select a concessionaire by the end of 2026.

Port Terminals Development Initiative. On October 27, 2025, the PCA initiated a market engagement process with global port operators and shipping lines for the development of new container terminals on both the Atlantic and Pacific coasts. The project contemplates an estimated investment of approximately U.S.$2.6 billion and a projected economic impact ranging between 0.4% and 0.8% of GDP. The initiative aims to increase shipment capacity by approximately 5.0 million TEUs per year, helping to address existing capacity constraints in the Canal region.The project is expected to generate approximately 8,100 jobs during the construction phase and around 9,000 jobs once operational. The development will be structured under a concession model, including feasibility studies, a competitive prequalification process, and the selection of a concessionaire, which is expected to take place in the fourth quarter of 2026.

 

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THE COLÓN FREE ZONE

The CFZ was created by the Panamanian Government in 1948 to take advantage of Panama’s unique geographic location and to boost trading activity in the province of Colón. The CFZ, located at the Atlantic entrance of the Panama Canal, has developed into the largest duty-free zone in the Western Hemisphere in terms of commercial activity. As of December 31, 2025, approximately 2,650 companies used the CFZ facilities for a variety of trading activities.

In addition to being exempt from tariffs and duties, companies operating in the CFZ enjoy preferential tax treatment. In the past, the income of CFZ companies was taxed at graduated rates from 2.5% to 8.5%. Under the Ley de Universalización de Incentivos Tributarios a la Producción, the income tax was changed to a flat rate of 15%. However, significant protests, including a refusal by some CFZ companies to pay taxes, resulted in the elimination of all taxes on international operations income for CFZ companies, effective January 1, 1997.

The main competitors of the CFZ at a regional level are the Miami (USA) and Cartagena (Colombia) free zones. At a national level, the Panama Pacifico area and the City of Knowledge represent important contenders, mainly due to tax benefits, modern infrastructure, as well as their paperwork and process facilities. Traditionally, the CFZ has enjoyed several competitive advantages over certain of its competitors, including the CFZ’s use of the U.S. dollar as legal tender, the absence of restrictions on capital movements and access to frequently traveled land, air and sea routes. Global and regional trends in trade patterns and capital liberalization, however, have narrowed several of these competitive advantages and affect the CFZ’s prospects for continued growth. Law No. 8 of April 4, 2016 provided a new framework for the CFZ, replacing Decree-Law No. 18 of 1948, which previously regulated the CFZ. Among other changes, the law provided for (a) an anti-money laundering/combating the financing of terrorism regime for the CFZ; (b) several revisions to the tax code, including exemptions from value-added tax in certain circumstances and providing for the Panamanian tax authority to communicate collection efforts through e-mail, phone, SMS text messaging and social networks; (c) reduction of the rate of the annual operation notice tax (from 1% to 0.5% on capital within the band of U.S.$100 to U.S.$50,000), which applies also to other free trade zones in Panama; (d) modifications

 

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to the activities that businesses may conduct within the CFZ, including services related to aviation, services by data centers and storage of digital information, international sale of goods through e-commerce, multi-modal services, services to individuals or entities located outside Panama and any other activity permitted by the duly authorized board of directors of the CFZ; and (e) establishment of an immigration regime for foreign workers and foreign investors in the CFZ.

The CFZ has a significant impact on the Panamanian economy. From 2021 through 2025, it contributed an average of 2.7% of GDP annually. The value of goods passing through the CFZ is considerable, particularly in relation to the Panamanian economy as a whole. In 2021, total imports to the CFZ were preliminarily estimated at U.S.$9.0 billion, while total re-exports were preliminarily estimated at U.S.$9.6 billion. By contrast, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$3.6 billion, while non-CFZ merchandise imports were preliminarily estimated at U.S.$11.3 billion in 2021. In 2022, total imports to the CFZ were preliminarily estimated at U.S.$14.0 billion, while total re-exports were preliminarily estimated at U.S.$11.6 billion. By contrast, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$3.7 billion, while non-CFZ merchandise imports were preliminarily estimated at U.S.$15.2 billion in 2022. In 2023, total imports to the CFZ were preliminarily estimated at U.S.$19.7 billion, while total re-exports were preliminarily estimated at U.S.$13.4 billion. By contrast, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$3.4 billion, while non-CFZ merchandise imports were preliminarily estimated at U.S.$14.5 billion in 2023. In 2024, total imports to the CFZ were preliminarily estimated at U.S.$12.7 billion, while total re-exports were preliminarily estimated at U.S.$12.2 billion. By contrast, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$0.9 billion, while non-CFZ merchandise imports were preliminarily estimated at U.S.$14.0 billion in 2024. In 2025, total imports to the CFZ were preliminarily estimated at U.S.$11.9 billion, while total re-exports were preliminarily estimated at U.S.$11.2 billion. By contrast, Panama’s non-CFZ merchandise exports were preliminarily estimated at U.S.$1.3 billion, while non-CFZ merchandise imports were preliminarily estimated at U.S.$14.2 billion in 2025.

In 2021, the activities of the CFZ increased by 29.0% compared to 2020, reflecting a contribution of 2.7% of GDP. The commercial area of the CFZ experienced a growth in re-exports of 23.4%, due to the economic reactivation, mainly in the sectors of medicine, clothing, footwear and electronics. In 2022, the activities of the CFZ increased by 37.8% compared to 2021, reflecting a contribution of 2.9% of GDP. The commercial area of the CFZ experienced a growth in re-exports of 21.4% due to economic reactivation, mainly in the sectors of medicine, clothing, footwear and electronics. In 2023, the activities of the CFZ increased by 29.1% compared to 2022, reflecting a contribution of 2.6% of GDP. The commercial area of the CFZ experienced a growth in re-exports of 14.9% due to demand for medicine, electronics, clothing and footwear. In 2024, the activities of the CFZ decreased by 24.7% compared to 2023, reflecting a contribution of 2.6% of GDP. The commercial area of the CFZ experienced a contraction in re-exports of 8.5%, mainly due to a decrease in re-exports of raw materials used in the manufacture of medicines. In 2025, the activities of the CFZ decreased by 7.2% compared to 2024, reflecting a contribution of 2.5% of GDP. The commercial area of the CFZ experienced a contraction in re-exports of 8.3%, mainly due to a decrease in four tariff sections that account for a significant share of the CFZ’s commercial activity; such as: footwear and accessories (25.0%), machinery and electrical equipment (23.0%), chemical industry products (14.4%), and textiles (3.4%).

On April 6, 2016, the government enacted Law No. 7 as part of an initiative to revitalize the CFZ. In accordance with this law, Panamanian residents are permitted, every six months, to buy up to U.S.$1,000 of tax-free merchandise for personal use. Also, the law provides incentives for infrastructure and enterprise investments in the CFZ, including certain tax exemptions.

