Despite slower GDP growth in 2014 – 6.5% compared to 8.4% in 2013 – Panama remains one of the fastest-growing economies in Latin America and the Caribbean, with regional counterparts averaging 5.5%. According to figures from the World Bank and the IMF, while the Panamanian economy is currently the 13th largest in the region, with a nominal GDP of $43.8bn, growth is set to continue at around 6% annually, which will make it the ninth largest in the region by 2026-27. Profiting from the advantageous general conditions, Panama’s retail sector has continued to expand over the past two years, with a spillover effect on the construction sector.

Rapidly growing demand for retail space has resulted in a construction boom. According to international real estate consultancy CBRE’s “Panama City Office Market View” report, Panama City currently offers 5363 retail properties, with 1.18m sq metres of commercial space, including the 563,607 sq metres that were still under construction as of the end of 2014. Most of these newly erected premises are shopping malls of different classes, including high-end malls that offer brand names (see analysis).

In addition to positive real estate conditions, the country boasts the lowest level of inflation in Central America, with a rate of 2.6% at the close of 2014. At the same time, the consumer price index decreased substantially in the transport services category as a result of the drop in fuel prices. Additionally, food costs remained stable due to price controls imposed in July by President Juan Carlos Varela. In 2013 the unemployment rate fell to 4.1%, hitting its lowest level in the past 40 years, before increasing again in 2014 to 4.8%.

Healthy Indicators

In recent years, the economic situation of Panamanians has improved significantly, providing a boost for the retail market, especially for products aimed at the growing middle class. Between 2007 and 2010 poverty levels decreased by 11%, while the middle class grew by 10%. According to World Bank statistics, the middle class now represents 39.75% and the upper class 3.73% of the Panamanian society. In addition, the country has experienced a significant increase in the number of foreign residents. Expatriates, often working in executive-level positions for multinational companies operating in the country, are another high-end target for retail chains.

Market Breakdown

Panama’s retail sector is dominated by specialty stores, which account for 30.9% of the market and occupy 365,361 sq metres of commercial space. Department stores represent 17.2%, or 203,776 sq metres, while supermarkets make up 8.2% of the market. The biggest conglomerates present in the Panamanian market are supermarket chains Riba Smith, El Rey and Super 99, while the food and beverage retail sector has experienced a growing influx of foreign brands.

In recent years multinational food and beverage company Nestlé has seen its operations in Panama grow by 10% year-on-year on average. In mid-2014 the firm, which already has two factories in Panama, opened a new distribution centre in Panama City’s logistics hub Parque Sur. Entailing an investment worth $20m, the new distribution centre was built with future expansion in mind, as the market is likely to remain dynamic. It offers 40% more warehouse space and 50% more handling capacity.

There are also growth opportunities for private label brands. At present, they constitute only 2% of supermarket revenues; however, consumer behaviour is changing and the popularity of private label products continues to increase. According to the World Bank, household final consumption expenditure as a percentage of GDP was 57.7% in 2012, the most recent year for which figures were available.

The consumer confidence index (CCI) also indicates that Panamanians are optimistic about the country’s economic potential with a score of 131 points – 31 points above the equilibrium – as of January 2015. According to Mikael Pasco, the Panama country manager for global market research company IPSOS, the CCI reached the highest level recorded in recent years. These favourable economic indicators have also contributed to the recent boost in the local trade industry. In 2014 income from retail and wholesale trade was worth over $6.2bn and accounted for 17% of the country’s GDP.

Because of these strong trade figures, combined with other economic indicators, Panama ranked as the second-most-competitive economy in Latin America, after Chile, in the World Economic Forum’s (WEF) “Global Competitiveness Report 2014-15”. The country also ranked highly for indicators that bode well for the sector, such as 39th out of 144 for buyer sophistication, 19th for ability to retain talented staff and 44th in extent of marketing.

Investment & Newcomers

One of the cornerstones of Panama’s expanding retail landscape is the construction of the SOHO Panama Mall, which will be officially inaugurated in September 2015. The $360m shopping centre will specifically target upscale customers and house high-end international brands, including Louis Vuitton, Fendi and Burberry, among others (see analysis).

Meanwhile, a more diversified offer will be found at Alta Plaza, in the northern part of Panama City, where outlets of this kind have yet to reach a high degree of penetration. The project is valued at $160m and the 66,000-sq-metre property will house brands such as Adidas, Calvin Klein, Nike, Forever 21 and Nine West. Alta Plaza is scheduled to open its doors to customers in September 2015.

