Double-digit GDP growth for four of the past seven years, moderate inflation and high employment have had a positive impact on Panama’s retail sector. According to the National Institute of Statistics and Census (Instituto Nacional de Estadística y Censo, INEC), retail revenues increased by 19.1% between 2011 and 2012, outpacing those of other service segments such as wholesale commerce (5.4%) and hotels and restaurants (9.5%). The sector is an essential economic contributor, accounting for 14% of GDP in 2012, the most recent figures available at the time of publication.

Purchasing Power

At the core of the favourable developments lies the increase in purchasing power across all layers of society. In 2012 the World Bank estimated that per capita income had reached $9500, up from $6500 four years earlier and above that of regional peers such as Colombia ($7700) and Peru ($6800). While domestic wealth is undoubtedly on the rise, the average has also been pushed up by an inflow of high-net-worth individuals from neighbouring countries such as Venezuela – the country is now home to an estimated 35,000 Venezuelans, for instance – and expatriates working for an increasing number of multinational firms with regional offices in Panama.

Furthermore, the middle class is also growing. According to Panama’s Chamber of Commerce, Industry and Agriculture (Cámara de Comercio, Industrias y Agricultura de Panamá, CCIAP), the upper and upper-middle class – those earning more than $1100 per month – will expand to account for 35% of the population over the next two years, up from 27% at present. Meanwhile, thanks to a gradual rise in minimum wages and low unemployment levels, similar growth is reported in the lower-middle class (those earning $500-1100 per month), as well as those with more modest incomes. Had it not been for the sizeable informal sector – estimated at over 30% according to the CCIAP – this growth would have been even faster.

“Informal workers’ exclusion from social security and access to loans undermines their ability to contribute to retail income,” Manuel Ferreira, the CCIAP’s director of economic affairs, told OBG.

While purchasing power has gone up, consumer prices have remained largely the same. According to figures from INEC, inflation has been stable, at an annual average rate of 4% in 2013, and is forecast to reach 4.5% throughout 2014. While some downside risk may be incurred due to the balboa’s peg to the US dollar and the US Federal Reserve’s plans to wind down its quantitative easing programme, consumers’ appetite for spending is stronger than ever before.

“Panamanians are now better off than ever before, which we can see through the sophistication of their purchasing choices,” Janet Poll, executive chairman of retailer El Machetazo, told OBG.

Optimism Supports Spending

One factor supporting this is greater consumer confidence. In November 2013, Ipsos, a global market research company, measured consumer confidence at 110 points, 10 points above the equilibrium and three up on the same month the year before. Meanwhile, according to research from Gallup, a US-based polling agency, out of 148 countries surveyed in 2012, Panamanians were the most optimistic about their living conditions, up from 12th position two years earlier.

Particularly strong growth has been registered for luxury goods, such as high-end men’s and women’s apparel, bags and accessories, shoes and cars. Between January and November 2013, 51,559 new cars – mostly sport utility vehicles and saloon cars – were sold, up 13.4% year-on-year and 76.5% compared to the same period in 2009, according to figures from INEC.

Consumer sales in general – and car sales in particular – have been facilitated by easy access to credit from the numerous banks that, in a scramble for a share of the local market, have kept interest rates accessible at between 6% and 8%. According to the CCIAP, up to 85% of new cars are financed through banks, accounting for 13% of all consumer loans. This is likely to grow as banks, confident in Panama’s economic strength, gradually lengthen payback periods. Overall, consumer loans grew by 34.4% from November 2010 to November 2013, when the total reached $7.05bn, according to the Superintendency of Banks of Panama, which regulates the financial sector. The lion’s share of this was made up of personal loans, at 69%, and credit cards, at 17%.

Retail Space

According to a first-half 2013 report by CBRE, a global real estate consultancy, Panama City’s total retail leasable area measured around 1.48m sq metres, of which specialised stores represented the greatest share, at 21.5%. Department stores were second with 12%, while shops targeting personal services, restaurants and supermarkets occupied 9%, 6% and 5%, respectively. According to Tagaropulos, a Panamanian retail and distribution conglomerate, the city has up to 16,500 points of sale, 50% of which are categorised as traditional shops, also known as bodegas.