Diplomatic and trade disputes with countries in the region have affected the CFZ. On March 6, 2014, Venezuela’s President Nicolas Maduro announced that Venezuela would break diplomatic and economic relations with Panama after Panama sought a meeting with regional diplomats in the OAS to discuss protests taking place in Venezuela. As a consequence, there were delays to the resolution of a series of overdue payments for the importation of goods into Venezuela from Panama’s CFZ; the overdue debts had resulted in part from exchange controls implemented by the Venezuelan National Center for Foreign Commerce (CENCOEX, formerly CADIVI), restricting the availability of U.S. dollars to Venezuelan importers. Estimates of the amount owed by Venezuelan companies range from U.S.$0.5 billion to U.S.$2.0 billion. Resolution of claims by Panamanian exporters will likely involve a protracted process. Diplomatic relations between both countries were restored as of July 8, 2014. In October 2014, a diplomatic mission, led by the Minister of Commerce and Industry and the Vice Minister of Foreign Affairs, traveled

 

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to Venezuela to meet with Venezuelan authorities regarding outstanding debts owed to CFZ reexporters and Copa Airlines. As a result of these meetings, the Binational Technical Commission was reactivated, with the objective of promoting a resolution of this matter. During 2015, Panamanian officials continued to visit Venezuela to advance the process. In 2016, the CFZ and Venezuela agreed to a new methodology to determine the amount due by Venezuelan businesses on accounts payable to their Panamanian counterparts. In accordance with the new methodology, the total amount owed to CFZ reexporters decreased from U.S.$530 million to U.S.$41 million. However, the CFZ Users Association has stated that the new methodology does not properly reflect the outstanding debt, which they estimate amounts to U.S.$300 million.

In January 2013, Colombia imposed supplemental import tariffs on certain textiles, apparel and footwear coming from countries with which no trade agreement with Colombia was in force. In June 2013, Panama lodged a complaint at the WTO against Colombia claiming that the effective import tariff applied to those products was higher than the maximum allowed under WTO agreements. In November 2015, a WTO panel issued a report in which it concluded that the Colombian measures were inconsistent with WTO agreements. In a report dated May 12, 2016, the WTO Appellate Body rejected Colombia’s appeal and recommended that Colombia bring its tariffs into conformity with Colombia’s WTO obligations. In a notice dated September 6, 2017, the WTO Secretariat announced that panels had been composed to examine whether subsequent measures taken by Colombia were in conformity with its WTO obligations and to examine whether Panama may suspend the application of WTO concessions and other obligations in the amount of U.S.$210.0 million in respect of services, intellectual property, and the Multilateral Agreements on Trade in Goods. On October 2018, the WTO concluded that the tariff measures applied by Colombia to the Panamanian re-exports of footwear and textiles did not violate the regulations of the organization. In November 2018, the Government of Panama filed an appeal against the WTO’s decision. On January 15, 2019, the WTO issued a statement informing that it would not be able to issue its appeal report after the expiration of the 60-day period provided for in Article 17.5 of the Dispute Settlement Understanding (the “DSU”), nor within the 90-day period provided for in paragraph 5 of Article 17 of the DSU, due to administrative procedure of the Appellate Body. The WTO Appellate Body advised that the Dispute Settlement Body would inform the parties when the hearing on this appeal could be scheduled. Due to an impasse at the WTO concerning the Appellate Body, the case has not progressed.

In December 2019, the Government assumed a debt of U.S.$83.4 million owed by the CFZ to the National Bank of Panama. In December 2019, the Ministry of Economy and Finance issued U.S.$83.4 million of its 2.85% PANOTAs due 2027 and used the proceeds to pay the CFZ’s debt entirely. The assumption and payment of these obligations was part of a financial strategy executed by the Government to organize and improve public finances and to revive the economy and employment in Panama.

In July 2020, the CFZ carried out its first e-commerce transaction on its new Electronic Declaration of Commercial Movement (Declaración de Movimiento Comercial Electrónico, or DMCE 2.0) platform, a historic milestone which promoted the evolution of the CFZ into a regional distribution center for e-commerce sales.

On August 31, 2020, then President Cortizo enacted Law No. 159, which created the Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing (“EMMA”). The EMMA Regime encourages the establishment of multinational manufacturing companies in the CFZ through fiscal and immigration benefits. The law’s intent is to promote job creation and economic growth in the country.

On November 30, 2020, a Memorandum of Intent of Agreement was signed between the CFZ and the Cobija-Bolivia Free Zone with the goal of importing new Bolivian products, as well as re-exporting goods from the CFZ to the Bolivian market. The memorandum has a term of ten years, effective as of the date of signature.

On February 10, 2022, the CFZ reported that electronic commerce transactions totaling more than U.S.$300,000 were carried out in the CFZ during 2021. In addition, the 25 companies that had an electronic commerce operation key had carried out commercial merchandise transactions through the DMCE 2.0 platform with destination to Central America, the United States, the Dominican Republic, Peru, Argentina and Bolivia.

 

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On June 14, 2022, the CFZ and the Suez Canal Economic Zone signed a Cooperation Agreement that sought to enhance cooperation between the two regions and the exchange of information to attract investors from different regions.

On November 21, 2023, Law No. 412 (Bill No. 620) was published in the Official Gazette. Law No. 412 modifies Law No. 8, which regulates the operation of the CFZ. Among its changes, Law No. 412 (i) adds to the functions of the CFZ’s board of directors, enabling the board to authorize judicial and extrajudicial settlements and investments or contracts with values of over $750,000; (ii) enacts certain tax benefits for companies operating within the CFZ, including exempting any transfers of securities to companies in the CFZ from income tax and exempting any commercial and industrial improvements within the CFZ from property tax; (iii) establishes new activities that companies may perform within the CFZ; (iv) permits eligible CFZ companies to access the benefits of the EMMA Regime; and (v) aligns the CFZ’s employment regime with those offered by other special economic zones within Panama, such as the Panama Pacifico Area.

On July 16, 2025, the Government announced a revitalization and expansion plan for the CFZ and the province of Colón. With this plan, the Government aims to promote investment by businesses already established in the CFZ, attract new businesses, create jobs, and strengthen Panama’s position as a regional logistics hub. The plan includes: (1) the reclamation of 250 hectares of land near the Colón airport, valued at U.S.$500 million, to allow for the expansion of the free trade zone and provide greater capacity for new businesses; (2) the redesign of new concession contracts; (3) the implementation of training agreements for residents of Colón, including through partnerships with the Ministry of Labor and Workforce Development and use of digital platforms for job placement, training, and career guidance, to facilitate their employment; and (4) the establishment of the Single Window for Procedures, which is already in operation, to streamline the process of approving documentation and plans necessary for the management of warehouses, permits and facilities within the CFZ. The Comptroller General also introduced the new “Panama Logistics” tool, an interactive map that consolidates information from Panama’s logistics sector to facilitate the identification and evaluation of key infrastructure (ports, free zones, airports and railway and road networks), with the purpose of optimizing the strategic planning of the national logistics system, oriented towards efficiency, modernization and sustainability.

