Panama - Current economic position and prospects

RETURN TO RESTRICtE REPORTS DES Report No.WH-91a WITHtN JF!Jj CORIYReotNW-l ! NEI WEEK This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CURRENT ECONOMIC SITUATION AND PROSPECTS OF PANAMA March 8, 1960 Department of Operations Westerrn Hemisphere  CURRENCY EQUIVALENTS U.S.$1 - 1 balboa (bi) 1 balboa - U.S.$1 bl. I million - U.S.$l million  TABLE OF CONTENTS Page No. BASIC DATA SUMMARY AND CONCLUSIONS ii I. INTROQUCTION: Land, People and Government 1 II. GROWTH OF THE INTERNAL SECTOR 2 III. GROWTH OF THE EXTERNAL SECTOR 4 IV. INTERNATIONAL PAYMENTS DEVELOPMENTS b V. THE FIlSCAL PROBLEK 8 VI. LONG RANGE PROSPECTS AND CREDITWORTHINESS 12 VII. APPENDICES A. Projection of External Earnings: 1959-1968 B. Public Debt C. Statistical Appendix: Tables 1-26  BASIC DATA Area, square miles 28,753 Population, mid-1959 1,024.,000 Gross domestic product, million $ $ 385 Per capita gross domestic product, 1958 $ 385 Gross capital formation, 1958 million $ $ 58.2 % of GDP 15% Commodity Exports, 1958 million $ $ 42.5 % of GDP 11% Foreign exchange receipts, 1958 million $ $ 86.3 % of GDP 22.5% Public revenue, 1958 million $ $ 52.9 % of GDP 13.8% Gold and foreign exchange reserves, end of 1958 million $ $ 48.0 % of imports 58% Public External Debt, June 30, 1959 million $ $ 41.2 1959 service, million $ $ 1.7 % of 1959 foreign exchange earnings 2% % of 1959 government revenues 3.3% Public Internal Debt, June 30, 1959 million $ $ 32.6  - ii - SUN4ARY AND CONCLUSIONS 1. During the last decade Panama achieved impressive gains in national income. Between 1950 and 1958 the gross national product ex- panded at an annual average rate of 5.1% against a rate of population growth of 2.6%. Capital formation increased by 9.3% per year. Income per capita in 1958 was estimated at $385, among the highest in Latin America. The growth of GNP has been primarily due to the increased activities in the main cities and the Canal Zone which have attracted a part of the under employed rural population. The increase of agri- cultural output was more pronounced in commercial enterprises producing bananas, rice, sugar, dairy products, beef cattle and shrimp for com- mercial markets than in farms growing basic food crops. 2. The Government's efforts to foster economic development have consisted mainly of granting tax and tariff exemptions to new enter- prises and of starting a road building program which connected some of the rural areas with urban markets. There has also been some extension of social and health services and improvement of education facilities. Except for very recent legislation aiming at the improvement of land utilization no serious effort has been made to formulate and apply policies needed to improve the agrarian structure of the country. 3. Reflecting the general economic growth of the country, govern- ment revenues also increased in absolute figures as well as in relation to GNP. Expenditures grew simultaneously mainly in the fields of social welfare, health, ecducation and in the general costs of adminis- tration. The share of capital expenditures in total budget expenditures declined from 17% in 1952 to 13% in 1958 and much of the government in- vestment was not made for directly productive purposes. During the five years preceding 1959, surpluses on current account were not large enough to cover investments and total public expenditures exceeded total public revenues. 4, In the past, deficits were financed by borrowing partly abroad and partly by means of local bond issues. The Government, apparently, intends to continue this practice for the current budgetary year and internal bond issues to cover the expected deficits of 1960 through 1962 have been authorized. So far government bonds have had good acceptance in Panama; the last two issues were fully subscribed but not as quickly as in the past although they were tax exempt and carried 6% interest. About one-third of all domestic bonds is in the hands of private individuals; the remainder is held mainly by the Social Security Institute.  (iii) 5. As in the past, a certain increase of government revenue, probably not less than 5% per annum, will result from further growth of the economy. Tax reforms in 1956 and 1957 already produced an increase in revenue, and fiurther efforts in this direction are planned. There is also room for better enforcement of tax laws. 6. With regard to the balance of payments on current account, in every one of the six years preceding 1959 surpluses from trans- actions with the Canal Zone have exceeded trade deficits with foreign countries. It is estimated that, during the next decade, income from the Canal Zone and from tolrism and transit trzde will rise by about 50%, income from the banana companies by about 70% and income from other exports like sugar, cattle, meat and shrimp will more than double. Total external receipts from commodities and invisibles are expected to increase from a level of $86 million in 1958 to around $135 million in 1968. At the same time, imports, already largest per head in Central America, are expected to grow less rapidly, principally because increased domestic production is expected to supply a larger share of internal foodstuff requirements. The feeder roads project itself by opening up large areas of agricultural land wouldcontribute to the realization of these expectations. 7. Panama's external debt reached $41.2 million in mid-1959 of which $13.1 million has not been disbursed. The highest annual service of that debt amounts to $3.1 million in 1963, or less than 3% of the countryts foreign exchange earnings and less than 5% of anticipated government revenues. Service charges on the external debt, considered by themselves, are not, therefore, likely to weighrheavily on the country's balance of payments. 8. Panama has no central bank and uses the U.S. dollar as its currency. Hence it is important to take account of the aggregate internal and external position in an assessment of Panama's creditworthiness. Service charges on the outstanding debt (external and internal) will reach a peak in 1964 when they would absorb about 9% of Government revenues -- estina ted on the assumption that revenues would increase at a rate commensurate with the growth of the economy but that there would be no major increase in taxes. It should not be difficult to meet these charges. But a further sub- stantial increase in domestic borrowing to finance public expenditures would adversely affect the Government's ability to obtain and service additional loans. Moreover, there is need for judicious selection of the projects to which loan proceeds, as well as revenues available for capital expenditures, are applied.  