Panama
Panama's dollarized economy rests primarily on a
well-developed services sector that accounts for 80% of GDP.
Services include operating the Panama Canal, banking, the Colon Free
Zone, insurance, container ports, flagship registry, and tourism.
Economic growth will be bolstered by the Panama Canal expansion
project that began in 2007 and is scheduled to be completed by 2014
at a cost of $5.3 billion - about 25% of current GDP. The expansion
project will more than double the Canal's capacity, enabling it to
accommodate ships that are now too large to transverse the
transoceanic crossway, and should help to reduce the high
unemployment rate. Strong economic performance has reduced the
national poverty level to 29% in 2008; however, Panama has the
second most unequal income distribution in Latin America. The
government has implemented tax reforms, as well as social security
reforms, and backs regional trade agreements and development of
tourism. Not a CAFTA signatory, Panama in December 2006
independently negotiated a free trade agreement with the US, which,
when implemented, will help promote the country's economic growth.
Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 75% of the population. Mineral deposits,
including copper, gold, and oil, account for nearly two-thirds of
export earnings. The government of Prime Minister SOMARE has
expended much of its energy remaining in power. He was the first
prime minister ever to serve a full five-year term. The government
also brought stability to the national budget, largely through
expenditure control; however, it relaxed spending constraints in
2006 and 2007 as elections approached. Numerous challenges still
face the government including regaining investor confidence,
restoring integrity to state institutions, promoting economic
efficiency by privatizing moribund state institutions, and balancing
relations with Australia, its former colonial ruler. Other
socio-cultural challenges could upend the economy including a
worsening HIV/AIDS epidemic, currently the highest rate in all of
East Asia and the Pacific, and chronic law and order and land tenure
issues. Australia supplied more than $300 million in aid in FY07/08,
which accounts for nearly 20% of the national budget. A consortium
led by a major American oil company hopes to begin the
commercialization of the country's estimated 227 billion cubic
meters of natural gas reserves through the construction of a
liquefied natural gas (LNG) production facility by 2010. The project
has the potential to double the GDP of Papua New Guinea.
Paracel Islands
The islands have the potential for oil and gas
development. Waters around the islands support commercial fishing,
but the islands themselves are not populated on a permanent basis.
China announced plans in 1997 to open the islands for tourism.
Paraguay
Landlocked Paraguay has a market economy marked by a large
informal sector, featuring reexport of imported consumer goods to
neighboring countries, as well as the activities of thousands of
microenterprises and urban street vendors. A large percentage of the
population, especially in rural areas, derives its living from
agricultural activity, often on a subsistence basis. Because of the
importance of the informal sector, accurate economic measures are
difficult to obtain. On a per capita basis, real income has
stagnated at 1980 levels. Most observers attribute Paraguay's poor
economic performance to political uncertainty, corruption, limited
progress on structural reform, and deficient infrastructure. The
economy rebounded between 2003 and 2008, however, as growing world
demand for commodities combined with high prices and favorable
weather to support Paraguay's commodity-based export expansion.
Paraguay is the sixth largest soy producer in the world.
Peru
Peru's economy reflects its varied geography - an arid coastal
region, the Andes further inland, and tropical lands bordering
Colombia and Brazil. Abundant mineral resources are found in the
mountainous areas, and Peru's coastal waters provide excellent
fishing grounds. The Peruvian economy grew by more than 4% per year
during the period 2002-06, with a stable exchange rate and low
inflation. Growth jumped to 9% per year in 2007 and 2008, driven by
higher world prices for minerals and metals and the government's
aggressive trade liberalization strategies. Peru's rapid expansion
has helped to reduce the national poverty rate by about 15% since
2002, though underemployment and inflation remain high. Despite
Peru's strong macroeconomic performance, overdependence on minerals
and metals subjects the economy to fluctuations in world prices, and
poor infrastructure precludes the spread of growth to Peru's
non-coastal areas. Not all Peruvians therefore have shared in the
benefits of growth. President GARCIA's pursuit of sound trade and
macroeconomic policies has cost him political support since his
election. Nevertheless, he remains committed to Peru's free-trade
path. The United States and Peru completed negotiations on the
implementation of the US-Peru Trade Promotion Agreement (PTPA), and
the agreement entered into force February 1, 2009, opening the way
to greater trade and investment between the two economies.