 

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EMPLOYMENT AND LABOR

Labor Force

As of September 2025, Panama’s labor force was preliminarily estimated at 2.20 million people, which represented approximately 64.0% of the total working age population, an increase from 2.15 million people as of October 2024.

As of September 2025, the service segment (principally consisting of real estate, commerce and tourism, public administration, the Panama Canal, banking, the CFZ and public utilities) employed 70.3% of the employed labor force, compared to 16.7% for the industrial sector (principally consisting of manufacturing, mining and construction) and 12.9% for the primary sector (consisting of agriculture and fisheries). As of October, 2024, the service segment employed 68.9% of the employed labor force, compared to 17.4% for the industrial sector and 13.7% for the primary sector.

As of October 2021, the unemployment rate was 11.3%, compared to 18.5% in September 2020, which decrease was mainly due to the relaxation of the sanitary measures and the gradual reactivation of commercial activity, which had remained inactive as a result of the pandemic caused by COVID-19. As of April 2022, the unemployment rate was 9.9%, compared to 11.3% in October 2021, which decrease was mainly due to the economic reactivation following the height of the COVID-19 pandemic. As of August 2023, the unemployment rate was 7.4%, down from 9.9% in April 2022, which decrease was mainly due to the recovery of the Panamanian economy. As of October 2024, the unemployment rate was 9.7%, up from 7.4% in August 2023, mainly due to the decline in economic activity resulting from the closure of the Cobre Panama mine. As of September 2025, the unemployment rate was 10.4%, up from 9.7% in October 2024, mainly due to the lingering effects of previous crises and structural changes in the economy.

 

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Historically, Panama’s unemployment rate has been influenced by the service-oriented nature of the economy, which is not labor intensive. Previous administrations introduced programs aimed at reducing unemployment, including Government-sponsored job fairs, training programs for those entering the work force for the first time, and policies to stimulate foreign trade and investment and to enhance education. Since 2009, the Government has sought to stimulate employment through long-term investment in infrastructure projects. Training programs such as My First Job (Mi Primer Empleo) and other similar programs have contributed to reducing unemployment levels; these programs have been executed by the Ministry of Work and Labor Development (Ministerio de Trabajo y Desarrollo Laboral, or “MITRADEL”), the National Institute of Professional and Human Development (El Instituto Nacional de Formación Profesional y Capacitación para el Desarrollo Humano or “INADEH”) and the Micro, Small and Medium Enterprise Authority (AMPYME).

Panamanian private sector workers have the legal right to join unions of their choice, subject to the unions’ registration with the Government. As of September 2025, approximately 9.9% of Panama’s private sector employees were unionized, with the transportation, storage, communication and mail sector union being the largest. Unions engage in collective bargaining, primarily involving the negotiation of wages. The law prohibits anti-union discrimination by employers and most workers enjoy the right to strike. Certain public service workers vital to public welfare and security (e.g., police, health, and PCA employees) are not entitled to strike. While there were significant strikes during the economic and political disruptions of the mid-to-late 1980s, the number of strikes in the early 2000s was generally limited.

However, protests including strikes have become more prevalent in recent years. In 2022, various sectors in Panama—teachers, construction workers, health workers, transport workers, students, indigenous communities, and citizens—staged strikes and protests against rising fuel prices, the high cost of living, medicine shortages, and the precarious state of education and health care. Their demands included freezing basic prices, increasing the education budget, and demanding greater transparency in the face of corruption. See “The Republic of Panama—Social and Economic Situation—National Roundtable for Dialogue”. In 2023, Panama’s renegotiation of the Cobre Panama copper mine concession contract with Minera Panamá, S.A. sparked nationwide protests by teachers’ unions, labor unions, and environmentalists, which included strikes, demonstrations, school closures, and roadblocks. Ultimately, the Supreme Court of Justice declared the mining concession contract unconstitutional. See “Foreign Trade and Balance of Payments—Cobre Panama Copper Mine and Mining Concession Contract”. In 2025, strikes and protests were led by teachers, banana worker unions, construction workers, students, and indigenous groups against the passage of Law 462, which purported to reform the CSS. See “—CSS Reform”. As a result of these protests, there were mass layoffs in the banana agroindustry (including by Chiquita Banana). See “Recent Developments—Republic of Panama—Social and Economic Situation”.

The following table presents selected labor force and unemployment statistics from October 2021 through September 2025:

TABLE NO. 11

Labor Force and Employment

 

		2021(4)				2022(5)				2023(6)				2024(7)				2025(8)
Total Population(1)			4,385.7				4,440.7				4,496.2				4,548.7				4,598.4
Working-Age Population(1)			3,258.2				3,291.9				3,354.8				3,391.4				3,433.6
Labor Force
Employed(1)			1,744.4				1,846.4				1,938.6				1,941.2				1,968.7
Unemployed(1)			222.1				203.3				155.6				209.4				227.3
Total			1,966.5				2,049.6				2,094.2				2,150.6				2,196.1
		(annual percentage change)
Total Population			2.5	%			1.3	%			1.2	%)			1.2	%			1.1	%
Working-Age Population			2.4	%			1.0	%			1.9	%			1.1	%			1.2	%
Labor Force
Employed			6.9	%			5.8	%			5.0	%			0.1	%			1.4	%
Unemployed			(40.2	%)			(8.5	%)			(23.5	%)			34.6	%			8.5	%
Total			(1.8	%)			4.2	%			2.2	%			2.7	%			2.1	%

 

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		(in percent)
Labor Force:
Participation Rate(2)			60.4	%			62.3	%			62.4	%			63.4	%			64.0	%
Employment Rate(3)			88.7				90.1				92.6				90.3				89.6
Unemployment Rate			11.3				9.9				7.4				9.7				10.4

Notes:

(1)	In thousands.

(2)	Total labor force as percentage of working-age population.

(3)	Employed labor force as percentage of total labor force.

(4)	For the year 2021, the data is recorded as of October, due to COVID-19 restrictions.

(5)	For the year 2022, the data is recorded as of April, as the unemployment rate decreased to 9.9% after the lifting of COVID-19 restrictions.

(6)

For the year 2023, the data is recorded as of August. The decrease in population between 2022 and 2023 is due in part to the new population count recorded during the 2023 Census. A full census is typically undertaken every decade. The last full census occurred in 2010. Total population figures for the years between 2010 and 2023 were all estimates based on the 2010 Census. According to the estimate of the Office of the Comptroller General, the lower-than-expected population growth rate between 2010 and 2023 is mainly due to a decrease in the childbirth rate at the national level.

(7)	For the year 2024, the data is recorded as of October.

(8)	For the year 2025, the data is recorded as of September.

Source: Office of the Comptroller General.