The vacancy rate in the capital city for class-A commercial shopping centres decreased from 9.1% to 7.4% during the first half of 2013. The class-B vacancy rate stood at 12.7%, up significant from 5% at the end of 2012. Meanwhile, average lease rates for class-A space remained almost within the previous range at $40.83 per sq metre per month compared with $40.16 at the end of 2012. Average rates for class-B space also increased slightly, rising from $16.43 per sq metre per month in December 2012 to $17.92 in June 2013.

Notable developments are happening in both the high-end and mid-range segments through the expansion of existing malls and construction of new ones. According to CBRE, the significant number of commercial projects and malls set to enter the market over the next few years reflects the great demand arising from new businesses looking to set up in the country. The firm estimates there was 574,686 sq metres of space under construction in June 2013. There are also a number of high-end malls planned for the city’s eastern and central areas, while as many as 25 smaller commercial complexes are being built across the city.

Interest is particularly high in the southern part of the city, close to the financial district, boardwalk and high-end residential areas. According to CBRE, only 1% of retail space in this area was vacant in June 2013, while rental prices were among the highest in the country at around $30-65 per sq metre per month.

Several high-end projects have recently come online or are under construction. One such example is the fourth expansion of Multiplaza, owned by El Salvador-based Grupo Roble, which extended its mall to more than 100,000 sq metres in 2012, allowing for a daily footfall of 45,000 visitors and annual sales of $400m. The new extension will host luxury boutiques such as Tiffany & Co and is scheduled to open in the spring of 2014. Another notable project now under way is Soho Mall. In addition to three towers destined for office and hotel use, this project includes a mall and a casino on the ground floor. The total value of the project, including the commercial space, is estimated at $360m, while delivery of the first phase, including the mall, is set to take place soon. The total available retail surface area will measure 34,000 sq metres, providing space for 120 stores, restaurants, cinemas, a spa and a gym. In the eastern part of the capital, Atrio Mall is being built in the uptown Costa del Este neighbourhood, home to the city’s second business district. At a total investment cost of $40m, the facility will bring an additional 14,500 sq metres of high-end retail space to the market, as well as cinemas, a children’s playground and restaurants. The project is estimated for delivery by the end of 2015.

The new additions join an established offering of high-end shopping facilities that cater to the local population and foreign visitors. Metromall, also owned by Grupo Roble, is located close to Panama’s main airport and targets tourists and transit passengers in particular. In a bid to attract transit passengers, it offers free transportation to and from the airport, an increasingly common service provided by luxury malls.

Shopping Destination

Foreign visitors and transit passengers are an essential part of Panama’s retail potential and, given the limited size of the domestic population, will play a key role in its development going forward. On average, up to 30% of annual revenues in department stores come from foreign visitors. This can rise up to 70% during the months of October, November and December, when visitors from across the region flock to the country’s malls for their Christmas shopping. A number of competitive advantages have helped to make Panama a regional shopping destination. The established network of Copa Airlines, the nation’s flagship carrier, which operates direct links to all the region’s capitals, helps to attract visitors from around the region to the country’s malls. This is encouraged by high inflation and currency appreciation in some of Latin America’s biggest economies – such as Venezuela, Colombia and Brazil – that has pushed up prices for consumer goods at home.

Copa Airlines’ US network is complemented by European arrivals brought in by KLM, Iberia and Air France, and Lufthansa is expected to start operations by the first quarter of 2014. In addition, the Panama Tourism Authority held talks with Qatar Airways in early 2013 about connecting Panama with the Middle East via a direct flight, which would be a first.

In addition to the local shopping malls, Tocumen International Airport also provides visitors and those in transit with an established retail offering. In 2012 alone, the latest year for which statistics are available, the airport registered $266.2m in retail income, a number which is set to rise as ongoing expansion works, slated for completion in 2016, are aimed at tripling the facility’s current annual passenger traffic of 7.05m.