I. INTRODUCTION: LAND, PEOPLE AND GOVERNMENT 1. Panama is the youngest and, in terms of population (l,024,000 on July 1, 1959), the smallest republic in the Western Henisphere, Its size exceeds the combined area of Costa Rica and El Salvador. Its land is fertile and its topography and climate are suited to the production of tropical products such as bananas, various food crops and cattle. A large proportion of the land, variously estimated at 75-90%, is state-owned. The area under cultivation :is estimated at 10-15% of the total and its ex- pansion awaits, among other things, the building bf highways and feeder roads. The western part of the country, which lies between the Canal and Costa Rica, includes the populous and developed areas of the Republic, while the south-eastern part is virgin territory where only a few aborigi- nal Indians live. 2. In spite of the rapid growth of the economy in the last decade, there have not been any significant changes in its structure, Agricul- ture continues to be the most important economic activity. In 1958 about 26% of the gross national product was derived from agriculture and more than half of the country's labor force of 290,000 earned their living in agricultural pursuits. The substantial migration from farm to city has been caused by the recent growth of employment opportunities in the terminal cities of the Canal and the concentration of government expenditures in Panama City. While the Capital received a large share of government ex- penditures, outlays in the rural areas on roads, electric power, agricul- tural extension stations and farm credit, essential to stimulate local pro- duction, have been inadequate. 3. The economy of Panama has several distinctive characteristics. First, a substantial part of its income from abroad consists of payments for services performed in the Canal Zone. Second, Panama has no central hank to which the Government could have recourse to finance its deficits. largely because of that, inflation has been avoided and the level of prices has remained stable. Third, the use of the U.S. dollar as the circulating medium, the full convertibility of the currency and the absence of exchange controls have offered strong incentives to foreign investment. 4. The absence of strong fiscal management and of a coordinated policy on the part of public agencies has greatly hindered the formulation and execution of sound public invest- ment programs. In the last two years, the Government has had to contend with a decline of economic activity. In an effort to combat unemployment, it has increased expenditures without a corresponding rise in revenues. As a result, substantial deficits occurred and the public debt rose rapidly.  II. GROWTii OF THE INTENAL SECTOR 5. Panama achieved impressive gains in national income during the last decade. World War II was followed by a period of boom years with high levels of output and employment, In 1958, the gross domestic pro- duct was estimated at $385 million (i.e. $385 per capita), 45% larger than the 1950-51 average. The annual rate of growth was thus 5% annually, against a rate of population growth of 2.6%.; 6. The impressive grcwth of GiNP has been primarily due tto expansion of the domestic sector. The increased activities in the terminal cities and the Canal Zone attracted a large part of the underemployed rural popu- lation, The migration of labor to the urban areas, however, did not ad- versely affect farm production. Agricultural output increased 55% since 1950 and the country has become self-sufficient in corn and rice, and now exports sugar, meat, coffee and a few other agricultural products. These developments were the outcome of increased use of capital-intensive methods in agriculture, the high price support of some farm commodities and the expansion of land under cultivation. 7. The building of new roads and the extension and improvement of the existing ones have to some extent removed what had been a major obstacle to the expansion of agricultural production. The construction of two highways, one partly financed by IBERD, and the other by Eximbank, made it possible to connect rural areas with existing markets, and thus made it economically attractive to put more land under cultivation. Other measures have been taken to encourage expansion of both the domestic and external markets. The Economic Development Institute, (IFE), established minimum prices for such basic commodities as corn, rice, coffee and sugar, In the case of export commodities, (e.g. coffee and sugar), the minimum prices become support prices. In the domestic market, their purpose is to protect the farmer from being forced to sell his crops to processors, warehouse owners and middle- men at excessively low prices. 8, Notwithstanding these favorable developments, subsistence farming continues to be the main characteristic of Panamats agriculture. The major part of the cultivated land is still inefficiently farmed. Nearly half of the occupied farm land is held by squatters who continue to eke out a bare subsistence. Since they have no title to the land they occupy and have no other type of security to offer, they cannot obtain long or medium-term credit from existing financial institutions. They are forced to borrow from money lenders at unfavorable terms. As a result, agricultural tech- niques remain primitive and productivity is low. While the area under basic food crops (corn, beans and rice) rose by 32% from 195b/1951 to 1957/ 1958, output of these crops increased by 20% only. This slow growth how- ever was compensated by the emergence of large scale agricultural enter- prises applying modern techniques in the production for commercial markets of bananas, rice, sugar, dairy products and beef cattle. Prcduction of these commodities expanded at such a rapid rate that it made up for the sl&w growth of other food crops. The overall expansion in the agricultural 2 All values shown in the report are at current prices. Since the price level has been virtua'Lly stable throughout the 1950's, no corrections for price changes have been made.  - 3 - sector during 1950-1958 amounted to 55%, or 5ol% per year, almost the same rate as that of the national product. This helped maintain the share of agricultural production in GNP at about 26%v 9. Expansion of agricultural income provided a stimulus for the setting up of new plants and the ex)ansion of the existing ones.y Most of these plants catered to the internal market with such commodities as beverages, processec. food, wood and clay articles, tobacco products and cement. Between 1950 arid 1956, however, industrial expansion was rather slow and manufacturing rose by about 3% per annum on the average. 10. The small size of the Panamanian market has been a big handicap to industrial growth. Until recently, many entrepreneurs preferred to exploit the cormercial opportunities provided by the Canal traffic rather than to venture into industry. Investment in real estate also was more attractive, partly because of large demand for houses and office space and partly because of the stimulation which an exemption from import duties and income taxes provided for the construction and remodeling of houses during a five-year period ending December 31, :1959. In view of these factors, a substantial part of capital investment was devoted to the construction of luxury dwellings and office buildings. 