Salaries and Wages

Panamanian labor law provides for a basic minimum wage (starting at U.S.$1.64 per hour as of January 16, 2026, depending upon the worker’s location and economic activity). Workers are also entitled to minimum benefits and working conditions including a cap on hours worked weekly (48 hours/week), specified holidays, vacations, retirement and severance benefits, and health and safety regulations. The Panamanian economy, however, has a substantial informal sector in which workers earn below the minimum wage and do not enjoy many of the benefits required by law. The informal economy, which is estimated to involve approximately one-third of the labor force, includes street vendors, operators and employees of unlicensed businesses and certain other self-employed persons. While overall GDP statistics include economic contributions of the informal sector, the Government has not found it feasible to quantify fully the GDP contribution of this sector.

By law, the minimum wage is subject to review every two years. Executive Decree No. 1 of January 10, 2024 increased the minimum wage to its current range of U.S.$1.64 to U.S.$4.95 per hour, depending on the area of the country, type of economic activity, type of profession and size of the employer company. Executive Decree No. 13 of December 31, 2025 increased the minimum wage to its current range of U.S.$1.64 to U.S.$5.01 per hour, depending on the area of the country, type of economic activity, type of profession and size of the employer company.

Although Canal Zone workers have been within the jurisdiction of Panamanian laws since the abolition of the Canal Zone in 1979, numerous treaty provisions and legislative and administrative actions have permitted the former Canal Zone workers who continue to work to be subject to United States wage and labor laws and benefits. Private sector employees rendering services related to the Panama Canal must be paid a significantly higher minimum wage than is applicable in the rest of Panama. PCC employees and civilian employees of the United States military were subject to special labor and social security regimes, depending on their nationality and the date of their original employment. By an amendment to the Constitution adopted in 1994, PCA employees did not have their wages or benefits diminished when the PCA assumed control of the Panama Canal on December 31, 1999.

In 2024, the average monthly wage in all sectors of the Panamanian economy was U.S.$1,310.4, an increase of 1.7% compared to 2023. In 2023, the average monthly wage in all sectors of the Panamanian economy was U.S.$1,287.9, an increase of 1.0% compared to 2022. In 2022, the average monthly wage in all sectors of the Panamanian economy was U.S.$1,275.3, a decrease of 0.3% compared to 2021. In 2021, the average monthly wage

 

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in all sectors of the Panamanian economy was U.S.$1,278.5, an increase of 2.4% compared to 2020. In 2020, the average monthly wage in all sectors of the Panamanian economy was U.S.$1,248.7, an increase of 5.4% compared to 2019.

In 2024, the average monthly wage for Central Government employees was U.S.$1,616.0, an increase of 1.8% compared to 2023. In 2023, the average monthly wage for Central Government employees was U.S.$1,587.2, a decrease of 0.6% compared to 2022. In 2022, the average monthly wage for Central Government employees was U.S.$1,596.1, an increase of 2.1% compared to 2021. In 2021, the average monthly wage for Central Government employees was U.S.$1,563.8, an increase of 1.9% compared to 2020. In 2020, the average monthly wage for Central Government employees was U.S.$1,533.9, an increase of 8.5% compared to 2019.

In 2024, the average monthly wage for municipal public sector employees was U.S.$834.4, an increase of 3.1% compared to 2023. In 2023, the average monthly wage for municipal public sector employees was U.S.$809.4, an increase of 2.8% compared to 2022. In 2022, the average monthly wage for municipal public sector employees was U.S.$787.4, an increase of 1.6% compared to 2021. In 2021, the average monthly wage for municipal public sector employees was U.S.$775.1, an increase of 0.3% compared to 2020. In 2020, the average monthly wage for municipal public sector employees was U.S.$773.1, an increase of 2.4% compared to 2019.

For the year 2024, the average banana plantation monthly wage was U.S.$723.6, an increase of 4.1% compared to 2023. In 2023, the average banana plantation monthly wage was U.S.$694.8, an increase of 3.9% compared to 2022. In 2022, the average banana plantation monthly wage was U.S.$669.0, an increase of 15.5% compared to 2021. In 2021, the average banana plantation monthly wage was U.S.$579.0, a decrease of 1.3% compared to 2020. In 2020, the average banana plantation monthly wage was U.S.$586.7, an increase of 10.9% compared to 2019.

In 2024, the average monthly public sector wage (which includes the wages of employees of the Central Government, municipalities, autonomous agencies, social security and public enterprises) was U.S.$1,689.3, an increase of 2.6% compared to 2023. In 2023, the average monthly public sector wage was U.S.$1,646.4, an increase of 0.9% compared to 2022. In 2022, the average monthly public sector wage was U.S.$1,631.7, an increase of 1.8% compared to 2021. In 2021, the average monthly public sector wage was U.S.$1,603.0, an increase of 1.5% compared to 2020. In 2020, the average monthly public sector wage was U.S.$1,579.8, an increase of 5.2% compared to 2019.

The following table presents average real monthly wage data for the five-year period from August 2020 through August 2024:

TABLE NO. 12

Average Real Monthly Wages

 

		2020				2021				2022(R)				2023				2024
Public Sector:
Central Government		$	1,533.9			$	1,563.8			$	1,596.1			$	1,587.2			$	1,616.0
Autonomous agencies			1,513.8				1,577.0				1,569.3				1,639.1				1,669.1
Social Security			1,705.2				1,733.1				1,766.9				1,791.9				1,827.6
Municipalities			773.1				775.1				787.4				809.4				834.4
Public Enterprises			2,069.6				1,993.5				2,087.4				2,156.5				2,208.8
All Public Sector			1,579.8				1,603.0				1,631.7				1,646.4				1,689.3
Private Enterprise			1,047.1				1,097.3				1,111.2				1,125.0				1,145.3
Banana Plantations			586.7	(1)			579.0	(1)			669.0	(2)			694.8	(2)			723.6	(2)
All Employees		$	1,248.7			$	1,278.5			$	1,275.3			$	1,287.9			$	1,310.4
		2020				2021				2022(R)				2023				2024
		(annual percentage change)
Public Sector:
Central Government			8.5	%			1.9	%			2.1	%			(0.6	)%			1.8	%
Autonomous Agencies			7.8	%			4.2	%			(0.5	)%			4.4	%			1.8	%

 

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Social Security			2.4	%			1.6	%			2.0	%			1.4	%			2.0	%
Municipalities			2.4	%			0.3	%			1.6	%			2.8	%			3.1	%
Public Enterprises			(3.6	)%			(3.7	)%			4.7	%			3.3	%			2.4	%
All Public Sector			5.2	%			1.5	%			1.8	%			0.9	%			2.6	%
Private Enterprise			(1.1	)%			4.8	%			1.3	%			1.2	%			1.8	%
Banana Plantations			10.9	%			(1.3	)%			15.5	%			3.9	%			4.1	%
All Employees			5.4	%			2.4	%			(0.3	)%			1.0	%			1.7	%

Note: Totals may differ due to rounding.

Notes:

 

(R)

Revised

(1)	For 2020 and 2021, the calculation of the average monthly banana plantation salary excludes workers who worked less than 22 days in a referenced month.

(2)	For 2022, 2023 and 2024 the calculation of the average monthly banana plantation salary was based on the administrative records of the Directory of Companies and Premises.

Source: Office of the Comptroller General.