Accomodation Upgrade

Rising visitor numbers are supported by the construction of luxury hotels such as Waldorf Astoria and Hilton, which have joined established chains like InterContinental, Marriott, RitzCarlton, Radisson and Sheraton. A number of these hotels are also part of ongoing shopping mall developments. Ritz-Carlton will be located in Soho Mall, for example, while Albrook Mall, the country’s biggest shopping centre, is building an extension to house a hotel with up to 350 rooms.

Overall, the total number of hotel rooms across the country is set to reach 24,000 by 2014. Other advantages for foreign visitors include the competitive retail prices – facilitated by a low sales tax and excess inventories from the Colón Free Zone (CFZ, see analysis) – safe shopping environment and lenient visa regime compared to that of the US. The latter helps significantly in the competition with Miami, which is the region’s most established shopping destination.

Over the next few years, the number of foreign visitors is expected to rise significantly in line with the country’s growing reputation as a tourism destination. For example, Panama was ranked first on the list of “Places to Go in 2012” by the New York Times. It attracted a total of 1.9m visitors between January and November 2013 – most of whom were medium- to high-income earners from North and South America – double that of six years earlier. In addition to those coming by plane, an increasing number of visitors arrive by cruise ships, which include Panama as a shopping break in between stops on Caribbean islands.

Nevertheless, while the new shopping projects are likely to find ample domestic and foreign customers, retailers are mindful of their reliance on foreign visitors to drive the sector’s development. Despite more stringent visa requirements, regional competitors such as Miami are likely to retain the upper hand when it comes to additional offering such as beaches, bars, restaurants and nightlife. As Daniel Bassan, the CEO of Dabsan International, a Panamanian clothing distributor, told OBG, “It is essential the industry and the authorities make a concerted effort to strengthen Panama’s image as a regional shopping destination and develop the appropriate facilities.”

“Besides the rising spending power of Panamanians, retailers are turning to the country to tap into the international market. Panama is increasingly establishing itself as a regional shopping destination rivalling Miami. Particular countries where shopping visitors come from include Colombia and Venezuela, although economic conditions have led to some reduction in numbers,” Bassan added.

Developers are also diversifying from high-end projects and targeting medium and lower classes. As such, more growth is expected to come from smaller, more specialised structures adapted to local needs.

“We are foreseeing a rise in developments in the outer east and west residential parts of town and a focus on outlets rather than high-end structures,” Ferreira told OBG. Projects are also coming on-line outside the capital in cities that have thus far largely been ignored by mall developers. Examples include Colón, Chorrera, Chiriqui, Santiago, Chitré and Herrera.

Domestic Players

While many retail sectors in South America are dominated by Chilean department stores such as Saga Falabella and Ripley, in Panama a number of home-grown companies are in the lead. One such example is Felix B Maduro, a leading family-run department store which traces its origins to 1877 and today has carved out a large share in men’s and women’s clothing, cosmetics, jewellery, games and home accessories. The firm operates six sites across the capital city, both in high-end shopping malls and standalone stores. Its parent company, Feduro, also oversees subsidiaries selling food and pharmaceuticals, making it the country’s leading distributor of consumer goods.

Steven’s, another major player, has been active since 1999 and currently manages three department stores in the capital’s biggest malls, including Albrook, Metro and Multiplaza. The remainder of the segment is made up of Panamanian firms that operate one or two stores, such as Collins, Dorians and La Onda.

In the shopping mall and distribution segment, Grupo Roble owns the aforementioned high-end shopping malls Multiplaza and Metromall. Harari Group, which partly owns Grupo Roble’s local operations, also distributes international clothing brands such as Guess, Zara and Nike. Grupo Wisa, the main investor in Soho Mall, represents foreign luxury fashion brands such as Chanel, Jimmy Choo, Ralph Lauren, Versace and Burberry, amongst others, and has several duty-free stores in Tocumen International Airport. Another important home-grown player is Empresas Tagarópulos, which holds a leading position in food distribution (its brands include Kraft, Heinz and Cadbury’s) and is also a major player in hygiene and beauty products (L’Oréal, Maybelline and Garnier). In addition, the group oversees leading supermarket chains Rey, which has 22 stores across the country, and Romero, with 11 stores, which it acquired in 2007. These complement the group’s Mr Precio discount chain, which opened in 2003 and today numbers 10 stores nationwide. In 2011 the group branched out into pharmaceuticals through the acquisition of the Metro and Econo Farmacias chains. Finally, Dabsan International runs the Sketchers franchise across 10 countries in the region, including Panama, which it supplies from a 1115-sq-metre distribution centre located in the CFZ.


