Panama: The Future Hong Kong of Latin America?

I just came back from conducting my program in Panama, and while I have been through the Panama City airport several times, I had never stepped outside its walls. This is a fascinating country. We had 150 attend the seminar including government leaders, CEOs, and entrepreneurs. The conversation showed me how seriously Panama is taking its opportunity to innovate on a national scale. I don't mean "spur innovation" as we are framing the challenge in the United States, but rather, Panama is looking at itself as an innovation and trying to understand the unique role it can play in the region and world.

This fact was reiterated on my flight back home. I found myself sitting next to the CEO of a specialty chemical company that distributes chemicals around the world. As we talked about Panama’s evolution over recent years, he grew animated, explaining why, after looking at several options in Latin America, his company decided to make Panama the logistical center of their Latin American operations. 

Panama, he said, has the largest free zone in the region; the country requires everyone to learn English in school so it is easy to find English speakers; and it is easy to find well-educated, skilled logistics experts. He said, "Panama is becoming the Hong Kong of Latin America."

This view was then supported that evening by a friend of mine. At a wine shop in Greenwich, Conn., which had been closed down for a private happy hour, I talked with a close friend and his wife. He is the head of Latin American sales for the animal health division of a major pharmaceutical firm. He said they had recently completed a broad study to analyze where they should base their logistical hub in Latin America, through what port should they funnel their distribution train and hold their inventory. They decided on Panama. 

So how has Panama achieved this respect from and allure to businesses? Like many of the thriving companies we review here, Panama’s government and businesses are following at least two time-tested strategies.

Befriend your enemies 

One perspective we’ve seen is that it is easier to grow by helping your competitors than by fighting them. This cuts against an instinctive desire to "beat the competition." As Sun Tzu and Mahatma Gandhi have both suggested in their own way – befriending an enemy is a far better approach.

During my Panamanian presentation, a participant, who heads a government agency, talked about Panama’s opportunity to be the "service" for the world’s "products." Most other Latin American countries are staking out product positions. For example, Colombia is known for coffee, Peru for gold, etc. All of these goods need a path out of the region and the Panama Canal can provide that.

By working with neighboring countries and offering the service-side of business, Panama can be seen as an ally to all South American governments and corporations.

Coordinate the uncoordinated

Innovation builds on innovation. For example, Disney’s skill at early animation gave it a unique advantage at designing theme parks. Circuit City’s experience running retail stores (the company was once the leading electronics retailer) parlayed well into selling used cars (CarMax is a spin-off of Circuit City).

Panama is seeking to consolidate the skills it has developed by operating its canal to become the worldwide center of logistics. Its banks, insurance firms, lawyers, and other experts, if coordinated correctly, could form a unique cluster of logistical experts and a strong infrastructure. The plan, as it was briefly described to me, is to cultivate this cluster in a national advantage.

This focus on building innovation was brought up at dinner that night with some close friends of mine.  As we sucked on clams sautéed in garlic and picked at spicy ceviche, one of my friends – the former Panamanian Ambassador to Singapore – talked to me a bit about the parallels between Singapore and Panama.

Both Singapore and Panama are small countries on the outskirts of large, diverse, economically robust regions. They both cluster experts that make them a natural gateway for the region to reach the world. They are both relatively easy for foreigners to navigate. And as you drive under the towering, dense skyscrapers of Panama City you cannot help but think - could Panama engineer in Latin America what Singapore has done in Asia?

Keep a lookout on Panama. Next year – I was told – could be the year when the rest of the world comes to realize its potential. And ask yourself the questions below to see if you can use some of the strategies that Panama is employing to grow innovation in your own business.

1. What is the biggest time-waster of my business or process?

2. What is the number one complaint from my customers and clients?

3. How could I work with another company to streamline inefficient processes?

4. Who can I coordinate to provide a better service or product?

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1 Comments

  • Andre Beladina

    I agree! I was born French, but since I discovered the beautiful country of Panama, I moved there and stayed. Today, I handle a tourism business in Panama. What I have come to observe over the past decade is an ever-increasing amount of tourism and investment money coming to settle in this land of the free.

    Capitalistically-speaking, Panama is heaven on earth!