Social Security

Social security benefits covering private sector and public sector employees are provided by the Social Security Administration (Caja de Seguro Social, or the “CSS”) with additional benefits for public sector employees provided through the Complementary Pension Fund for Civil Servants (“CPF”). The main sources of CSS revenue are employer and employee contributions, transfers from the Central Government, and investment income.

Law No. 462 of 2025 reformed Panama’s social security system, replacing the former social security scheme, based on intergenerational solidarity, where active workers’ contributions financed current retirees, with an individual capitalization system in which each worker accumulates savings in a personal account to fund his or her own pension. While the reform makes the system primarily individual, it also establishes a solidarity component that guarantees a minimum monthly pension of U.S.$144.

As most recently updated by Law No. 462 of 2025, contributions by employees are equivalent to 9.75% of wages, and contributions by employers are equivalent to 13.25% of wages (from April 1, 2025 through February 28, 2027), and will increase progressively to 14.25% of wages (for the time period from March 1, 2027 through February 28, 2029), and to 15.25% of wages from March 1, 2029 onward. The contribution paid by self-employed workers is equivalent to 9.36% of their taxable income to cover benefits under the IVM system, and 8.5% of their taxable income for voluntary contributions to cover illness and maternity risks. Likewise, the Government will provide a $20.5 million annual subsidy to offset fluctuations or decreases in interest rates held by the CSS in bonds or other securities, in addition to a $25 million annual contribution to the Sickness and Maternity Risk Fund. To cover the current deficit, the Government will contribute $966 million annually, which will be adjusted annually based on an actuarial analysis.

In 2025, the CSS’s revenues and expenditures amounted to 4.8% and 5.3% of nominal GDP, respectively.

The CSS provides benefits in the following areas: health, pensions and disability (the “IVM program”), workers’ compensation and program administration. Demographic trends, such as an aging population and increase in the number of pension beneficiaries, have contributed to a decline in the financial position of the IVM program.

To provide annual funds to the CSS’s IVM program as mandated by Law No. 51 of 2005, Panama, represented by the Ministry of Economy and Finance, executed an Administration and Investment Trust (“IVM Trust”) in September 2008. Pursuant to Law No. 51 of 2005, Panama disbursed U.S.$75.0 million per year to the IVM Trust from 2007 to 2009; U.S.$100.0 million per year from 2010 to 2012; U.S.$140.0 million per year in 2013 and 2014; and is scheduled to continue to disburse U.S.$140.0 million per year until 2060. To cover IVM deficits, the CSS requests transfers from the IVM Trust. In 2017, the IVM program had a surplus of U.S.$1.8 million. In 2018, the IVM program had a deficit of U.S.$48.0 million. In 2019, the IVM program had a deficit of U.S.$249.9 million. In 2020,

 

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the IVM program had a deficit of U.S.$517.5 million. In 2021, the IVM program had a deficit of U.S.$166.1 million, after extraordinary contributions from the IVM Trust totaling U.S.$297.9 million, corresponding to the deficit for 2018 and 2019. In 2022, the IVM program had a deficit of U.S.$654.6 million. In 2023, the IVM program had a deficit of U.S.$156.1 million, after extraordinary contributions from the IVM Trust totaling U.S.$517.5 million, corresponding to the deficit for 2020. In 2024, the IVM program had a deficit of U.S.$359.7 million, after extraordinary contributions from the IVM Trust totaling U.S.$464.0 million, corresponding to the deficit for 2021. In 2025, the IVM program had a surplus of U.S.$505.4 million, after extraordinary contributions from the IVM Trust totaling U.S.$1,416.4 million.

On May 11, 2024, the CSS transferred more than U.S.$500 million to the IVM Trust, in compliance with Article 102 of Law 51 of December 27, 2005. This amount represented 75% of the surplus generated by the CSS between 2010 and 2023.

The CPF, created in 1975, facilitates payment of pensions to retired public sector employees, including those eligible to receive pensions under certain special laws that generally allow retirement before the CSS’s statutory retirement ages with pensions of up to 100% of the most recently earned salary. Some of the special laws date back to the 1930s when the Government began granting benefits to particular categories of public sector employees. Once the statutory retirement age is reached and CSS pensions are received, the special laws provide additional pensions so as to maintain 100% of the most recently earned salary (up to certain maximums).

To finance the CPF’s pension payments, public sector employees contribute 2.0% of their salaries to the CPF and employers pay 0.3% of their employees’ wages to cover the CPF’s administrative costs. Law No. 8 of 1997 reformed the CPF and established the SIACAP, a defined contribution pension plan for most public sector employees. Only public sector employees who retired or were eligible for CPF pensions on or before December 31, 1999 continue to be CPF participants. Other public sector employees were immediately transferred to SIACAP. SIACAP participants have individual accounts funded initially with Government-issued bonds equal to CPF contributions previously made by the participant plus interest at 5.0% per annum since contribution. Subsequent contributions have been made by participants and the Government as a percentage of the participant’s wages. Because SIACAP is a defined contribution plan, the value of future retirement benefits will depend on the assets in an individual’s account, thus eliminating future unfunded pension liability for the CPF for SIACAP participants.

Because SIACAP participants no longer make contributions to the CPF, the CPF has no revenues and will run annual deficits, although its annual deficits will decline as the number of participants falls.

Since its inception in July 2000 through December 31, 2025, SIACAP had managed approximately U.S.$2.3 billion in participant contributions. As of December 31, 2025, SIACAP had 607,455 participants and carried a balance of U.S.$1,024.2 million in contributions from its participants. As of December 31, 2024, SIACAP had 590,018 participants and carried a balance of U.S.$942.9 million in contributions from its participants. As of December 31, 2023, SIACAP had 574,013 participants and carried a balance of U.S.$875.6 million in contributions from its participants. As of December 31, 2022, SIACAP had 578,794 participants and carried a balance of U.S.$821.2 million in contributions from its participants. As of December 31, 2021, SIACAP had 535,988 participants and carried a balance of U.S.$838.7 million in contributions from its participants.

On December 18, 2020, Law No. 191 of 2020 was published, temporarily allowing current and former public employees economically affected by the COVID-19 pandemic to receive an advance of between 50% and 70% of the funds they had saved in SIACAP, depending on their eligibility. Current public employees could withdraw 50% of their savings if they could show that their spouse or children were unemployed. Former public employees could withdraw 50% of their savings if they could show that they were unemployed in the private sector. Current and former public employees who were within 12 months of retirement age (age 57 for women and age 62 for men) could elect to withdraw up to 70% of their savings.

CSS National Dialogue

On January 18, 2021, the director of the CSS began the National Dialogue of the CSS with the objective of: (i) strengthening the IVM program by improving its financial situation, (ii) including informal workers in the social security system, (iii) improving the efficiency of the CSS administration with a view to ensuring the future viability

 

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of the CSS, and (iv) focusing the economic benefits of the Sickness and Maternity Program. Commissions were formed to focus on the administration of the CSS, the independent sector, the Sickness and Maternity Program and the IVM program during the CSS National Dialogue. Each commission was focused on providing solutions to each of the main objectives, following a work methodology in phases where the conclusions and thematic proposals would be submitted to a plenary session and, if approved, would be sent to the Executive and the National Assembly.