Despite the dominance of local players, there have been signs of interest from foreign firms in recent months, particularly from the US. Following the validation of the US-Panama Trade Promotion Agreement in October 2012, the Panamanian embassy in Washington DC has seen an uptick in requests from large investors, including US-based retailers such as Walmart and JC Penney, as well as Walgreens, a chain of drug stores.

According to Mario Jaramillo, Panama’s ambassador to the US, the interest is largely driven by the country’s strong economic growth fundamentals, its sound trade and investment relationship with the US, and its growing American and Canadian population, estimated at around 50,000 people, predominantly affluent pensioners. Furthermore, in its “Doing Business in Panama 2012” report, the US Commercial Service highlighted the consumer attitudes and brand preferences that the two countries share, together with the positive reputation US manufacturers enjoy across the region. In addition, consumer tastes in Panama are becoming increasingly sophisticated, to the point that expectations may now be exceeding local standards.

Dabsan’s Bassan told OBG, “Panamanian department stores often lack the drive to invest in new facilities and product offerings. They have managed to hold on to most of their clientele for the moment, but as younger people gain spending power, their demand for a more modern retail experience will grow, and that is where foreign entrants may find their niche.”

Besides US firms, other possible entrants include Chilean retail conglomerates Saga Falabella and Ripley, companies that have successfully branched out into South American markets over the past decade.


Despite its sound performance in recent years, newcomers in Panama’s retail sector are faced with a number of challenges. First off, Panama is prone to electricity shortages, particularly in the dry season, when much of the country’s hydroelectric capacity, which generates as much as two-thirds of its electricity, is compromised. This was highlighted in early 2013, when the country was affected by one of the most intense droughts of the past two decades. This reduced power supplies and prompted the government to mandate minimum usage of air conditioning, a move that had operational implications for the retail sector.

Another challenge is the level of local pricing. Panamanian shoppers enjoy favourably low rates across the spectrum of consumer goods, ensured in part by a modest sales tax and by the country’s position along well-provisioned supply lines towards South America (see analysis), complicating the entrance of foreign retail chains, particularly price fighters like Walmart.

An additional challenge facing all players in the retail space is the limited availability of human resources. Macroeconomic growth in general, and retail growth in particular, has led to a shortage of qualified personnel and a rise in salary levels. While immigrants from Colombia, Venezuela and, in more recent times, Spain have somewhat alleviated the pressures, there is a clear need to expand the local workforce. “Besides the numbers, we need to work on the quality of our personnel,” Bassan said. “Nurturing a customer service spirit is a particular necessity, especially if we want to be successful at attracting a foreign clientele.”


While a gradual reduction in infrastructure investment and salary growth is likely to ease the retail boom of the past three years, sound economic growth – which INEC estimated at 8% at the end of the third quarter of 2013 – is likely to sustain the continued expansion of both purchasing power and retail revenues. This will be further encouraged by an ongoing segmentation of the domestic customer base and the expansion of modern retail outlets across the country, while the number of shopping facilities and retail operators looks set to continue to rise. In addition, the sector is keeping an eye on the number of tourists.

Nevertheless, the industry is edging towards saturation. The CCIAP forecasts consolidation of the sector in the next few years, indicating a (temporary) halt to the development of new high-end shopping centres as the existing ones recuperate their investment. Innovation through a more focused offering and new formats, such as small-scale neighbourhood retail outlets, will increasingly define operators’ performance. Meanwhile, tourism development across the country is complementing the retail offering in a bid to establish Panama as a regional shopping destination. Provided the country maintain its secure and stable image in the run-up to the upcoming presidential elections, retailers look set for more good news to come.