Panama is falling behind neighboring countries in attracting new industrial investment, according to a stark new report from the nation’s leading manufacturing association. The Union of Industrialists of Panama (SIP) warns that the country is losing ground to regional economies like Costa Rica and the Dominican Republic, particularly for large-scale production projects. This trend threatens the long-term stability of Panama’s economic model, which has recently relied heavily on service sector growth.
The findings come from the SIP’s latest economic report, titled “Performance of the Industrial Sector: Perspectives on the Panamanian Economy, Challenges and Opportunities for Industry.” The document, prepared with specialized data from the firm Indesa, analyzes recent economic behavior and outlines the structural challenges facing Panama’s industrial base. While the nation’s Gross Domestic Product (GDP) grew by 4% in 2025, that growth was driven almost entirely by service activities like transportation and hospitality.
Manufacturing Growth Stalls Amid Broader Economic Expansion
Manufacturing itself registered a meager growth rate of just 0.46% last year. This figure highlights a significant slowdown within a key segment of the national economy. The industrial sector’s sluggish performance stands in sharp contrast to the double-digit expansion seen in logistics and other service-oriented fields.
Despite this modest output, industry remains a crucial employer. It currently provides 152,605 direct jobs, accounting for 7.93% of the national total. Its importance is even more pronounced in provinces outside the capital, where it ranks among the top formal private-sector activities. For thousands of families, industrial work represents a primary source of income and economic stability.
“For 2026 and 2027, performance will be closely linked to the activation of strategic projects and the consolidation of conditions that allow for greater industrial prominence in the country’s growth,” said SIP President Rosmer Jurado. [Translated from Spanish]
The report outlines two potential economic scenarios for the coming years. A favorable one depends on the reactivation of a major copper mine and the execution of large projects linked to the Panama Canal. Under these conditions, growth could remain above 4%. An adverse scenario, where these strategic investments are delayed, would result in a more limited economic pace with negative effects on employment, private investment, and fiscal performance.
Competitiveness Hinges on Institutional and Energy Reforms
Beyond immediate projects, the SIP identifies areas needing urgent improvement to boost competitiveness. Institutional strengthening and human capital formation are cited as critical factors. On energy, a constant concern for manufacturers, the report acknowledges progress with long-term power contract tenders. These are designed to offer more stability and predictability for productive sectors, even though cost challenges persist.
The industrial group also points to specific opportunities for growth. One key proposal involves strengthening Panama’s Free-trade zone model by fostering greater integration of local suppliers. This move would create internal productive linkages and keep more value within the country. Another opportunity lies in leveraging Panama’s status as an Associate State of the Southern Common Market (MERCOSUR) to expand export markets and attract new investment.
The economic impact of a robust industrial base is significant. The SIP’s analysis underscores the sector’s high multiplier effect. For every dollar invested in industry, an additional $1.91 is generated in broader economic activity. This makes targeted support for the sector industrial a potent tool for national development.
Panama retains strategic advantages, including its geographic position and world-class maritime hub. The SIP concludes, however, that the country must redouble its efforts if it hopes to compete more successfully within the region. Strengthening the role of industry as an engine of sustainable growth and formal job creation is presented not just as an option, but as a necessity for the coming years.