Although new retail areas are emerging in all parts of the city, there are some neighbourhoods that have attracted more interest than others. Most retail branch investments in 2014 were located in the traditional shopping district of El Dorado in Panama City’s downtown and Periferia Este, which is logistically convenient because of its proximity to Tocumen International Airport (TIA). A number of shopping malls are also opening in other areas of Panama City. The municipality of San Miguelito will soon be home to a 13-storey mall that will include 103 shops. The investment in Hacienda Plaza is worth $26m, with work on the project beginning in January 2015.

Retail Tourism

Over the short to medium term, the retail industry should also benefit from increased marketing efforts to support growth in the tourism sector. The industry is already a major pillar of the Panamanian economy: between 2013 and 2014 investments in the hotel segment exceeded $200m. Building on its existing beach and resort offerings, Panama is seeking to enrich its cultural attractions as well. In addition, by investing almost $200m in the construction of a new convention centre, Panama’s authorities and entrepreneurs aspire to turn the country into a venue for international conventions. Given Panama’s popularity as a tourism destination, it is unsurprising that tourists account for a significant percentage of both shoppers and purchases.

Recognising the economic importance of tourism and travel, even if the visit is just a layover, Panama’s Copa Airlines intends to increase the number of foreign visitors by introducing new international routes. This strategy has turned TIA into a regional hub for passengers travelling onwards to other destinations in South and North America, such as New Orleans and Montreal, among others. The airport authorities have decided to take advantage of the situation and have recently begun to work on enhancing the quality and variety of its shopping offer. There are plans to open 40 new stores in 2015, and establish outlets selling products from a broader range of categories. The estimated income from the rental of the new commercial space will reach $30m by end-2015.

Increasing connectivity outside the capital from the construction of new airports, including the $17.3m Scarlett Martinez International Airport in Coclé and the $27.4m Enrique Malek International Airport in David, Chiriquí, will also provide tourists with access to a growing retail offer on the way to and from the provinces’ many beach resorts.

Colombian coffeehouse chain Juan Valdez and Starbucks are believed to have already submitted tenders for the new airport retail space. Regardless of the outcome of the tender, Starbucks is set to enter the Panamanian market in mid-2015. The US coffee company will begin by opening its first store in Street Mall – another new shopping centre set to be inaugurated by mid-2015 in Panama City.

In April 2015 California-based international frozen yogurt franchise Pinkberry, which is part of Royal Food Services, announced the opening of its first two shops in the country, located in Plaza Costa del Este and Balboa Boutiques, both in Panama City. Roshni Dinani, president of Royal Food Services, believes the Panamanian market presents several opportunities for growth. Pinkberry aims to establish a total of 10 stores by year-end 2016. The investment in each outlet will be worth between $250,000 and $350,000, and each shop will hire around 10 employees.


Informal Retailing

According to the 2013 labour market survey, nearly 1.74m of Panama’s 3.9m residents are economically active and over 1.67m are employed. While the unemployment rate is low, the Panamanian government still faces the problem of the informal economy. Elizabeth Tinoco, the International Labour Organisation’s regional director for Latin America and the Caribbean, noted in a June 2014 report that despite the seriousness of the situation, significant progress has been made on the issue of formalisation. Indeed, the number of informal workers in Panama decreased by almost 2.5% between 2011 and 2013; however, informal employment still accounts for 38.6% of the workforce, most of which is represented by informal retailers. According to data from the National Competitiveness Centre (Centro Nacional de Competividad, CNC), the informal economy comprises over 194,000 small and medium-sized enterprises (SMEs).

Street vendors selling food, fruit and vegetables, as well as fake branded electronics, clothes and accessories account for significant percentage of informal employment. Local authorities estimate there are around 2000 informal grocery stalls in Panama City alone. However, it is the vendors who suffer the consequences of their unregulated status, the most serious of which is the lack of social security benefits. In order to address the issue the CNC, under the auspices of the Ministry of Economy and Finance (Ministerio de Economía y Finanzas, MEF), has introduced a Support Programme for the Informal Sector. The programme aims to encourage formalisation through the development of guidelines and regulations, as well as by facilitating access to financial services for SMEs.

Online Retail

According to the WEF’s “Global Information Technology Report 2015”, Panama’s telecoms and technology infrastructure is among the best in Latin America, ranking 19th in terms of affordability and 41st in business and innovation environment out of the 143 countries covered.

Panama’s digital potential is being leveraged by online retailers. In 2014 its e-commerce industry was worth $330m, and Euromonitor forecasts that total will reach $700m by 2018. Although by early 2015 not more than 5% of Panamanian retailers sold their products online, the relevance of the online market increases significantly at the consumer level.

