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Panama's dollar economy is not the only rare aspect of its economy in comparison to its Central American neighbors. It is not a signatory of the Central American Free Trade Agreement (CAFTA).

Rather than sign CAFTA, Panama negotiated its own free trade agreement with the U.S. The agreement, signed June 28, "will help promote the country's economic growth," according to the CIAWorld Factbook.

The Panama Canal is a center of trade and a key feature in Panama's overall economy. What used to be an isthmus has been a canal and a key to trade since the early 20th century. By the end of the 2006 fiscal year, 943,032 vessels had used the canal, according to the Panama Canal Authority.

"The waterway moves 4 percent of the world's cargo," according to the AssociatedPress.

The Panama Canal is a center of trade and a key feature in Panama's economy

The Panama Canal is undergoing an expansion that began Sept. 3. Two sets of locks—wider than the ones in place—are going to be constructed on each side of the canal.
"The $5.25 billion expansion is expected to double the 50-mile canal's capacity and lower the price of consumer goods on the East Coast of theUnited States by allowing wider vessels to squeeze through with more cargo," according to the Associated Press.

"In addition to benefiting international trade, the new locks are expected to generate more revenue for the canal and Panama's government," according to the Associated Press. Such projects are meant to draw tourists, but, in addition to drawing tourists themselves, Panama wants toattract those who invest in tourism.

"In 1994, Panama passed Law No. 8—still the most modern and comprehensive law for the promotion of tourism investment in Latin America and the Caribbean," according to "In so-called Special Tourism Zones, Law 8 offers incentives such as 100 percent exemption from income tax, real estate tax, import duties for construction materials andequipment, and other taxes."

The banking industry is certainly benefiting from investors. "In the first five months of this year, Panamanian banks reported profits of $444.1 million, up 19.4 percent from the same period in 2006. The banks say credit is expanding 15 percent a month," according to The Dallas Morning News.

There is a lot of development and growth happening in Panama inaddition to that happening within the tourism industry. "We have the canal expansion coming in here. It's about a $5 billion project. There [are] two oil refineries coming into Panama, both about $6 billion projects," Duda said. "Panama now has the largest number of mega projects going on in the whole world."

It is this overall growth and expansion that makes many optimistic about Panama's economy,both in the present and in the future. "The expansion of the Panama Canal, hopes for big energy investments and happy days in the banking industry all point to rapid economic growth," according to The Dallas Morning News.

There is a lot of optimism surrounding Panama as an investment location because it is experiencing growth across a wide variety of sectors. While many markets take offbecause of one outstanding feature, Panama's success does not hinge on any individual trend.

|Panama's economy is 64.7 percent free, according to our 2008 assessment, |  | |
|which makes it the world's 50th freest economy. Its overall score is | ||
|essentially unchanged from last year. Panama is ranked 12th out of 29 | | |
|countries in the Americas, and its overall score is higher than the | | |
|regional average....
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