From October 11 to October 21, 2021, the proposals from the Commission on Economic Benefits were evaluated, and issues of illness and maternity, professional risks, economic benefits, lack of medicines and the mechanisms for the supply of medicine were addressed.

On November 8, 2021, the CSS National Dialogue held a plenary session, during which the agreed proposals from the Commission on the Administration of the CSS were presented. The Commission on the Administration of the CSS proposed a modification to the competencies of the CSS Board of Directors to include the responsibility for creating policies for the modernization and betterment of the CSS and ensuring the implementation of such policies so that the CSS continues to meet its objectives. The proposal was approved during the plenary session.

On December 15, 2021, the CSS National Dialogue concluded, and each of the commissions (with the exception of the IVM Commission, which waited to base its proposals in part on an ILO report about the IVM system) submitted a report concerning the progress made during the year.

Within the framework of the CSS National Dialogue, the International Labor Organization (“ILO”) developed a preliminary actuarial study and report on the IVM program’s pension funds to help guide the IVM Commission’s pension reform proposal. On September 19, 2022, the CSS published the ILO actuarial report, which warns of the mixed subsystem’s poor design, the possible exhaustion of the total reserve of the defined benefits subsystem by 2024 and the contributions that the Government should make to continue the payment of pensions under the IVM program.

Additionally, the ILO report contained nine recommendations for the CSS, namely to (i) discuss and define reform options for the sustainability of the Panamanian pension system within the framework of the CSS National Dialogue; (ii) share reform options with the ILO; (iii) submit the ratification of the ILO Convention number 102 (International Standard) for discussion; (iv) design and implement a coverage extension strategy, based on studies and technical evaluations; (v) provide a modernization plan for CSS management of the IVM program, with a long-term vision and financing for its implementation; (vi) apply actuarial best practices in the valuations carried out by CSS technical departments; (vii) prepare a proposal to optimize the mechanism that allows short-term use of the defined benefit subsystem trust funds; (viii) establish mechanisms for the automatic adjustment of benefits, minimum and maximum contribution limits and pension amounts based on transparent indicators; and (ix) analyze the gender inequities in the Panamanian pension system to generate proposals for compensatory measures for women.

On August 17, 2023, the Board of Directors of the CSS received a presentation from the ILO on the actuarial report prepared about the Panamanian pension system. The CSS planned to organize a new National Dialogue to discuss this issue, with participation from the Ecumenical Committee of Panama, the Council of Educators, the ILO, the Government, the private sector and workers.

On November 27, 2023, the Supreme Court of Justice declared the mining concession contract between the Government and Minera Panamá S.A. unconstitutional. See “Foreign Trade and Balance of Payments-Foreign Direct Investment—Cobre Panama Copper Mine and Mining Concession Contract”. The concession contract was expected to include provisions for the transfer of: (i) 50% of the annual royalties under such contract to the IVM pension system, and (ii) 20% of the annual royalties under such contract to the CSS to help increase monthly pensions to U.S.$350 per month for retirees and pensioners.

Throughout August 2024, President Mulino met with representatives from the country’s political parties, labor unions, medical associations and private sector to discuss and gather input for possible reforms to the CSS with the aim of alleviating consistent deficits and putting the pension system on a more sustainable basis.

On September 12, 2024, President Mulino announced a strategy to reform the CSS, based on the feedback gathered from his meetings. The strategy includes (i) the implementation of a “single purchase” program to coordinate purchases by the Ministry of Health and the CSS of medicines and supplies for laboratories, diagnostic imaging and

 

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surgical material, with the aim of eliminating bureaucracy and improving prices; (ii) the digitization of the medical appointment system, with the aim of increasing efficiency and improving wait times; and (iii) improvement of the IVM Trust’s financial situation, a process which will include managing debt owed by public and private sector entities to the IVM Trust, taking inventory of the IVM Trust’s assets, and establishing a system for workers to have access to information about their contributions.

In addition, President Mulino announced that from September 16, 2024, to October 31, 2024, working groups made up of representatives from several sectors of society would be set up to evaluate initiatives and proposals for the CSS reform. The working groups conducted feasibility analyses, and considered funding sources for the proposals. Once the working groups completed their evaluations, their input were used to draft a bill regarding the CSS reform, which was presented to the National Assembly.

On November 6, 2024, the Executive Branch submitted to the National Assembly Bill No. 163 with the purpose of amending Law No. 51 of December 27, 2005, which amends the Organic Law of the CSS. Among the main changes proposed were: (i) an increase to the current retirement age for men and women who are under 55 and 50 years old, respectively; (ii) an increase in the employer’s contribution from 4.25% to 7.25%; (iii) annual mandatory Government contributions of U.S.$966 million to cover the actuarial deficit of the IVM program; (iv) a return to a single funded social security system with a solidarity guarantee, where the reserves of the defined benefit system and the mixed pension system are integrated; and (v) annual adjustments of economic benefits indexed to the Consumer Price Index so that beneficiaries can maintain their purchasing power.

 

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PUBLIC FINANCE

Public finance in Panama is heavily influenced by the U.S. dollar-based monetary arrangements in place since 1904. The lack of a printed national currency and the general absence of domestic budgetary financing through the banking system, except to a limited extent, have imposed constraints on fiscal and monetary policy that are not present in countries that can finance their deficits by printing local currency.

Central Government Budget

The Government’s fiscal year is the calendar year. Pursuant to the Panamanian Constitution, responsibility for the preparation of the Central Government budget rests with the executive branch. Under Article 184 of the Constitution, the executive branch must submit a budget proposal to the National Assembly by October 1 of each year.

Prior to December 31 of each year, the National Assembly may accept, reject or suggest revisions to the budget proposal. If the National Assembly accepts either the original or a revised budget proposal, it becomes law. If the National Assembly rejects the budget proposal or the National Assembly suggests revisions to the executive branch budget proposal and the executive branch does not reflect the revisions in the form of a new budget proposal submitted to the National Assembly, then, for most expenditures, the prior year’s budget remains in force until a new budget is approved. For certain limited classes of expenditures, including budgeted debt service payments, the budget proposal must be implemented each year regardless of National Assembly action. If the National Assembly fails to take action on the budget by December 31 by accepting, rejecting or suggesting revisions, the new budget automatically becomes law on January 1.