Philippines
Economic growth has averaged 5% since President
MACAPAGAL-ARROYO took office in 2001. MACAPAGAL-ARROYO averted a
fiscal crisis by pushing for new revenue measures and, until
recently, tightening expenditures. Declining fiscal deficits,
tapering debt and debt service ratios, and increased spending on
infrastructure and social services bolstered optimism over
Philippine economic prospects. Although the general macroeconomic
outlook improved significantly in recent years, the economy still
faces several long term challenges. The Philippines must maintain
the reform momentum in order to catch up with regional competitors,
improve employment opportunities, and alleviate poverty. The
Philippines will need still higher, sustained growth to make
progress in alleviating poverty, given its high population growth
and unequal distribution of income. The Philippine economy grew at
its fastest pace in three decades in 2007 with real GDP growth
exceeding 7%, but growth slowed to 3.8% in 2008 as a result of the
world financial crisis. High government spending, a relatively small
trade sector, a resilient service sector, and large remittances from
the four- to five-million Filipinos who work abroad have helped
cushion the economy from the current financial crisis.
Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships. In October
2004, more than one-quarter of Pitcairn's small labor force was
arrested, putting the economy in a bind, since their services were
required as lighter crew to load or unload passing ships.
Poland
Poland has pursued a policy of economic liberalization since
1990 and today stands out as a success story among transition
economies. In 2008, GDP grew an estimated 4.8%, based on rising
private consumption, a jump in corporate investment, and EU funds
inflows. GDP per capita is still much below the EU average, but is
similar to that of the three Baltic states. Since 2004, EU
membership and access to EU structural funds have provided a major
boost to the economy. Unemployment is falling rapidly, though at
roughly 9.7% in 2008, it remains above the EU average. In 2008
inflation reached 4.3%, more than the upper limit of the National
Bank of Poland's target range, but has been falling due to global
economic slowdown. Poland's economic performance could improve
further if the country addresses some of the remaining deficiencies
in its business environment. An inefficient commercial court system,
a rigid labor code, bureaucratic red tape, and persistent low-level
corruption keep the private sector from performing up to its full
potential. Rising demands to fund health care, education, and the
state pension system present a challenge to the Polish Government's
effort to hold the consolidated public sector budget deficit under
3.0% of GDP, a target which was achieved in 2007-08. The PO/PSL
coalition government which came to power in November 2007 plans to
further reduce the budget deficit with the aim of eventually
adopting the euro by 2012. The new government has also announced its
intention to enact business-friendly reforms, reduce public sector
spending growth, lower taxes, and accelerate privatization. The
government, however, has moved slowly on major reforms. Pension and
health-care bills passed through the legislature, but the
legislature failed to overturn a presidential veto.
Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, successive governments have privatized
many state-controlled firms and liberalized key areas of the
economy, including the financial and telecommunications sectors. The
country qualified for the European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-08. GDP per capita stands
at roughly two-thirds of the EU-27 average. A poor educational
system, in particular, has been an obstacle to greater productivity
and growth. Portugal has been increasingly overshadowed by
lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. The budget deficit surged to an all-time
high of 6% of GDP in 2005, but the government reduced the deficit to
2.6% in 2007 - a year ahead of Portugal's targeted schedule.
Nonetheless, the government faces tough choices in its attempts to
boost the economy, which declined 0.1% in 2008, while keeping the
budget deficit within the euro-zone 3%-of-GDP ceiling.
Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, US
firms have invested heavily in Puerto Rico since the 1950s. US
minimum wage laws apply. Sugar production has lost out to dairy
production and other livestock products as the main source of income
in the agricultural sector. Tourism has traditionally been an
important source of income with estimated arrivals of nearly 5
million tourists in 2004. Growth fell off in 2001-03, largely due to
the slowdown in the US economy, recovered in 2004-05, but declined
again in 2006-07.