11. Since 1956, however, manufacturing has increased by about 6% per arnum. This rapid rate of growth has been associated with a rise in invest-- merit outlays. During the period 1956-58, the share of gross investment in GNP amounted to 16.5% against 114% in 1950-1952. Most of this increase ori- ginated in the private sector; private capital formation increased from an annual average of $22 million over the period 1950-52 to $48 million in 1956- 58 and its share in total investment outlays rose from 72% to 85% (Table l4) A sizeable portion of these investment outlays has been used to import capital equipment and machinery on an increasing scale (Table 15), to expand pro- duction of powdered milk, butter and other dairy products; new plants produced commodities previously imported such as polyetnlene products, storage batteries, edible oils, cigarettes, beer, frozen meat and fruit juices. 12. The growth of investment was helped by an inflow of foreign capital. at a fairly rapid rate. As of December 31, 1957. the only date for which information is available, the declared capital of foreign companies holding licenses amounted to $147 million. This estimate does not include companies engaged in agriculture, fisheries and services as these act;ivities were not subject to license.. The investment by subsidiaries of the Ur.ited Fruit Com- pany and of American and Foreign Power, the two major U.S. inr-estors in Panama, was estimated at $28 million each in 1959. The Power Compar.y plans to expaond in 1960 its facilities and add 50,000 kw to its generating capacity. The cost of the new investment is estimated at $ 22-24 million. 13e Manufacturing expansion was reinforced by additional factors. Lo- cally produced comnodities were protected by exceedingly high tariffs. Under the Development of Industries Law, the Government awarded special concessions to manufacturing enterpi2ises using local labor and matcrial; these concessions include the exemption from import duties on fuel, equipment and raw materials  - h - and from income taxes for a period of 15 years. The existence of a reservoir of rural under-employed labor willing to work at low wages, the availability of power ancd the abundance of local raw materials were among the important additional causes for the recent industrial ex- pansion. III. GROWTH OF THE -EITERNkL SECTOR 14. Panama's export earnings have not been subject to drastic price changes in recent years. As a result, the countryts merchandise exports to the rest of the world provided a secure source of income. In 1958, the combined value of bananas and shrimp exports accounted for 70% of Panama's total receipts of about $37 million. Among other export commodities are cacao, cattle, sugar, abacca, coffee and cement. 15. During the period 1953-1958, income from commodity exports rose by 22%, or 4% per annum on the average. The rise in export earn- ings was interrupted in 1958 when blowdowns on the banana plantations of the Chiriqui Land Company, the local subsidiary of the United Fruit Company, reduced production by some 7%. Production was expected t o increase again in 1959 due to favorable weather conditions and acreage expansion. The Company has increased the area under cultivation by 500 hectares or about 5% of the total and is in the process of extend- ing plantings of the Lacatan type of bananas which are strongly re- sistant or perhaps even immune to the Panama disease, and are expected to have the same acceptance in the United States as the Gros Michel type. If the Lacatan plantations are successful, the exportable pro- duction of bananas may increase each year by as much as one million stems after 1961 so that total export production by the United Fruit Company would reach some 11 million stems in 1965, 60% above its present levels, 16, An expansion of banana exports may also be expected on account of a contract recently awarded to an enterprise known as The Swiss Company which obtained a concession from the Government for an area of 24,ooo hectares in the Darien region for the purpose of growing bananas, cacao, palm oil nuts and other export crops. Under the terms of the concession, it must plant 2,000 hectares by 1961, with 500 hectares to be added each succeeding year. 17. Shrimp constitute the second largest source of export receipts. The share of shrimp in total commodity expcrts has risen from less than 2% in 1950 to 28% in 1958. In 1958, shrimp export declined because of a bad catch. A recovery was reported in 1959, 18. Earnings from the Panama Canal Zone, transit services and tourism have been of major importance to the Republic. The Canal and related activities have absorbed for many years a large proportion of the labor supply at comparatively high wage rates. Several lines of  retail trade have flourished because of the patronage of U. S. amned forces and civilian personnel. According to the DIF balance of pay- ments estimates, total wage and salary income from the Canal Zone, pay- ments to contractors, purchases of food and other supplies and direct payments to the Panamanian Government reached some $145 million in 1958.1/ This amount paid for more than half of Panama's imports and is more than the value of commodity exports. 3.9. Income and anplo,iment in the Panama Canal Zone declined somewhat in 1957 and 1958. The number of Panamanian workers employed directly was reduced to some 9,000 in 1958 against 11,000 in 1954 and 21,000 in 1950. The net effect on the economy of this cut, however, is much less than these employment figures indicate. The reduction in employment is partly offset by the hiring of Panamanian contractors (who use local material and labor) engaged in construction work that was previously handled by the Canal staff This change is due principally to a treaty concluded in 1955 between the Governments of the United States and Panama which provided for equal wages for U.S. and Panamanian employees in the Canal Company. later, in 1957, non-U.S. employees, who lived in Panama City and had been permitted to pur- chase much of their necessities from U.S. Commissaries rather than the local market, were barred from purchasing in U.S. Post Exchanges. 20. In the next few years heavy construction projects in the Zone are expected to result in very considerable dollar receipts for local goods and services. The main projects to be undertaken between now and 1964 are a $20 million bridge across the Canal at Balboa; a $12 million Canal-widening project; a tj5.5 million housing project for the U.S. army; and a 4j;10 million office building and school construction program. 21. The impact of the Canal Zone has been reinforced by the growth of international transit trade. Since the establishment of the Colon Free Zone in 1953, efforts have been made to attract world commerce to the Zone and these efforts have been successful. Under special legis- lation, merchants are permitted to store, repack, manufacture, assemble and ship their goods to any foreign destination free of duties or consular fees. Also, the Government exempts from income taxation 90% of net profits earned from the re-export trade. Because of these in- ducements, an increasing number of U. S., European and Asian firms have been operating in the free Zone. Goods in transit in the Zone rose from $14 million in 1953 to $90 million in 1959. Closely connected with transit traffic is income from tourism. The location of Panama, the availability of modern hotels, the establishment of the new airport at Tocumen and other facilities have encouraged the growth of the tourist industry. Annual expenditures of tourists and other travellers have groown from 466 million in 1954 to about ;9 million in 1958. 