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					A. Agriculture

The agriculture sector recorded a 3.0% growth in 2004. Mostly non-traditional export
products, such as pineapple, melon and watermelon, recorded a 39.2% growth
altogether. Also, traditional products such as corn grew by 5.2%, beans by 4.8%, cane
by 3.3%, coffee by 4.8% and floriculture by 11.4%. Livestock went up to 2.7% mainly
with a rise in the number of slaughters; hog-breeding grew by 6.9%, and poultry-
breeding by 12.7%.

A negative factor was the fall in banana tree production, by 1.1%, due to labor
problems, phytosanitary and weather inconveniences; but mainly due to trade problems
in the European market and the prevailing phytosanitary problem, with the Black
Sigatoka plague directly affecting production costs. The former company reached an
agreement with the workers’ union and as a result, the company split in two: the
production and management part is in the hands of the workers, and the fruit marketing
remains in the hands of the former business' owner, Chiquita Brands, and its new
affiliate company, Tecno Asesora Agrícola S.A. This company has a 10-year contract
for marketing the fruit.

B. Fishing

In 2004, it grew only to 1.5%, compared to 12.6% in 2003. The raise of industrial and
export fish (porgy, sea bass, dorado, anchovy and herring) accounts for a slight 1.5%
drive to this activity. Shrimp export is still facing problems regarding international
prices, as a consequence of Europe’s refusal to import shrimp, and the increase in the
offer of this product from Asian countries, leaving it only heading to the American
market. Another factor preventing the shrimp activity expansion is the white spot virus.
As for aquiculture, this has recorded a 6.6% growth backed by pond shrimp cultivation.


C. Mining

This activity has grown by 33.7%, strongly backed by a greater demand of stone, sand
and clay stemmed from the construction boom. The construction of the second bridge
over the canal has significantly influenced this activity, together with its access roads
and container transportation works in the Balboa port.


D. Manufacturing

The sector’s 4-year-straight downward trend was refrained in 2004, recording a 2.6%
growth this year. The sectors that contributed to its improvement were beef, pork meat
and poultry meat; fruits, vegetables, horticultural products, beverages, sugar, sawmills,
glass, cement and concrete. The printing sector has played an important role, mainly on
account of the electoral campaign, which requires a great amount of printed material.




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There are still non-recovered areas within the sector, such as fish processing and
conservation, oil manufacturing, milk product manufacturing, textile products and shoe
manufacturing.


E. Electricity, Gas and Water

This activity attained an 8.8% growth, up from a slight 1.2% growth in 2003. The
growth was strongly backed by the electrical sector, which in turn backed the hydraulic
energy production, which recorded a 37.8% growth. The Bayano plant, which operated
with its three hydraulic plants, and the hydroelectric plant Estí, which started operations
this year, are underpinning the growth of this sector.
Compared to 2003, electricity went into reverse in 2004. Last year, the thermal
generation went up by 39.2%, while the hydroelectric generation dropped by 11.9%, as
a consequence of the low level of dams. In 2004, the hydraulic power generation raised
by 37.8% due to the improvement in the level of dams; whereas thermal generation
went down by 37.5%, on account of the raise in oil prices.

Water billing increased by 3% in 2003, as a result of a larger invoicing of home and
commercial consumption (4.4% and 3%, respectively). Industrial consumption went
down by 12.3%; and government consumption dropped by 5.1%. In 2004, water billing
went up by 7.6%, largely higher than in the previous year, which is associated to the
increase in residential construction works.


F. Construction

In 2003, the construction sector went up by 32.5%, driven by several factors, such as
house and commercial loans and an interest rate reduction, the removal of the income
tax on workers earning up to B/.800.00 a month, the termination of property tax, and
finally the extension of the Act 65 of October 29th, 2003, which keeps the preferential
interest system. In 2003, the government engagement in important infrastructure works
increases, such as the second bridge over the canal, the vehicle junction in Albrook and
the expansion of the Interamerican highway.

In 2004, the sector kept expanding at 16%. Most of last year's works continued in 2004,
taking advantage of the previous year's fiscal incentives. The projects for this year have
been infrastructure investments performed in the terminal ports of the Pacific and the
Atlantic oceans, and the second bridge over the Canal and its access roads.


G. Wholesale/Retail

In 2003, the income tax reduction on workers earning a salary less than B/.800.00
contributed to stop the fall of the sector; trade went down only by 0.7%. By 2004, the
scenario changed radically: growth was 11.1% because the Colon Free Zone showed
symptoms of a solid recovery, with an increase of 19%, due to the recovery of the
Southern Cone market. Another contributory factor was a higher purchasing power of a
worker sector and a wide variety of commercial centers, including the recently-opened
malls in Panama.


