5.2.6.- Panama

Panama has faced strong economic growth after the decision has been taken to double the capacity of the Panama Canal and to provide passage for container carriers having a width surpassing the actual measurements of the Canal.
Foreign investments are enormous and the sky line of Panama City starts to become a real metropolis. This development spurs governmental income enabling the government to initiate programs which have not been possible before due to a lack of resources. Besides the access to funds, this government seems to be quite aware of the fact that a more equal division of wealth creates more safety and safety is one of the key reasons for many investors to take a final positive decision or to discard one. Rural development has become one of the priorities within this government and the agricultural sector starts to benefit.
Panama does have agriculture but it is limited in terms of non-traditionals. Vegetables are hardly exported and ornamentals, except for some leather leaf, even less. Exports of Panama consist of Banana, Melon, Water Melon and Pineapple. Except for Banana (dominated by Chiquita) it is likely that the other mentioned crops can increase further especially because of possible financial support from the National Government.
The main aim for Panama as a country at this moment is to develop crops which could be characterized as ‘non-traditional commodity fruits’. In other words, most exotic fruits can be considered to be part of that group except for banana. Such a policy would create jobs in ‘migration sensitive areas’, would make better use of available land, and would contribute to create a higher percentage of agricultural exports on the trade balance.
It is unlikely that Panama will be able in the next few years to attract investors for vegetables for exports, (pre-finished) pot plants or for cut flowers. The country is just not ready for that kind of products but it should be noted that Panama is probably the best example of a country which is hard to predict due to the fact that it is promoting itself in a very strong and positive way and that strategy could lead to (unexpected) investments. Besides that, it is likely that (cooling) facilities at the airport will improve in the upcoming years creating opportunities for exports through air freight.
GANTRAP has recently organized the Central American melon congress (July, 2007) in Panama, during which the country (and the fruit sector) were able to show competitors in Central America and buyers from Europe and the USA, what developments have taken place in Panama in recent years. It is recommendable for the fruit sector (together with the Ministry of Agriculture) to continue with the organization of similar kind of events and to participate in international events. Panama is still referred to as a country with a huge Canal and a strong financial sector, not as an exporter of fruits or other non-traditional agricultural crops.

5.2.6.1.- Costa Rican - Panamanian set up of melon production

Actual Situation
Costa Rica is facing problems in its melon sector due to increasing costs, availability of labour and competition with other sectors like construction and tourism. The way to proceed for Costa Rica is to either specialize or to reduce costs substantially. That last option is less likely as possibilities for a sharp cost reduction are limited. To spread their risks, it can be recommended to Costa Rican growers of melon and or water melon to invest in production sites abroad.

Panama has strong ties with Costa Rica and no conflicts on borders or other politically delicate issues. Besides that, Costa Rica has a long history in melon and watermelon and is the biggest exporter of pineapple in the world. Costa Rican growers have the experience of dealing with European clients and supermarkets. Other countries in Central America like Honduras and Guatemala have their focus on the US market which requires a different approach. Panama is relatively new, has grown strongly and can be considered ready for the European market but does need foreign knowledge to improve their quality and credibility in the international market.

Future scenario
Taking both the strengths of Costa Rican producers and Panama as a production country into consideration, it can be considered as an interesting opportunity for “Tico” (Costa Rican) producers to co-invest in Panama. There is financial support available from the local government and favourable tax regulations up to a total of 50% of the investments. Although there are quite some requirements, this option can be considered to be very attractive.

The Costa Rican grower will need to have the willingness to start a business in Panama. He can either choose to rent his own land and start up the business or make a type of cooperation / joint-venture with a local grower. The ties between Costa Rica and Panama are good making Costa Rican investments in Panama more likely than in other Central American countries.

As part of a Panama government program, agricultural students can be trained in Europe (Spain) which could in the near future turn into an interesting program as very few Central American agricultural engineers have experience in the European market.

Opportunities for Dutch importers will be the sourcing of fruits. Seed companies with varieties for the European market and certification and residue laboratory services will be needed as well. Similar scenarios are to be considered for pine apple, mango and other tropical fruits.