Aware of the attractiveness of the local market, French discount online retailer Cdiscount recently launched a new branch in Panama. The retail giant, already operating on four continents, offers a variety of products ranging from clothing to electronics. Many other local e-commerce retailers, such as Mercader, 2GoStore and Linio Panamá, are also gaining popularity among consumers. Considering the current trends and the country’s economic and ICT capabilities, the demand for online shopping is expected to continue to grow, offering opportunities for new online retailers and consumers.


Situated in the heart of the Americas and home to the Panama Canal and Colón Free Trade Zone (CFTZ), the world’s second-largest free trade zone after Hong Kong, the country is commonly recognised as an international distribution and re-export hub. The expansion of the canal will continue to increase the commercial activity surrounding the transport and logistics industry. The WEF’s “Global Competitiveness Report 2014-15” ranked the quality of Panama’s port infrastructure as the seventh best in the world.

Additionally, Panama’s investment incentive framework is contributing to the expansion of both local and international trade and encouraging an increasing number of companies to open warehouses and distribution centres in the country. The construction of a major merchandise distribution project in the capital is currently being discussed by Panamanian authorities, the Development Bank of Latin America and representatives from the private sector. According to the proposal, the centre would portion out the cargo coming in from the ports, tax it, repackage it and then deliver it to its final destination.

Another logistics investment plan revealed in late 2014 is the possibility of a Walmart distribution centre in the CFTZ to serve Latin America and the Caribbean. While negotiations have not been finalised, it has been made public that a group of Panamanian businesspeople have approached the US corporation to promote the country as a competitive location for the distribution centre.


Taking into consideration the recent performance of Panama’s economy, there are numerous prospects for the retail industry. However, increasing demand and an influx of new players and investments in the sector also pose challenges for local authorities. According to US agency, the labour market is a subject of concern. Panama’s labour laws lack flexibility and consequently may discourage international players from entering the market. Local regulations protect employees from being fired, making it nearly impossible in many cases. As a result, labour mobility is rather limited. In addition, the report mentions that there is a deficit of highly specialised, English-speaking technical workers, which is an issue for foreign companies looking to establish a presence. Also, in order to consolidate the position of Panama as a distribution centre, some adjustments should be made in the administrative field. Although Panama is rated by Forbes as the sixth-best country for doing business in Latin America and second in Central America, foreign investors would appreciate reassurances due to concerns over past government practices, including bidding procedures and contract obligations.

The country’s distribution infrastructure will receive a boost from the ongoing expansion of the canal. A third set of locks, as well as deepening and widening of the existing channels, will double the canal’s capacity and allow for the transit of post-Panamax vessels. This will present attractive development opportunities for the logistics sector. In order to take full advantage of the anticipated increase in the trade industry, a lot remains to be done with respect to transport infrastructure. Panama’s roads are among the best and safest in Central America, according to the WEF’s ranking, although 7500 km of its total road network of 11,000 km remain unpaved.

In addition, the network of highways is not evenly distributed, which can hinder distribution in some parts of the country. Last but not least, the Association for Safe International Road Travel observed that there is lack of traffic lights at some key intersections and that many sections of the highways are not illuminated properly and are poorly maintained, which often results in serious car accidents. In short, much needs to be done to enhance the quality of Panama’s road infrastructure.

To address the issue, MEF recently announced a new project aimed at supporting and enhancing the logistics sector in the short term. In addition to refurbishing some neglected ports and building new moorings, much attention has also been paid to the development of the highway network. The cost of all of the planned investments is estimated at $3.28bn, of which $2.9bn will be dedicated to financing the construction of new roads.


Development prospects for the retail sector are promising. The stable economic outlook, one of the highest GDP growth rates in Latin America and a strong business forecast are likely to continue to drive growth in retail consumption. Meanwhile, the country’s tourism marketing strategy and the growing presence of highly specialised foreign employees will also contribute to boosting demand.

The ongoing public investments in infrastructure, especially the expansion of the Panama Canal and TIA, as well as the construction of new retail spaces, will increase the country’s commercial capacity. The recent entry of luxury brands to the local market has diversified the retail landscape, and this trend is expected to continue in the near future.

With the construction of the high-end SOHO Panama Mall, the extension of upscale wings at other shopping malls and the expansion of TIA’s duty-free area, Panama is competing with other regional markets as an international shopping destination. The number of foreigners who visit Panama, attracted by its low sales tax and broad retail offer, is increasing and they have become an important retail segment. These visitors are mainly from other Latin American countries, especially Colombia, Brazil and Venezuela. Given the expansion plans of Copa Airlines, which plans to increase foreign visitor numbers by introducing new routes, Panama may soon become even more popular as a shopping destination.

Additional opportunities are present for online retailers. Highly rated ICT infrastructure and the rising popularity of e-commerce among local consumers also support retail growth in the country.