Panama, a Latin America procurement hub
Since the completion of the nine-year Panama Canal expansion in 2016, the economy of the Central American country has continued to rise but the automotive market is yet to take off.
Under former president Juan Carlos Varela (2H14-1H19), the economy rose 5.4% per year on average. And in the latest year-over-year comparison, 2018 GDP rose 4.5% to US$65.1 billion.
While inflation was just under 1% in 2018, this year (Q319) is showing prices down some 0.6%. Moreover, the country’s benchmark interest rate was approximately 1.4% last year and unemployment stood at around 6%.
Panama’s new president as of July 2019 is Laurentino “Nito” Cortizo. During his inaugural speech, he vowed to crack down on corruption and reduce the wealth gap in the nation. Panama is among the worst ranked in Latin America when it comes to even income distribution.
President Laurentino Cortizo during UN meeting, 74th assembly (source: Panama government)
As for vehicle sales, a 6% fall was reported in 2018 to 52,500 units, the second consecutive year-over-year decline. Although Toyota led in sales, its performance was down compared to 2017, along with second and third place Hyundai and Kia.
Nissan sales, however, jumped 61.4% in 2018 and various luxury vehicles have seen upticks in sales.
Meanwhile, from January-July of this year, the downward trend continued, dropping by some 5% in the seven-month period to 27,484 units.
The Panama vehicle park is made up of approximately 1.22 million vehicles, roughly one vehicle per three inhabitants, including passenger cars, trucks, and motorcycles. As used car imports are allowed, there are numerous car models in the country and more than 50 brands on roads.
In terms of OEM corporate fleet operations, it is quite low. Approximately 14% of this fleet are light commercial vehicles and 5.5% are heavy long-haul trucks.
A Latam Hub
Although large countries in Latin America such as Brazil and Mexico are common procurement hubs in the region, Panama is also an option due to its centralized position, its business-friendly taxation and incorporation legislation, strong banking system, economic stability, and low currency risk (US dollar).
One recent hub change has been with food and beverage company Nestlé which, in 2016, opened-up a new office in Panama City.
“Through what we call PA 2.0, Nestlé went through a procurement facelift in 2016. This changed a lot of our procurement strategies and this included creating three hubs around the world, being in Switzerland, Panama, and Malaysia,” regional (Americas) procurement manager Polo Palmen told Global Fleet in a recent interview.
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