1/ A U.S. estimate puts this figure as high as $63 millionj see Table 17.  - 6 - IV. IN=TEkATIONAL PATIEMITS DEVEL0B)ENTS 22. The increase in Panama's external earnings has not only sus- tained economic growth but also made it possible to expand imports which are the largest per head in Central Arm-erica; (i.e. $85). Dur- ing the period 1950-58 imports rose fairly rapidly; i.e. by almost 40%, and absorbed on the average 30% of the national income. Imports of foodstuffs, live anirials and beverages increased little, reflec- ting in part the growth of domestic food production. Capital goods imports, on the other hand, more than doubled, and imports of raw materials increased by two-thirds. hanufactured consumer goods also were imported in appreciably larger quantities. The differences in the growrth of the various categories of imports were reflected in changes in the composition of imports; 'he share o' foodstuffs de- clined and that of manufactured goods remained more or less unchanged while the share of capital goods rose from 17%-l8% of total imports in the early fifties to around 30% in the last three years. 23. Panama's foreign exchange earnings, discussed in the prece- ding section, were supplemented by a large inflow of private capi- tal, by official donations, and considerable net receipts of capital on governrnent accounts (Table I). Total foreign exchan-e receipts were adequate to pay for the increasing volume of imports, a rising level of earnings of foreign capital, and a growring voluL.-e of personal remittances (mainly of U.S. personnel residing in Panama) apparently without adversely affecting foreign exchan-e reserves and the money supply. Foreign exchange reserves (i.e. holdings of foreign currency deposited abroad and investment in foreign securities of the banking sys-tem), remained fairly stable except for one year, 1957, when they fell froim $?42 to $29 million. In 1958, reserves rose to $48 mLillion, or equivalent to eight monthst inports (Table 21). 24. Two remarks may be made at this point. First, the size of the adverse current account balance as shown in Table I is probably exaggerated. The free movement of goods and services between Panama and the Canal Zone and the use of the U.S. dollar as the de facto national currency prevent the compilation of accurate statistical records and data on movements of holdings by the public of U.S.currency or of deposits of private individuals and institutions in U.S. banks are inevitably incomplete. This explains, in part, why the "errors and omissions" item is so large. Second, because of Panama's monetary system, fluctuations in receipts from international transactions do not create balance of payments problems as such. Since the currency in circulation and the means  - 7 - TABLE I PANAMA: INTERNATIONAL PAYMENTS, 1953-1958 1953 1954 1955 1956 1957 1958-1/ Export Receipts, f.o.b.Z/ 32.1 38.3 44.7 39.5 39.6 42.5 Net Transactions with Canal Zone 36.5 33.8 38.9 41.5 49.2 44.8 Imports, f.o.b. -64.1 -64.6 -66.5 -74.9 -88.6 -82.4 Investment Income (net) -11.8 -17.2 -17.8 -17.8 -19.0 -27.2 Other (net) - 4.5 - 2.1 - 3.7 - 3.4 - 5.6 - 3.0 Private Remittances - 4.1 - 7.5 - 8.9 - 8.1 -14.9 -13.5 Balance on Current Account -15.9 -19.3 -13.3 -23.2 -39.3 -38.8 Financed by: Net Capital Movements 3.9 0.8 2.0 16.5 20.1 30.8 a) Private Capital 3.5 7.0 2.1 13.0 9.1 29.1 b) Official and Bank Capital 0.4 - 6.2 - 0.1 3.5 11.0 1.7 Official Donations 1.6 1.9 2.4 3.0 4.6 5.3 Net Errors and Omissions 10.4 16.6 8.9 3.7 14.6 2.7 Source: IMF / Preliminary / Domestic exports adjusted for undervaluation of bananas (cf. Table 18), plus net exports of Colon Free Zone; the rise in the 1958 figures was due to a substantial increase in net exports of the Colon Free Zone from $4.7 million in 1957 to $9.9 million in 1958.  - 8 - for foreign payments are the same, Panama does not have a transfer problem as such; fluctuations in receipts act directly on the income and expenditures of the Panamanian people and, by so doing, they keep the countryts demand for impwrts within the means of paying for themA/l Import surpluses can only be financed temporarily through a decline in the liquidity of the monetary syster or through foreign loans and credits. V. THE FISCAL PROBLEM 25. Between 1952 and 1958 government revenues rose from $36 million to $53 million (or at an annual rate of 6.7%) and their share in GDP also increased appreciably, from 12.4% to 13.8%. During the same period, expenditures increased from $42 million to $57 million, or at an annual rate of 5.2%. Current expenditures, mainly for social welfare, health, education and administrative purposes, accounted for most of the increase in government spending while the share of capital expenditures in the total declined from 17% in 1952 to 13% in 1958. Moreover, some of the investment was made for rather low priority purposes. Examples are provided by luxurious office buildings and by the race track near Panama City which was built at the cost of $8 million in 1956 and has been operating at a loss ever since. 26. The deficits, which in the last six years varied from $300,000 to over $10 million, were financed partly by means of local bond issues and partly by foreign borrowing. In addition, in some years substantial short-term debts accumulated and were carried over from one year to the next ( cf. Table II). In 1958, the deficit, including the carry-over of floating debts, exceeded $14 million. In 1959, the deficit was expected to exceed $16 million including some $11 million of floating debt. The prospects are that 1960 will be again a year with sizable deficit; with current expenditures of about $56 million and investment expenditures of $12 million, the 1960 budget is expected to show a deficit of 110 million in spite of the expected increase in receipts mainly from the contemplated gasoline tax, real estate tax and a rise in the income tax liability of the Banana Company. / This does not me an, however, that Panama does not have a debt service problem; see paragraph 28 below.  TABLE II GCERNMNT REVENUE, EXPENDITURE AND FINANCING OF DEFICIT 1955-1960 (in million balboas) estimate*projection* 1955 1956 1557 1958 1959 1960 Government Ordinary Revenue 45.3 48.8 5O.7 52.9 51.5 57. 5 Cuirrent Expenditure.2 -40.6 -47.8 -45.6 -50.1 -54.0 -55.5 1. Gross surplus or deficit (-) on current account 4,7 1.0 5.1 2.8 - 2.5 2.0 Investment Expenditure - 7.1 -11.3 - 5.4 - 7.3 - 9.8 -12.0 2. Surplus or deficit (-)W - 2.4 -10.3 - 0.3 - 4.5 -12.3 -10.0 Floating debt carried over from preceding year - 6.1 - 6.9 -10.5 -10.0 - 3.8 -11.3 3. Total deficit - 8.5 -17.2 -10.8 -14.5 -16.1 -21.3 Deficit Financed by: 1. Receipts from internal bond issues 3.0 6.7 1.8 2.6 4.5 5.5 minus: amortization of internal debt - 1.5 -1.7 - 2.0 -2.5 -1.1 -1.3 Net internal financing 1.5 5.0 - 0.2 0.1 3.4 4.2 2. Proceeds of external loans 0.4 2.0 1.3 2.2 2.0 5.5 minus: amortization on ex- ternal loans -0.3 - 0.3 - 0.3 - 0.3 - 0.6 - 0.5 Net external financirng 0.1 1.7 1.0 1.9 1.4 5.0 3. Proceeds of special bond issue - - - 8.9 - - 4. Other - - - 0.2 - - Total (1 through 4) 1.6 6.7 0.8 10.7 4.8 9.2 Unpaid bills carried over to succeeding year 6.9 10.5 10.0 3.8 11.3 12.1 * Estimated and projected by mission. / Takes into account tax receipts from the United Fruit Company on 1959 operations and receipts from the contemplated gasoline tax; account has also been taken of the expected loss in revenues from the National Bank. Total expenditures minus debt amortization payments minus extraordinary expenditures financed from proceeds of local bond issues and foreign borrowing. / Exclusive of floating debt.  - 10 - 27. To cover the capital expenditures of the 1959 budget and in subsequent years, the Government has decided to borrow abroad and to issue domestic bonds as it had done in t he past. As of June 30, 1959, internal bond issues totaling $12.4 million were authorized. Their allocation is shown below; 1959 1960 1961 1962 Total (in million of balboas) Inter-American Highway 0.7 1.0 0.8 0.8 3.3 Water and Sewerage 0.6 1.2 - 1.8 Construction and pavement of streets 0,3 0.5 _ _ 0.8 School buildings 0.8 1.0 1.8 Tocumen Airport 1.5 - _ 1.5 Roads and other Projects in Colon 0.5 1.5 - - 2.0 Urbanization and Colonization 0.2 0.3 o.4 o.4 1.3 TOTAL 4.5 5.5 1.2 1.2 12.4 28. So far, government bonds have had a good acceptance in Panama and more than one-third oi all bonds is in the hands of private individuals (see Appendix B). Nevertheless, there is a limit to the amount which the Government can prudently borrow and there is also the question of how far the Government should go in c ompeting with the private sector for loanable funds. The internal debt which, like the external one, is serviced in U.S. dollars, amounted to $33 million on June 30, 1959 and by the end of the year the figure may have risen to $35 million. Service on t he external debt amounted to $1.7 million in 1959 and total debt service (excluding payments of the floating debt) to $4.0 million, equivalent to 8% ofgovernment revenues. 29. The high level of current spending together with the necessary local expenditures for new development projects will require larger fiscal resources than before. Meanwhile, because of the growing burden of debt service, the Government cannot rely as heavily on borrowing as it did in the past in order to meet investment expenditures. The Government is thus faced with the problem of either cutting current and low priority capital expenditures, or increasing taxes, or both, 30. A decrease in current expenditures would not be easy. The Government could continue to function effectively with a substantial reduction of personnel; but dismissal on a significant scale appears politically difficult, and it would be unrealistic to expect more than a firm policy not to hire more people and to rely on attrition to eliminate the excess personnel. One factor likely to prevent an im- mediate reduction of government personnel is the presidential election scheduled for May 1960. In the past, public spending has invariably  - 1U1 - increased immediately preceding elections. For example, in connection with the last election, Government expenditures rose from $48 million in 1955 to $59 million in 1956; after the election they declined to $51 million in 1957. 31. It should be possible, though not easy to increase government revenue materially. As mentioned before, the present ratio of government revenue to g ross domestic product is less than 14%. But, if account is taken of the fact that about $7-8 million of the revenue represents tax payments of foreign companies, the burden of tax payments on the income of Panamanian.s alone comes to only 12*8%o Thus, there appears to be some room for new taxes. A beginning has been made by the tax reforms of 1956 and 1957 which raised import duties, persoral income and property taxes and imposed new taxes on some consumer goods. As a result of these reforms, revenue from external trade (mainly import duties and consul.ar fees) increased in 1957-58 by 20% compared to what it was in 1954-55. Simultaneously, the yield of consumption taxes rose by 20% and receipts from property taxes by 4%. The increase in revenue was not sufficient to balance the budget but was a step in the right direction. 32. It might also be possible to raise revenue by broadening the tax base, and by a better enforcement of existing tax laws. Tax ex- emptions in Panama seem excessive both with regard to scope and duration. For example, as indicated before, the construction industry has been exempt from import duties as well as income taxes for five years ending December 31, 1959. Even more important than an increase in tax rates and a critical review of tax concessions is an iaprovement of the tax administration. In the opinion of competent observers, improved tax assessment procedures and effective enforcement of the fiscal law nay raise government revenue by several million dollars within a year or two. There is a shortage of auditors. In Panama City, for example, there are only 15 auditors and these have little experience or job security, In the Province of Colon, there is only one auditor to assess and review income tax returns and, at the same time, attend to office work. VI. LONGER RANGE PROSPECTS AN] CREDITWORTHINESS 33. In spite of its fiscal difficulties, Panama has been able to maintain a rapid pace of economic growth and to achieve satisfactory gains in real per capita income. The country's geographic location, the ample supply of rich agricultural land, the secure income from the Canal Zone and from transit trade, the relative stability of export prices and income, and the strength of the currency and freedom from exchange re- strictionslave, among other things, contributed to the rapid expansion  - 12 - of investment and output while at the same time establishing a strong foundation for future economic growth. 34. The factors making for economic growth are likely to be more vigorous in the future than in recent years. Construction scheduled to take place in the Canal Zone in the next few years will raise income from that source to probably the highest level since World War II. Detailed projections of foreign exchange earnings are shown in Annex A. According to these projections, net transactions with the Canal Zone and income from tourism and transit trade, are expected t o rise during the next decade by about 50%; i.e., from a level of $50 million in 1958 to $75 million in 1968. Moreover, income from the banana companies is Likely t o increase by about 70% between 1958 and 19684 Other commodity exports like sugar cane, beef cattle, and shrimp are expectedto in- crease even faster; i.e., more than double between now and 1968. All in all, total external earnings from commodities and invisibles could rise by more than 50% or from a level of $86 million in 1958 to about $135 million 1968. 3.5, The favorable impact of expansion of commodity exports and invisibles on the balance of payments may be reinforced by the growth of domestic production. The existence of a r eservoir of cheap labor and abundant unused fertile land, the avaiLability of power and the possibility of rapidly imi)roving productivity, should make it possible for Panama to produce efficiently foods, raw materials, and products of light industries now imported. 