II. LEADING TRADE PROSPECTS FOR U.S. BUSINESS The sectors highlighted in this section and detailed in Appendix B offer significant market opportunities for U.S. exporters. U.S. products remain competitive in the local market. Panamanians are very receptive to U.S. goods and services. However, other foreign imports are slicing a greater market share of the pie, because of their increasingly higher quality goods at competitive prices. Growth prospects for the next three years correlate directly with continued growth of the Panamanian economy. (Refer to Appendix B for more information on each sector). LEADING AGRICULTURAL SECTOR EXPORTS The best prospects for U.S. Agricultural exports to Panama are basically consumer oriented or high value products, followed by bulk agricultural commodities and intermediate agricultural products. Agricultural Consumer Oriented Products (COP) These products have the greatest market opportunities because of the GOP's trade liberalization program and the strong consumer demand for high quality products. COP products include: processed (canned) fruit and vegetables, beer, snack foods, breakfast cereals, fresh fruits (grapes, pears, and apples) and fruit and vegetable juices. Bulk Agricultural Commodities The market for bulk U.S. agricultural commodities is expected to remain strong as the demand for wheat increases with population and income, and the demand for yellow corn grows in relation to the poultry and livestock industries. Intermediate Agricultural Products These products, such as soybean meal and corn gluten, will continue to represent a good trade prospect, because the demand for these products is expected to grow alongside with the domestic swine and poultry industries in Panama. Vegetable oil is also a good prospect opportunity. Panama imported US$ 10 million in soybean oil in 1993, of which 5% came from the U.S. LEADING INDUSTRIAL SECTOR EXPORTS Building Products The construction sector continues to grow at a double digit rate and has led Panama's impressive economic growth during the last four years. Construction activity remains strong, even though the rate of growth is expected to slow in 1994. Highest growth rates remain in the high cost or residential and commercial areas in Panama City and is expected to expand into other areas in the future. The value of construction permits issued for Panama City and Colon grew by a startling 70 percent in 1993 and by 40 percent in the rest of the country. Prospects for U.S. building products are excellent especially in the fixtures and non-lumber subsectors. Computers and Peripherals The market for computers and peripherals has been strong. It has grown more than 10 percent during the last three years and is expected to grow at an average annual rate of 12 percent during the next three years. Lower import duties for computer products, emphasis in computer education in public schools, and a continued trend in office automation in the private sector, are the bases for a continued strong growth rate in this sector. U.S. products have an excellent reputation for incorporating the latest technology, and declining price tags are making U.S. equipment more competitive against its primary competitors from the Far East. Apparel Panama's relatively high per capita income and the perception of U.S. products as being of high quality and value, have represented important factors in the preference for U.S. apparel products. U.S. products are preferred especially in the medium-to-high income sectors. U.S. exports of apparel products to Panama have grown steadily during the last four years, and are expected to continue this trend for the next three years. Automotive Parts and Services Panamanian imports of automotive parts and service equipment have increased steadily along with the upward growth trend of automobile sales. The market for these products reached the US$ 37 million mark in 1993 and is expected to grow at an average rate of 10 percent during the next three years. Panamanians prefer to purchase high quality U.S. goods, which lower tariffs recently rendered more affordable, i.e. price competitive. Medical Equipment Panama is executing a comprehensive health care program with the Inter- American Development Bank (IDB) loans to upgrade the country's public health care sector. Additionally, private clinics and hospitals are modernizing and expanding their facilities to offer high quality services, comparable to those services available at U.S. medical centers. U.S. medical equipment products are preferred and compete well with their foreign competitors in terms of quality and price. This market is estimated to grow at an average annual rate of 11.5 percent during the next three years and U.S. products are expected to maintain their strong market share. Air Conditioning and Refrigeration Climatic conditions in Panama are the principal factors for the increasing development of the air conditioning and refrigeration equipment market. This market has grown over the last four years and is expected to grow an average annual rate of 12 percent over the next three years. Local consumption for perishable goods is up, as well as the demand for refrigeration and air conditioning equipment by the fishing and food processing industries. Food Processing and Packaging Equipment The food and beverage industry in Panama has grown an average annual rate of 8 percent during the last four years. This growth follows the expansion of the local economy. The domestic food industry represents about half of Panama's total manufacturing output. Industry representatives explain they need to expand production capacity to satisfy local demand and improve their competitive position. Food processing and packaging equipment imports are expected to increase at an average rate of at least 10 percent, in order to support the increased demand for processed food. Telecommunications Equipment The development of the telecommunications sector during the next three years is based upon the expansion of basic telecommunication services. Major projects include new digital telephone lines, expansion of a fiber optic transmission network and a cellular telephone system. These projects represent excellent opportunities for U.S. telecommunication companies. To date, the market is dominated by Japanese and European companies. Agricultural Machinery and Equipment The Government of Panama offers incentive programs such as special interest rates for capital goods acquisition and duty-free treatment for imported agricultural inputs to companies operating in the agricultural sector. The Panamanian agricultural sector is expected to undergo substantial change in order to remain competitive internationally in the future. As a result, new agricultural practices, modern equipment purchases and high technology transfers will be incorporated. These represent excellent sales opportunities for U.S. machinery and equipment. The agricultural machinery and equipment market is estimated to grow at an average annual rate of 10 percent during the next three years. Security and Safety Equipment Panama's economic growth, especially in the commercial and banking sectors, has been associated with increased crime and security-related problems, particularly in Panama City. Banks and large commercial establishments are protecting themselves with more sophisticated security measures. The market for these products is expected to grow at an average annual rate of 11 percent during the next three years. U.S. products are considered to be state-of-the art and price competitive.