The National Assembly approved Panama’s 2025 budget on October 31, 2024. The 2025 budget contemplates total expenditures of U.S.$30.1 billion, with budget estimates based on an anticipated nominal GDP of U.S.$92.6 billion (6.0% real growth from 2024) and an anticipated consolidated non-financial public sector deficit of approximately U.S.$3.7 billion (approximately 4.0% of preliminary nominal GDP) for 2025. The 2025 budget allocates public recurrent and capital expenditures as follows: 46.4% to social services; 13.1% to financial services; 11.5% to general services; 6.0% to infrastructure development; 2.3% to development and promotion of production; 1.0% to environment and technology; and 19.8% to other services. Article 10 of the Social and Fiscal Responsibility Law, establishes a ceiling for the fiscal deficit adjusted balance of the non-financial public sector of 4.0% of nominal GDP projected in the budget for the 2025 fiscal year, 3.5% of nominal GDP projected in the budget for the 2026 fiscal year, 3.0% of nominal GDP projected in the budget for the 2027 fiscal year, 2.5% of nominal GDP projected in the budget for the fiscal year 2028, 2.0% of nominal GDP projected in the budget for the fiscal year 2029 and 1.5% of nominal GDP projected in the budget for the fiscal year 2030 and subsequent years.

 

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The National Assembly approved Panama’s 2026 budget on October 27, 2025. The 2026 budget contemplates total expenditures of U.S.$34.9 billion, with budget estimates based on an anticipated nominal GDP of U.S.$95.1 billion (4.0% real growth from 2025) and an anticipated consolidated non-financial public sector deficit of approximately U.S.$3.2 billion (approximately 3.5% of anticipated nominal GDP) for 2026. The assumptions set forth above represent Panama’s estimates of the 2026 economic results prepared for budgetary purposes. While Panama believes that these assumptions were reasonable when made, some are beyond the control or significant influence of Panama, and actual outcomes will depend on future events. Accordingly, no assurance can be given that economic results will not differ materially from the figures set forth above. The 2026 budget allocates public recurrent and capital expenditures as follows: 39.4% to social services; 18.2% to financial services; 10.0% to general services; 6.3% to infrastructure development; 1.9% to development and promotion of production; 0.8% to environment and technology; and 23.4% to other services.

The table below sets forth the budgeted expenditures of the Central Government by function for the indicated budget years:

TABLE NO. 13

Budgeted Expenditures of the Central Government by Function⁽¹⁾

(in millions of dollars)

 

Itemization		2022				2023				2024				2025				2026(2)
Legislative			144.0				150.0				150.0				98.7				98.7
Judiciary			205.6				330.3				385.1				351.2				351.2
General Comptroller			150.9				147.4				125.6				128.0				127.9
Presidency			218.1				225.0				191.8				200.0				212.4
Government			537.2				677.0				452.4				466.0				493.6
Foreign Affairs			68.6				67.1				71.3				72.3				81.0
Education			2,623.7				2,876.8				4,996.5				5,071.6				4,859.7
Commerce and Industry			74.6				81.0				73.2				63.8				54.4
Public Works			728.7				1,243.7				1,265.6				912.5				1,185.1
Agriculture			334.8				437.7				398.8				276.3				238.6
Health			2,532.1				2,555.5				2,636.4				2,489.9				3,503.9
Labor			36.3				39.8				113.7				92.6				79.8
Housing			188.1				148.5				131.5				134.7				79.8
Economy and Finance			795.4				758.1				745.9				632.3				670.1
Social Development			703.7				306.8				304.0				267.0				238.7
Security			847.1				903.1				946.1				1,032.7				985.0
Public Ministry			207.1				251.1				275.9				276.6				276.6
Environment			55.5				77.6				84.2				101.1				90.0
Electoral Tribunal			94.4				159.5				234.6				112.6				112.6
Tax Administrative Court			2.6				3.9				3.5				3.9				3.9
Court of Accounts			3.8				4.1				5.3				5.0				4.8
Prosecutor of Accounts			4.3				5.0				7.0				5.8				5.8
Ombudsman			6.3				7.5				8.0				7.3				7.3
Culture			42.3				52.5				100.2				114.3				147.0
Other expenses			3.815.8				4,409.4				5,702.2				5,673.5				8,007.0
Women			0.0				0.0				11.8				11.5				7.3
Total		$	14,421.1			$	15,918.4			$	19,408.9			$	18,601.1			$	21,922.3

Note: Totals may differ due to rounding.

 

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(1)	Excluding transfers, subsidies and debt service.

(2)	Original 2025 budget, before modifications.

Source: Ministry of Economy and Finance.

In 2025, Panama’s non-financial public sector balance  registered a deficit of approximately U.S.$3.3 billion (3.7% of nominal GDP), a decrease in the deficit of 38.4% compared to a deficit of approximately U.S.$5.4 billion in 2024 (6.2% of nominal GDP). The decrease in Panama’s non-financial public sector deficit was largely due an increase of U.S.$933.5 million in general current revenues (a 6.5% increase compared to 2024), and a decrease of U.S.$931.8 million in capital expenditures interest (a 20.4% decrease compared to 2024), as part of the Government’s plan to consolidate more efficient and targeted public spending management in 2025.

In 2025, the Central Government’s overall balance registered a deficit of approximately U.S.$4.7 billion (5.2% of nominal GDP), a decrease of 28.3% compared to a deficit of approximately U.S.$6.6 billion (7.6% of nominal GDP) in 2024, in part due to a 9.4% increase in current revenues and a 5.9% decrease in total expenditures. In 2024, the Central Government’s overall balance registered a deficit of approximately U.S.$6.6 billion (7.6% of nominal GDP), an increase of 97.7% compared to a deficit of approximately U.S.$3.3 billion (4.0% of nominal GDP) in 2023, in part due to a 19.7% increase in current expenditures. The Central Government’s overall balance registered a deficit of approximately U.S.$3.1 billion (4.1% of nominal GDP) in 2022, and a deficit of approximately U.S.$4.5 billion (6.7% of nominal GDP) in 2021.

Taxation

The Panamanian Constitution authorizes the levying and collection of taxes by taxing authorities at both the national and municipal levels. The Central Government collects taxes on personal and corporate income, real property and certain securities. In addition, the Central Government collects import and export duties and a value-added tax on all personal property, except food, medicine and other minor items. In July 2010, the value-added tax increased from 5.0% to 7.0%. Municipalities are permitted to collect taxes from sources of a more local nature, such as taxes on public performances, sales of alcoholic beverages, quarry activities and forestry.

Preliminary figures indicate that approximately 60.9% of the Central Government’s current revenues in 2025 came from various forms of taxation. Central Government tax revenues in 2025 were U.S.$6.4 billion, an increase of 9.0% from U.S.$5.9 billion in tax revenues in 2024, in part due to a 10.9% increase in corporate income tax revenue, a 38.6% increase in individual income tax revenue and a 29.0% increase in property tax revenue in 2025. Approximately 58.0% of 2025 tax revenues were from direct taxes, compared to 55.3% of tax revenues in 2024. Direct tax revenues in 2025 were U.S.$3.7 billion, a 14.4% increase from U.S.$3.3 billion in 2024, primarily due to an increase in income tax.

