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However, in the 1700s as gold and silver from the once powerful Inca Empire started to dry up, the service related jobs related to transporting goods started to decrease and the economy stagnated. This is the first historic example of the Panama's economy being dependent on world commerce for prosperity and imports.

In the mid 1800s the economy boomed as a result of increased cargo and passengers during the California gold rush. In 1848 gold was found in California. As a result, some 49ers as they were called decided to go through Panama. This decision saved the travelers more than 8,000 miles. To cross the isthmus, the 49ers first had to go down the Chagres River and then use the Camino Cruces trail that led to Panama City.

People charged the gold rushers 3-4 dollars at first to ferry them down the Chagres in canoes called bungos. As the demand grew, prices tripled. Along the trails, service stations popped up everywhere that were designed to help the travelers. Porters were high in demand. In addition, in Panama City there was a need for clothes, food, and housing for the men waiting to board ships to California. As a result these sectors of the economy increased greatly.

The growth of the economy was boosted further with the completion of the Panama Rail Road in 1855 which created many new jobs. The Panama Rail Road kept boosting the economy until the first trans-continental rail road opened up in the United States 15 years later. At this point the isthmus crossing was no longer the fastest way to get from the west coast to the east and lost it' importance.

In the 1880s the French attempted to build the Panama Canal and later the Americans picked up where they left off and completed it in 1914. After its completion, the traffic expanded by 15% every year from 1915 to 1930. The stimulus was most strongly felt in the terminal cities of Colon and Panama City.

The stock market crash of 1929 caused a reduction in international as ships carrying goods through the canal passed through with reduced frequency. This caused severe unemployment in the terminal cities. During World War II canal traffic decreased but the convoy presence and the increase of U.S. Troops sent to protect the Panama Canal increased foreign spending in the cities. The end of the war was followed by an economic recession which resulted in more unemployment. As a result many Panamanians resorted to subsistence agriculture.

The post war depression gave way to rapid economic expansion between 1950 and 1970 when the GDP increased by an average of 6.4%. This is one of the highest sustained increases in an economy in history. All sectors contributed to its growth. Agricultural output rose, shrimp fishing activities grew, high value fruit production increased, and rapid growth of banana exports after disease resistant trees were planted.

In the 1970's and 80's Panama's growth fluctuated with the world's economy. In 1973 economic expansion slowed considerably as a result of the number of international and domestic factors. In the early 80's the economy rebounded with GDP rates of 15.4% in 1980, 4.2% in 1981 and 5.6% in 1982. The hard Latin American recession of 1982 devastated Panama's economy. In 1983 and 1984 GDP growth was slow at .4% for both years.

Leading up to the intervention of 1989 Panama's economy was severely damaged by the strict U.S. economic sanctions and disruptions brought on by the Noriega administration.

Subsequently during the American backed Endera administration the United States pumped 2 billions dollars into the economy. In 1994, president Perez Balladares improved economic conditions by establishing fiscal reform and job creation. He also attracted foreign investment.

Extremely high debt plagued Panama after the invasion and throughout much of the ‘90s. On December 31, 1999 the U.S. turned over its rights of the canal to the Panamanian government which opened Panama to further foreign investment.

Since then foreign investment in Panama has been growing steadily to the point where it's absolutely nuts. The real estate market in Panama is bringing in lots of foreign investors mostly from the United States and Europe. The real estate boom has been going on for the last several years but the days of buying an oceanfront condo for 80 grand are gone. Now you can get one for maybe $200,000. When Donald Trump announced that he would be building a 250 million dollar development in Punta Pacifica, it solidified Panama's stance as a major locus of real estate investment. You'll see why the Panamanian economy will be even more successful when the recently approved $5.3 billion Canal expansion project starts. Then there will really be investors flocking to the PTY pumping cash into the country.

Currently, Panama's GDP sits at around $23.33 billion and ranks 110 in the world and is experiencing a sharp upswing in its economy. The future of Panama looks about as bright as tenth planet, Pluto. Last sentence contributed by Matt Landau.

Citations:

1. cia.gov/cia/publications/factbook/

2. photius.com/wfb1999/panama/panama_economy.html

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Comments (7)

Dino: Trump did trump actually start to build? 1 November 04, 2007 Budd: ... Whaddaya trying to say, Matt? A healthy Panama economy is obviously dependent on foreign commerce. If and when that begins to slow, there'll be a stampede for the exits. Dark economic clouds are currently looming on the world horizon, and the current high prices of fuel and other commodities spell difficult times ahead for world commerce and therefore for Panama. Still a nice place to be, though 2 December 20, 2007 Andreas Cain: ... I can see why Trump will build in Panama. Despite the global slowdown (which most sensible people would acknowledge), much is being written in the overseas property industry about [www.panamaventure.co.uk]property in Panama[/www.panamaventure.co.uk] being the next big place to invest. One needs to remember that although your average Joe may have less equity to release from his house to buy property (due to the slowdown), there are still pockets of investors who want to buy property, imho. 3 March 07, 2008 Faustino: Industriousness of the Panamanian People That is about the funniest thing I have read in years. You obviously have never had a Panamanian employee. I have lived and had businesses in 5 countries, 3 of them Latino. This country was built by foreigners..Gringos,Judios,Chinos,Griegos,Espanoles,Italianos,etc. The Panamanaians are the parasites that live off these people. 4 March 22, 2008 Faustino: Truth hurts a little too much to publish Truth hurts a little too much to publish 5 March 23, 2008 susan: ... Th Trump Ocean Club in Panama looks gorgeous! The sail-shaped building on Punta Pacifica has condos and condo-hotel units. 6 May 30, 2008 Josue: Being Real! it is ridiculous to say that the panamanian people are parasites and that they live off of the "foreigners", when if you really knew panama's history, you would well know that all panamanians are foreigners, which means, that you can't just separate the two. Of course, there are always lazy people everywhere, even in the the USA. So, those who have done well is because they could and wanted to, but not because they where "foreigners". Are you saying that the chinese or jews or spanish are not panamanian, even though they prob have been here for over 100 year? how long does it take for them to become panamanian? The US is a great example of that. Would you say that Americans live off of foreigners? come on, dont be ignorant!!!! 7 September 25, 2008

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