Panama: The Dubai of the Americas and rise to become the financial centre of South and Central America

November 4, 2025

This article was published in Gente de America magazine

Panama, a strategically located country in the heart of Central America, is not only known for its geographical proximity between two oceans, but has also established itself as a major financial powerhouse in the region, often referred to as the ‘Dubai of the Americas’. This designation not only reflects the country's dynamic development in the financial and service sectors, but also highlights the geopolitical competition for influence over the Panama Canal, which is essential for global trade.

Panama is strategically located, making it an indispensable hub for international trade. The Panama Canal, a masterpiece of engineering, connects the Atlantic and Pacific oceans and has had a significant impact on global trade since its opening in 1914. By using the canal, ships can avoid enormous detours and significantly reduce transport costs.

The Panamanian economy has achieved remarkable growth rates over the past two decades. Strongly influenced by the service sector, particularly transport, tourism and financial services, the canal contributes significantly to Panama's economic stability. The use of the US dollar as the official currency and the comparatively low inflation rate enrich the country's economic environment.

With the modernization of the Panama Canal, logistics and transport services in Panama have evolved, leading to an increase in international investment in the infrastructure and transport sector. These developments are making Panama increasingly attractive to multinational companies that need a reliable logistics base.

The Panama Canal is not only a significant economic driver, but also a key geopolitical instrument. In recent years, the attention of international players, especially China, has focused on the canal.

China has intensified its economic and political activities in Central and South America in recent years, with the Panama Canal receiving particular attention. Through investments in infrastructure projects and trade agreements, China sought to expand its influence in the region. These efforts raised concerns in Washington, particularly among the Trump administration, which feared for US influence in the region.

In view of this geopolitical challenge, the Trump administration put Panama under considerable political pressure in January and February 2025. The pressure increased because President Trump feared that Chinese investment in the Panama Canal could lead to a strategic loss for the US. Trump warned Panama of possible consequences in terms of trade agreements and international support if it maintained close business relations with China.

Trump threatened the Panamanian government with reviewing existing trade agreements, withdrawing military and economic support from the US, and even using force if Panama did not reconsider its close business relations with China. These threats put considerable pressure on the Panamanian leadership, which had to take into account its geographical and economic dependence on the US.

The Panamanian government was forced to practise seamless diplomacy. It balanced the economic benefits of its relations with China and the strategic Americans. Ultimately, there were a series of bilateral talks between the US and Panama, working towards expanding military cooperation and economic integration to allay US concerns.

In addition to the strong influence of the United States and China, Israel's influence in Panama should not be underestimated. Over the years, Israel has developed a significant and strategic relationship with Panama that has both economic and political dimensions.

From an economic perspective, Panama is an important trading partner for Israel in the Central American region. Bilateral relations between the two countries have strengthened in recent years, particularly through the export of Israeli technologies to Panama's agro-industry, water management and security technologies. Israeli companies are increasingly investing in infrastructure projects and renewable energies in Panama, which promotes the country's economic base and innovative capacity.

One example of this is the implementation of advanced agricultural sciences to support Panamanian agriculture. These technologies help to increase agricultural productivity while contributing to food security.

Politically, Panama is one of the few countries in Latin America that has traditionally maintained close relations with Israel. These relations are characterised by joint security and defence cooperation and support for Israel's position in international forums.

In addition to the geopolitical importance of the canal, Panama is also known for its offshore banking system, which allows international investors to manage assets discreetly and in a tax-optimised manner. This practice has made Panama an attractive financial destination internationally.

The tax advantages and high degree of anonymity offered by the offshore banking system have attracted many foreign investors, including wealthy individuals and multinational companies. However, these practices have met with international mistrust in recent years.

Following the Panama Papers revelations in 2016 and continued pressure from the international community to introduce stricter regulations, Panamanian authorities face the challenge of striking a balance between attracting foreign investment and complying with international standards. The implementation of regulatory reforms should help improve Panama's international reputation.

Tourism is also becoming increasingly important for Panama's economy. With its unique blend of nature, culture and history, Panama offers a variety of experiences that will make any traveller's heart beat faster.

One of Panama's main features is its breathtaking biodiversity. The country is home to several national parks, including the famous Darién National Park and Coiba National Park, which are among the most valuable ecosystems in the world. Here, travellers can discover exotic flora and fauna, from colourful birds and dazzling fish to animal species found nowhere else.

Panama's beaches, especially those on the gentle San Blas Islands and in Bocas del Toro, offer sun-seeking travellers a paradise setting. These islands are known for their unspoilt nature, crystal-clear waters and vibrant underwater world, ideal for diving and snorkelling.

Cultural diversity is another highlight of Panamanian tourism. With roots in indigenous peoples, European conquerors and African immigrants, Panama has a rich history that is reflected in its festivals, traditional cuisine and art. The historic old town of Panama City, Casco Viejo, is a UNESCO World Heritage Site full of colonial architecture and offers restaurants, boutiques and cultural events that immerse visitors in Panama's vibrant culture.

An absolute must-see for every visitor is the Panama Canal, considered one of the greatest engineering feats of mankind. A tour of the locks and a visit to the Miraflores Visitor Centre offer fascinating insights into the workings of this amazing structure that has revolutionised global trade.

Panama is a very diverse country and is of great strategic importance as both a geographical and financial power centre. The coming years will be decisive in determining how Panama can shape its geopolitical and economic strategy to meet the needs of both international investors and geopolitical realities.