Personal income tax rates vary at incremental levels based on the individual’s annual earnings. Each tax bracket includes a fixed component as well as a variable percentage assessed on income above the minimum income level for the applicable bracket. Corporate income taxes are 30% of non-CFZ income, as a result of the 1995 Ley de Universalización de Incentivos Tributarios a la Producción (the “LUIT”). Domestic transaction taxes, such as the value-added tax, a tax on petroleum products, tobacco and beverage taxes and other indirect taxes, accounted for 42.0% of 2025 tax revenues.

Pursuant to Law No. 8 of 2010, beginning on January 1, 2012, companies in the categories of electricity distribution, reinsurance, certain financial activities, cement production, gambling, mining and banks pay income tax at the rate of 27.5%, down from the previous rate of 30%. This rate decreased further to 25% as of January 1, 2014. Companies that fall under these categories and have a gross income of U.S.$1.5 million or more will pay the scheduled income tax or, in the alternative, will pay 4.6% of their gross income towards income tax, whichever is higher. Companies that are owned 40% or more by the Republic will pay 30% of their gross income towards income tax.

As a result of the LUIT, Panama’s accession to the WTO and other trade agreements, the rates and computation of various import duties have changed and can be expected to continue to change in the future. See “Foreign Trade and Balance of Payments— Tariffs and Other Trade Restrictions.”

 

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The Dirección General de Ingresos (“General Directorate of Taxation” or “DGI”) of the Ministry of Economy and Finance serves as the national tax authority. In addition to the Central Government and municipalities, other public sector entities also have taxing authority. These include the CSS, whose various taxes and assessments generally equal approximately 9.75% of an employee’s wages and 12.25% of an employer’s wage bill, while the education tax is equal to 1.25% of an employee’s wages and 1.5% of an employer’s wage bill.

Revenues and Expenditures

Year Ended December 31, 2025

The Central Government’s total revenues for 2025 were approximately U.S.$10.6 billion, a 9.3% increase compared to approximately U.S.$9.7 billion in 2024. In 2025, capital expenditures were approximately U.S.$2.7 billion, an 27.2% decrease compared to approximately U.S.$3.7 billion in 2024. In 2025, the Central Government’s current savings registered a deficit of approximately U.S.$2.0 billion, approximately 2.2% of preliminary 2025 GDP and an 29.8% decrease compared to a deficit of approximately U.S.$2.8 billion in 2024, mainly due to a 9.0% increase in tax revenues.

The table below sets forth the revenues and the expenditures of the Central Government for the periods indicated:

TABLE NO. 14

Fiscal Performance—Central Government

 

		Period Ended December 31, (in millions of dollars)
		2025(P)				2024(R)
Total Revenues			10,570.5				9,669.2
Adjusted Current Revenue			10,552.7				9,642.4
Tax Revenue			6,425.8				5,893.6
Non Tax Revenues			4,126.9				3,748.7
Capital Income			17.8				26.9
Donations			0.0				0.0
Total Expenditures			15,271.7				16,226.4
Current Expenditures			12,554.2				12,491.9
Current Savings			(2,001.5	)			(2,849.6	)
Capital Expenditures			2,717.5				3,734.5
Deficit			(4,701.2	)			(6,557.2	)
% of GDP			(5.2	)%			(7.6	)%

Note: Totals may differ due to rounding.

(P) Preliminary figures.

Source: Ministry of Economy and Finance

The non-financial public sector, which includes the Central Government, decentralized agencies (including the CSS and principal universities) and non-financial public enterprises, had total revenues of approximately U.S.$15.6 billion during 2025, a 6.9% increase compared to approximately U.S.$14.6 billion in 2024, mainly due to an increase in the Central Government’s current revenues. Current savings for the non-financial public sector registered a surplus of approximately U.S.$292.0 million in 2025, a 134.6% increase compared to a deficit of approximately U.S.$842.8 million in 2024, mainly due to a 6.5% increase in the Central Government’s current revenues.

The following table sets forth the revenues, by purpose, and expenditures, by sector, of the consolidated non-financial public sector for the periods indicated.

 

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TABLE NO. 15

Fiscal Performance—Consolidated Non-Financial Public Sector

 

		Period Ended December 31, (in millions of dollars)
		2025(P)				2024(R)
Total Revenues			15,614.4				14,604.7
Adjusted Current Revenue			15,344.7				14,411.2
Capital Income			24.0				32.1
Donations			0.0				0.0
Total Expenditures			18,935.2				19,995.0
Current Expenditures			15,304.1				15,432.0
Current Savings			292.0				(842.8	)
Capital Expenditures			3,631.2				4,563.0
Deficit			(3,320.8	)			(5,390.3	)
% of GDP			(3.7	)%			(6.2	)%

Note: Totals may differ due to rounding.

(P) Preliminary figures.

Source: Ministry of Economy and Finance.

The following tables set forth the revenues, by purpose, and expenditures, by sector, of the Central Government and the consolidated non-financial public sector for the years 2021 through 2025. Under the terms of the 1994 amendments to the Constitution, the Panama Canal Authority budget is not included in the budget of the Central Government.

TABLE NO. 16

Central Government Operations

(in millions of dollars)

 

		2021				2022				2023				2024(R)				2025(P)
Total Revenues		$	7,932.6				9,292.4				10,621.7				9,669.2				10,570.5
Current Revenues			7,932.6				9,292.4				10,103.0				9,642.4				10,552.7
Tax Revenues			4,579.6				5,866.0				6,291.8				5,893.6				6,425.8
Direct			2,490.2				3,340.7				3,796.7				3,257.1				3,725.8
Indirect			2,089.4				2,525.3				2,495.1				2,636.5				2,700.0
Non Tax Revenues			3,340.7				3,420.9				3,811.1				3,748.7				4,126.9
Adjustments to Rent
Capital Gains			12.3				5.6				518.8				26.9				17.8
Donations			0.0				0.0				0.0				0.0				0.0
Total Expenditures		$	12,428.1				12,440.0				13,938.3				16,226.4				15,271.7
Current Expenses			9,057.0				8,674.2				10,433.4				12,491.9				12,554.2
Wages and Salaries			3,791.8				3,899.3				4,078.5				4,442.6				4,453.5
Goods and Services			609.3				751.6				852.1				852.7				800.3
Transfers			2,877.6				2,626.2				3,277.0				4,390.1				4,233.5
Interest			1,539.9				1,317.5				2,147.0				2,519.4				2,717.6
Others			238.3				79.7				78.8				287.3				349.3
Current Savings		$	(1,124.4	)			618.2				(330.4	)			(2,849.6	)			(2,001.5	)
% of GDP			(1.7	)%			0.8	%			(0.4	)%			3.3	%			(2.2	)%
Total Savings			(1,124.4	)			618.2				188.3				(2,822.7	)			(1,983.7	)
% of GDP			(1.7	)%			0.8	%			0.2	%			3.3	%			(2.2	)%
Capital Expenditures		$	3,371.2				3,765.8				3,504.9				3,734.5				2,717.5
Primary Balance		$	(2,955.6	)			(1,830.1	)			(1,169.6	)			(4,037.8	)			(1,983.6	)

 

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