Since the arrival of the Spanish in the early 1500s, Panama has taken full economic advantage of its superb geography. The Panamanian isthmus was immediately used to ship the crown's gold from Peru back to Spain. However, because of its dependence on geographical characteristics, Panama has experienced much economic fluctuation as international trade exploded and recessed through the years. For example, when travel across the dangerous isthmus declined centuries ago due to a technology boom allowing ships to sail around Cape Horn more easily, Panama's economy was directly affected. When a railroad was completed across the isthmus, Panama once again experienced a period of economic prosperity as this was now the preferred trade route. Likewise, the completion of the canal marked another dramatic increase in economic growth.
Panama is characterized as a nation whose GPD is developing and improving every year. Compared to other Central American countries, Panama has a very low GDP percentage attributed to the agriculture sector with only slightly more than 7%. Of the nearly 1.5 million person labor force, one-fifth is devoted to agriculture. Such agricultural commodities produced are bananas, coffee, sugarcane, corn, rice, vegetables, livestock, and shrimp. Of these products bananas and shrimp are exported to other nations most notably Spain, the U.S., Italy, and Germany.
Industry accounts for roughly double that of agriculture at just 16% of the national GDP. Of the labor force, roughly 18% is devoted to industry and the production of clothing and textiles, construction materials, sugar, and also the brewing industry. Of these commodities, coffee, sugar, and clothing, are exported around the world. Panama's industrial sector is growing at a rate of 3% per year.
The economic sector that contributes the most to the national GDP is services at over 75%. In addition, this sector accounts for more than 60% of the labor force and includes such services as the operation of the Panama Canal, banking, insurance, flagship registry, and tourism to name only some.
The Panamanian economy has changed significantly in the last several decades. For example, in the 1950s, though the agriculture sector experienced growth and expansion and accounted for 29% of the GDP, this number quickly dropped over 10% in the next fifteen years and another 10% in 1985 to a total amount of 9% of the national GDP. This drastic change was due to the explosion of Panama's services sector. A difficult problem during this period of rapid services growth was policymaker's attempt to use it as a way to also increase agricultural and industrial growth. However, as previously explained, the services sector accounts for a heavy majority of the GDP with agriculture and industry tailing far behind.