36. Actually, PanainOls agricultural and industrial development depends primarily on the speed and intensity of measures to make effect- ive use of its resources, These measures should include the creation of an adequate overhead capital structure, However, the transportation problem has, in recent years begun to r eceive attention from the Govern- ment. In 1955, a loan of $5.9 million was obtained from the IBRD for a highway rehabilitation program. In 1958, work on the Inter-American highway was started and is expected to be completed by 1962. The Govern- ment has also made plans for the construction, during 1960-1963, of a network of feeder roads. 37. Though valuable in attracting private capital to agriculture, these measures in themselves will not be sufficient to assure the fuller exploitation of the country's agricultural production potential. In order to accomplish this, the Government must channel savings to farm producers for the purchase of farm equipment and machinery and extend basic agricultural services to support the farm program. Generally there has been a lack of effective planning of public investment in a systematic fashion; such planning is needed to promote the development of the economy.  - 13 - 38. Because of the nature of Panama's monetary system, an assessment of Panama's creditworthiness must take into account the total debt service and the adequacy of public revenues for meeting these obligations. To assess Panama's creditworthiness is thus in effect to assess the budgetary prospects of the Panamanian Government. 39, Panama's external public debt which is on a long-term basis, reached $41.2 million on Jume 30, 1959 of which $13.1 million has not been disbursed. The highest annual service of that debt amounts to $3.1 million in 1963 or less than 3% of the country's foreign exchange earnings and less than 5% of anticipated Government revenues. Service on the entire debt (external and internal)J will reach a peak in 1964 when they would absorb 9% of anticipated Government revenue and less than 5% of prospective ex- change earnings. 4o. On balance, Panama's longer range prospects generally appear favorable. However, her fiscal and administrative problems, though not acute, will require close attention from the Government. And, in order to realize the country's growth potentialities, the Government will have to conserve its borrowing capacity for use on high priority projects. / Service on public debt outstanding plus undisbursed amounts, and on authorized local bond issues (even if not yet sold) as of September 28, 1959.  AP?EIDIX A Projections of External Earnings Commodity Exports 1. The largest increase in merchandise exports is likely to take place in bananas, cattle, fruits, vegetables, cacao and perhaps cotton. The value of merchandise exports is expected to expand from '37 million in 1958 to 4P61 million in 1968, or at an average rate of 6% per annum, against lsss than 4% in the preceding five years. 2. Increased investment by the Chiriqui Land Company and the new project of the Swiss Company are expected to provide the major part of foreign exchange income. The Swiss Company's purchases of local goods and services and its income tax payments are expected to rise from about 4'0.5 million in 1960 to about "'5 million in 1968. Income accruing to Panamanian residents from the Chiriqui Company is expected to grow rapidly; i.e. from some $19 million in 1958 to about be27 million in 1968 on the assumption that production of the Lacatan type will from 1962 on, increase by one million stems annually. (Table I below.) 3. Barring catch failures, shrimp exports are estimated to rise from $5.6 million in 1958 to 0-5 million in 1968; i.e. by 3% annually on the average. Other exports like cacao, beef cattle, meat, sugar cane, fruits and perhaps cotton may grow from a level of '?2.1 million in 1958 to 09.5 million in 1968 on account of the prospective ex- pansion of the area under cultivation and improverment of production methods. Net Transactions with Canal Zone 4. Panama's net earnings from the Canal Zone are likely to reach a peak of Q66 million in 1964, 60% above the 1958/59 level. The con- struction program of the U.S. military establishments and of the Canal Zone Company, estimated at *,'47.5 million during the period, will be the principal source of this income. Beyond 1964, projected foreign ex- change income from the Canal Zone may level off unless additional in- vestments are undertaken. Tourism 5. Tourism and transit trade are expected to grow steadily from some ,9 million in 1958 to about $15 million in 1968, at a rate of about 6% per annum. This projection is based on a conservative esti- mate of the continuation of growth in world trade and in the economic activity of the United States. Actually, income from tourism may in- crease at a much faster rate than present estimates indicate after the completion of the Inter-American highway, expected in 1962.  Page 2 Appendix A TABLE IA PANAIW,A: Estimates and Projections of Fbreign Exchange Receipts, 1956-1965 (in million U.S. W) Actual Estimate Projection 1956 1957 1958 1959 1963 1964 1968 1. Expenditures of Chiriqui Land Company 18.6 15.4 19.3 1L.4 22.0 23.5 27.0 a) Purchases of local goods and services 13.4 13.3 13.6 13.0 16.0 17.0 19.5 b) Tax P'ayments 5.2 2.1 5.7 1.4 6.0 6.5 7.5 2. Expenditures of Swiss iompany - - - - 3.0 3.0 4.8 a) Purchases of local goods and services - - - 2.5 2.5 4.0 b) Tax Payments - - - - 0.5 0.5 0.8 3. Other Commodity Exports 5.0 7.4 7.7 8.9 13.0 15.0 17.0 Shrimp Exports 4.4 6.2 5.6 6.2 7.0 7.5 7.5 Cacao 0.6 0.9 1.1 1.2 2.0 2.0 3.0 Beef cattle, abaca, sugar cane, vegetables, frui-ts, cotton and other agricultural cropsL - - 0.5 0.5 2.0 3.0 3.5 Leather, coffee, bever- ages, meat, tobacco, minerals, oil and other processed goods/l - 0.3 0.5 1.0 2.0 2.5 3.0 4. Net Exports of Colon Free Zone 9.2 _ 4.7 9.5 10.0 11.5 12.0 12.5 Total Merchandise Exports (1 / - / 3 / 4) 32.8 27.5 36.5 33.3 49.5 53.5 61.3 5. Net Transactions with the Canal Zone 45.4 45.8 41.1 43.5 62.5 64.o 60.0 /1 Export earnings primarily from the Canal Zone market.  Page 3 Appendix A Table I continued Actual Estimate Projection 1956 1957 1950 1959 1963 1964 1965 Expenditures of U. S. Military and Canal Zone Company 17.1 12.3 11.0 13.0 30.0 31.0 25.0 Expenditures of other U.S. and Canal Zone Personnel 21.6 21.6 21.6 22.0 22.5 23.0 24.0 Net Earnings of Pana- manian Residents in the Canal Zone 16.3 21.4 18.0 18.5 20.0 20.0 21.0 Sub-Total 55.0 55.3 50.6 53.5 72.5 74.0 70.0 Minus: Other Goods and Services bought from Zone 9.6 9.5 9.5 10.0 10.0 10.0 10.0 6. Tourism and Transit Trade 7.2 7.9 8.7 9.7 13.0 13.5 14.5 Total External Earnings 85.4 81.2 86.3 86.5 125.0131.0 13508 Source: Compilation and projection by IBRD Mission  APPENDIX B Panama's Public Debt A. The External Debt 1. The outstanding disbursed debt at the end of June 1959 was W28.2 million practically all of Which was in U.S. dollars, held by private and public agencies as follows: Table 1B Panama's External Debt Outstanding by Holders, 1950-1959 (in million UZ.$) Total End of Year Outstanding CREDITORS: IBRD EXIM ICA LEHKANN U.S. PUBLIC BROTHERS ISSUE 1955 11.8 0.9 1.1 - 9.8 _ 1956 12.6 2.0 0.9 - 9.7 - 1957 13.9 3.5 0.8 - 9.5 - 1958 28.2 - 1.8 0.2 9.4 16.8 June 30, 1959 28.2 - 2.0 0.4 9.2 16.6 Source: Office of the Comptroller General. 2. The amount of ,2 million due to the Export-Import Bank repre- sents the first disbursements of the 20-year loan of $12.9 million for the Inter-American Highway which was made in 1957, and the payment on a q`l.5 million loan made in 1951 for the construction of a hotel. The amount of ti400,000 shown under ICA are disbursements from a loan of a2 million made in 1957 for water-supply works. The amount of ,9.2 million due to the National City Bank is the sum outstanding on a 410.5 million, 45-year loan made in 1950, sold privately to Lehmann Brothers and se- cured by >450,000 of the Canal annuity. 3. Near the end of 1958, the Panamanian Government made a public issue in New York in an amount of 4,16.8 million at 4.8% for 35 years. The loan is secured by one million dollars of Canal annuities and was utilized to prepay Ci6.3 million on tiw IBRD loans, to repay a ;,3. million loan obtained from the Chiriqui Land Company, and to retire short and long-term domestic obligations of '96.9 million. 4. The 1958 bond issue relieved the Treasury of the relatively high debt service burden during the period 1959-1963. As Table 2 and Chart I indicate, the debt service for 1959 which would have been SJ6.6 million was reduced to i3.8 million. Beyond 1963, debt service de- creases slowly to <;3.2 million in 1968 and q-2.5 million in 1978.  Appendix B, page 2 Table 2p Service on Consolidated Public DebtJ/ as of June 30, 1959 before and after the Refunding Operation, 1959-1978 (in million U.S.,,) Year Before Refunding After Refunding Decrease Increase 1959 6.6 3.8 2.8 - 1960 7.4 4-. 3.4 - 1961 6.6 h.o 2.6 - 1962 4.7 3.9 0.8 _ 1963 3.9 3.8 0.1 l 1964 3.6 3.8 _ 0.2 1968 2.7 3.2 0.5 1978 1.5 2.5 1.0 Source: Office of the Comptroller General. / Not including undisbursed portion of loans. B. The Internal Debt 5, The internal funded debt rose from yl8.1 million in 1950 to p32.6 million at the end of June 1959. The proceeds of the borrowing operations were used to finance budgetary deficits. As Table 3 indi- cates, a large part of these loans has been obtained from the Social Security Fund, but a remarkably large amount of bonds is held privately outside the banking system. However, bonds in the hands of the public declined from 15 million in 1957 to less than '99 million in 1959. This decline primarily resulted from the 1958 refunding operation. How- ever, there are also some indications that government bonds may not be as readily accepted by the public as in the past although they are exempt from inheritance taxes and there is no income tax levied on the 6% interest paid on them. Table 3B Panama: Internal Debt Holdings, 1955-1959 (in million balboas) End of Year Total Bondholders Official Caja de Seguro Private Other Private Banks Social Banks Holders 1955 26.9 2.3 15.0 - 9.6 1956 32.0 2.4 15.2 - 14.4 1957 31.8 2.1 14.7 - 15.0 1958 31.2 0.3 21.8 - 9.1 June 30, 1959 32.6 0.2 21.7 2.0 8.7 Source: Office of the Comptroller General.  SERVICE ON CONSOLIDATED PUBLIC DEBT OUTSTANDING BEFORE AND AFTER THE REFUND OPERATION OF DEC.3,1958 (MILLIONS OF BALBOAS) 8YEARLY E E 8 7 7 6 6 5 5 4 4 AFTER REFUNDING INCREASE IN SERVICE~~:Q 2. 2 _ 2 1959 '60 '61 '62 '63 '64 '65 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75 '76 '77 1978 IBRD- Economic Staff 1595  Appendix B, page 3 6. The yield of the public bond issues has not been sufficient to meet the financial requirements of the Government which resorted to issuing bonds in lieu of cash to its suppliers. This explains in part the sharp increase in the floating debt between 1958 and 1959; unpaid bills were estimated to exceed Vll million in 1959 as shown in Table 4 below. Table 4B Summary of Panama's Public Debt, 195C)-1959 (in million U.S.',) Internal End of Year Total External Funded E'loating 1950 34.5 10.6 18.1 5.8 1951 36.4 10.9 17.5 8.o 1952 42.3 11.6 17.9 12.7 1953 42.8 11.4 23.8 7.6 1954 43.6 11.1 26.4 6.1 1955 45.6 11.8 26.9 6.9 1956 55.1 12.6 32.0 10.5 1957 55.7 13.9 31.8 10.0 1958 62.9 28.2 31.2 3.8 1959'? 74a.1 28.2 34.,5 11.3 * Estimate Source: Office of the Comptroller General.  STATISTICAL APPENDIX: Tables 1-26  LIST OF TABLES Table No. Title 1. Summary of External Public Debt outstanding plus undisbursed as of June 30, 1959 with Major Reported Changes through September 30, 1959 2. External Public Debt outstanding plus undisbursed as of June 30, 1959 and Major Reported additions July 1 - August 31,, 1959 3. Interest and Amo rtization Payments on External Public Debt, actual payments 1954-1958 and Estimated contractual payments 1959-1973 4. Population and population density 1930-1959 5. Land area and use, 1950 6. Land holdings by .size and type, 1950 Census 7. Expenditures, employment, ecports and land utilization by The Chiriqui Land Co.., 1954-1958 8. Area, production .exports and yields of major farm crops, 1950-1959 9. Production of industrial commodities, gas and electricity, 1950-1959 10. Gross product and income by origin, 1950-1958 11. Gross domestic product, by origin, 1950-1958 12. Share of sectors in GNP, 1950=1958 13. National income, 1950-1958 14. Gross investment, public and private, 1950-1958 15. Gross investment by type, 1950-1958 16. Consumer price index 17. Estimated income derived from Canal Zone operations, 1958 18. Quantity and value of commodity exports, 1950-1958 19. Imports by *category 20. Balance of payments 21. Gold and foreign exchange reserves 22. Ordinary government revenues by source: 1951-1958 23. Central government expenditures by Ministry, 1949-1959 24. Central government and investment expenditures and their financing 1952-1958 25. Government revenue, expenditure and financing of deficit, 1952-1960 26. Actual and Projected Ratios of External Debt Service to foreign exchange oarniings and government revenue, 1956-1968  TABLE 1 PA.AYMA: SUl,,':ARY OF IMTERIAL P'UBLIC DE3T OUTSTANDING PLUS UNDISIBURSED AS OF JUNE 30, 1959 WITH 1AJOR REPORTED ADDITIONS JULY 1 - AUGUST 31, 1959 National and Goverrnent Guaranteed Debt (In thiousands of U.S. dollar equivalents) Item Amount % TOTAL EXTERNAL PUBLIC D:ZT OUTSTANDING JUNE 30, 1959 (all U.S. dollars) 41,227 100.00 Outstanding 2S,174 68.33 U-ndisbursed 13,053 31.67 Publicly-issued bonds 16.606 40.27 Privately-issued bonds 9,216 22.36 U.S. Govern,m:ent loans 153405 37.37 Export-Im-nport D.nk loans 13,4.5 32..52 Outstancting 2,005 4.86 Undisbursed 11,400 27.66 Other U.S. Government loams 2,nQQ 6_S5 Outstancling 347 0.84 Undis'Dursed 1,653 4,01 MAJOR REPORTED ADDITION JULY 1 - AUGUST 31, l959 (Eix3ort-In,port Bank loan) 250 100.00 Source: IBRD - Economic Staff October 23, 1959  TABLE 2 PANAMA: EXTER1aqAL PUBLIC DEBT OUTSTANDING PLUS UNDISBURSED AS OF JUNE 30, 1959 AND KAJOR REPORTED ADDITIONS JULY 1 - AUGUST 31, 1959 National and Government Guaranteed Debt (In thousands) Debt outstanding Major reported Item plus undisbursed additions June 30. 1959 July 1 - Aug.3l.l95? TOTAL EXTERiAL PUBLIC DEBT (All U.S.dollars) 41.227 250 Publicly-issued bonds 16,606 $16,800,000 Republic of Panama Conversion Bonds 4.8%, 1958-1993 J 16,606 Privately-issued bonds 9.216 $10,500,000 Lehman Brothers to the Republic of Panama 3%, 1950-1995 j 9,216 U.S. Government loans 15.405 250 Export-Import Bank loqns 13,405 250 $1,500,000 to Republic of Panama 4%, 1951-1962 555 $i12,850,000 to Republic of Panama 54-%, 1957-1977 12,850 J $250,000 to Republic of Panama 8/27/59 250 Other U.S. Government loans 21000_! $2,000,000 ICA loan to Repub:Lic of Panama 3%, 1957-1978 2,000 v / This issue is secured by a pledge of $1,000,000 annually of the $1,500,000 annual payment receivable under Treaty by Panama from the United States forthe Canal Zone. j This loan is secured by a first charge and lien on the annual payment from the U.S. to Panama for use of the Canal. / Of this amount, $11,400,000 was undisbursed as of June 30, 1959. _/ Of this amount, $1,653,204.40 was undisbursed as of June 30, 1959. Source: IBRD - Economic Staff. October 23, 1959  TABLE 3 PANAMA: INTEREST AND AMORTIZATION PAY,ENTS ON EXTa AL PUBLIC DEBT, ESTIMATED ACTUAL PAYMENTS 1954-1958 AND ESTrlIATED CON- TRACTUAL PAYMENTS 1959-1973 ON DEBT OUTSTANDING PLUS UNDIS- BURSED AS OF JUNE 30, 1959 WITH MAJOR REPORTED ADDITIONS JULY 1 - AUGUST 31, 1959 (In thousands of U.S. dollar equivalents) T o t a 1_ Year Debt outstanding Payments during year plus undisbursed Amortization Interest Total January 1 1954 15,217 2,603 459 3,062 1955 12J615 397 380 777 1956 18,119 437 453 89e 1957 17,142 452 464 916 1958 31,542 6,697 614 7,311 PROJECTED 1959 41,227 507 1,166 1,673 1960 41,396 578 1,773 2,351 1961 40,824 598 1,809 2,407 1962 40,232 1,652 1,784 2,836 1963 39,186 1,412 1,721 3,133 1964 37,781 1,430 1,653 3,083 1965 36,358 1,399 1,586 2,985 1966 34,966 1,421 1,529 2,941 1967 33,551 1,443 1,454 2,897 1968 32,114 1,464 1,385 2,849 1969 30,656 1,490 1,316 2,806 1970 29,173 1,514 1,246 2,760 1971 217,666 1,542 1,176 2,718 1972 26,132 1,565 1,104 2,669 1973 24,574 1,595 1,031 2,626 Except for $345,000 equivalent in Deutsche marks, service payments are in U.S. dollars.  TABLE 4 PANAMA: POPULATION AND POPULATION DENSITY, 1930-1959 End of year Population Annual rate of growth End of year Population Annual rate of growth 1930 467,459 _ 1956 953,550 2.9 1940 622,576 2.9 1957 980,940 2.9 1950 805,285 2.6 1958 1,009,170 2.9 1951 828,190 2.8 1954/ 1,024,000 1.5 1952 851,790 2.8 1953 876,100 2.9 1954 901,150 2.9 1955 926,960 2.9 Population Density per square mile 1930 16.3 1940 21.7 1950 28.0 1959 35.6 1/ July 1, 1959 Source: Office of the Comptroller General  PANAIA - LAND AREA AND USE, 1950 1,000 hectares % of Total Total Area 7,847.0 100.0 (excludes Canal Zone) Area in Use 1 159.1 15.6 Cultivated 3e2 Temporarily not used 213.6 2.9 Pasture 552.l 7o4 Other Uses 156.8 2.1 N.B. 1 hectare - 2.47 acres Source: Department of Statistics and Census; 1950 Census  TABLE 6 PANAMA: IAN) HOLDINGS BY SIZE AND TYPE - 1950 CENSUS (in heetares) Land Hoidings Size of Holdings Total area Owner Usufruct Rented REPUBLIC, TOTAL 1,159,083 539,105 507,931 112,047 1.0 to 1.9 ha, 21,982 2,100 16,1411 3,471 2.0 to 4.9 " 73,922 7,542 57,754 8,625 5.0 to 9.9 o 106,453 17,978 78,375 10,100 10.0 to 19.9 " 152,580 37,182 98.368 17,030 20.0 to 49.9 " 236,794 83,938 130,497 22,360 50.0 to 99.9 I? 156,115 76,340 66,697 13,079 100.0 to 199.9 " 103,315 62,3025 33,722 7,268 200.0 to 499.9 " 100,152 75,520 18,003 6,630 500.0 to 999.9 " 61,2h3 49,913 5,832 5,497 1,000.0 and more " 146,527 26,268 2,272 17,987 Source: Contraloria General de la Republica  TABLE 7 PANAiM: EXPEND ITURESg EMPLO YMENT EXPORTS AND LAND TJTILIZATION BY THE CHIIRIQUI LAND CO. 1954 1-1958- 1954 1955 1956 1957 1958 EXPENDITURES (in million $) 1. To Government (import duties, in- come tax, export tax on bananas and cacao) 4.2 5.5 5.2 2.1 5.7 2. To individuals: wages & local com- modities 12o0 12.8 13.4 13.3 13.6 TOTAL $ 16.2 18.3 18.6 15.4 19.3 KIPLOYMENT Division of Armuelles 6,405 6,258 6,099 6,470 5.,767 Division of de Bocas 4,965 5,2298 4,677 4,825 3,946 TOTAL 11,370 11,556 10,776 11,295 9,713 C-ULTIVATED AREA (in hectares) Banana 10,085 12,167 1L, 945 11, 947 .11901 Cacao 1,280 1,245 1,224 1,215 1,211 Ab;aca 945 - 700 700 700 Oil palm 700 700 350 337 337 Others 576 566 5L886 46 53 TOTAL 13,586 14,678 20,105 14,245 14,202 1ECPORTS Banana (in million stems) 7.1 8.3 6.1 9.0 8.6 Cacao (thousand pounds) 2.1 1.7 1.8 2.4 1.7 Others (in tons of 2,240 pounds) 14,637 4,763 3,097 4,459 3,737 Source: Chiriqui Land Company; Annual Reports  TABIE 8 p tD YIELDB (TF MAJOR FIMW CROPS, 1950-1959 Crops * 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Banana Area 7,645 7,616 8,096 9,094 10,085 12,167 11,945 11,947 11,901 - Production in 1,000 stems - 4,330 - 4,279 - 6,521 6,101 7,142 6,658 - Exports in 1,000 stems 5,022 4,904 4,099 4,689 5,700 7,018 6,231 7,423 6,920 - Yields in stens/hectare 1,373 568 442 470 9S0 536 511 598 559 - Cocoa Area - 3,452 2,988 2,719 1,280 1,2415 1,224 1,215 1,211 Producticn in 1,000 lbs - 2,997 2,196 1,900 2,172 1,652 1,759 2,384 1,692 Eqports in 1,000 lbs 2,971 1,897 2,682 2,630 3,623 3,082 2,558 3,373 2,794 Yield6 ib lb-s/h6ctare - 868 735 699 1,697 1,327 1,437 1,962 1,397 Coffe Azma 15,800 15,800 - - 17,800 18,200 19,400 20,600 21,600 - Production in quintals 59,800 61,500 63,900 50,300 60,200 60,800 45,200 51,100 58,400 70,000 Exports in 1,000 quintals - - - 5,342 10 1,394 - - 1,181 20 Yields in quintals/hectare 4 4 _ _- 3.4 3.3 2.3 2.5 2.7 - Tobacoo Area 485 - _ _ _ 672 445 410 510 555 Producticn in quirt als 7,190 - - - - 16,060 7,125 7,005 6,770 9,330 Yields in qOntals/hectare 14.8 - - - - 23.9 16.0 17.1 13.3 16. ccca - Area 69,200 71,400 72,600 85,900 86,000 83,400 83,400 86,300 90,:0O Produotion in 1,OC quintals 1,376 1,475 1,562 1,677 1,645 1,757 1,602 1,690 1,742 1,700 lBqports in quintals - - - - - - - - - 68,000 Yields in quirtals/hectare 19.9 20.7 21.5 19.5 19.1 21.1 19.2 19.6 19.3 - qrontinu d.. .  T 8LE 8 (conti nued) PMNAMA: AREA. PRODUCTION, EXPYTS AND YIELDS c07 -AnR F.pl CTDS-3. 1950-1959 Crops * 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Beans Area 13,000 7,100 12,400 25,000 18,000 18,500 15,800 16,bC0 14,600 - Production in quintals - 78,500 125,800 132,000 111,100 158,200 107,000 83,600 103,600 - Yields 12.1 11.0 10.1 5.3 6.2 8.6 7.0 5.1 7.1 - Sugar Cane Area - 19,000 15,200 14,300 20,000 14,600 - 13,500 13,300 16,600 - Production in quintals 7,600 - - _ - - 9,100 11,300 - Yields - - - - - - - - - Area 67,500 65,700 67,$400 79,500 82,600 86,800 85,100 88,900 98,000 - Production in 1,000 quint* 1,849 1,866 2,009 2,414 2,144 2,126 2,129 1,907 2,580 2,880 Tiblds in quintals/bectare 27.4 28.4 29.8 30.1 26.0 24.5 25.0 21.4 26.3 - Total Area in hectares 192,630 186,268 177,784 222,213 230,365 220,984 230,314 239,072 254,622 *Area is in hectares of 2.47 acres each. 1 quintal - 100 pounds Sources Contraloria General de la Republica  TABLE 9 PANAMA - PRODUCTION OF INDUSTRIAL CGHMODITIES. GAS AND ELECTRICITY 1950-1959 Unit 1950 1951 1952 1953 1954 1955 1956 1957 1958 First Semester 1,00o 1958 1959 Sugar Quintal 287 328 384 374 399 328 331 459 501 - 544 Condemsed and Evapor- ated t