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H. Hotels/Restaurants

This economic item has been proving strong since 2002; tourism has become one of the
driving sectors of our economy. In 2003, it recorded a growth of 10.9%, underpinned by
the arrival in the country of passengers residing abroad, tourists and travelers in transit.
By October and November, passengers from cruisers increased. In 2004, the sector’s
growth was 8.2%, driven by hotel services, which showed went up by 11.6% and
restaurants by 6.2%. The arrival of visitors increased by 12.4% and their consumption
was up 11.3%.


I. Transport, Storage and Communications

During 2003 and 2004, this sector went up by 13.6% and 11.6%, respectively, mostly
driven by the port activity, the Canal, telecommunications and the Colon Free Zone.
Ports continue to support this strongly, mostly now as a result of the recovery of the
main Latin American countries, and also due to the fact that China has mobilized huge
cargos on the East coast of the United States, across the Panama Canal.


The port activity mobilized 2 millions of TEUs altogether across the ports of
Manzanillo International Terminal, Panama Ports Company and Colon Container
Terminal; 95.9% of this mobilization was foreign trade cargo and only 4.1% was local
cargo. Of the total cargo mobilization, private ports moved 98.9% and state ports 1.1%.

Telecommunications have played a significant role in this area of the economic activity.
The activity of Call Centers and internet cafés offering moderate prices for
communication services, both local and international. The removal of the one-dollar tax
per international call that was replaced with a uniform tax of 12% on international calls
has turned the country more competitive. Telecommunications show a great dynamism
on account of a greater offer of broad band services, which speed up Internet
connections.

The Colon Free Zone has shown a strong recovery, mainly due to the economic upturn
of countries such as Brazil, Argentina and Venezuela.


J. Financial Intermediation

On the whole, this activity went down by 6.2% in 2003, and in 2004 things remained
quite the same, since the sector’s total decline was 2.6%. This activity has been
decreasing for four straight years. By 2003, the banking sector went down by 14.4%,
affected by a foreign license low financing at a local level. In broad terms, and
compared with previous years, there has been a lower activity of the credit portfolio in
international license banks and development banks. The positive side was reflected in
the sale of life fire and car insurance policies. However, financial corporations and the



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insurance sector record a positive performance in 2004, with 18.0% and 2.5% rates,
respectively.


K. Real Estate

In 2003, this activity went up by 3.7%, backed by a demand of dwelling units, local
establishments, information technology services, advertising and legal services. In
2004, this sector shows the same dynamism, recording a 6.3% growth. In addition to the
previous year's sectors, other activities joined positively, such as machinery and
equipment lease, corporate advice, photography and private security.


L. Private Education


Private education is backed mainly by higher studies, and offer new post-graduate and
master degree courses. In 2003, the sector grew by 1.1% and by 2.2% in 2004, equally
supported by higher education activities.


M. Social Services and Private Health

In 2003 and 2004, they grew by 6.3% and 5.9%, respectively, equally supported by the
activity of physicians and odontologists.


N. Other Services

They showed a 1.2% fall in 2003, as a consequence of the low activity in race track and
bingos; while casinos recorded a positive growth. This positive trend of casino activities
remains the same in 2004, and has helped the sector recover, resulting in a positive
growth of 6.7%, which is also attributable to radio and television services.


O. Government Service Providers

In 2004, they grew by 1.5%, with an increase observed in education, health and public
security contracting. In 2003, they recorded a 2.6% growth, with an staff increase in
governmental entities, such as education, health and public security. Because 2003 and
2004 were pre-election and election times respectively, the court of elections hired new
ad hoc personnel.


P. Domestic Service Providers

In 2003, they recorded a slight increase of 2.0%, which edged up to 4.8% in 2004, as a
result of the local economy dynamism.




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III. FORECAST 2005


By 2005, the economy will still be driven by the international market; the economic
growth rate could reach 6.7%. The largest contribution could derive from the transport
sector, mainly from the Canal, container transport, cruiser tourism and rail transport. A
large tourist movement is expected, which will contribute significantly to hotel and
commerce activities. A strong contribution from the construction sector is also
expected, although not as much as that of last year, since the construction of the second
bridge of the Canal and the 3rd phase of the expansion of the Balboa Port have been
completed. Real estate activities are also likely to grow substantially in the light of the
transactions resulting from the properties built in Punta Pacífica and Costa del Este.


                                                                                                        GDP Growth Rate Forecast
                                                                                                               Year 2005
                 2.0%
                                                                                                                                                                   0.017639341
                 1.8%                                                                                                                                                                                                        0.01588436
                                                Total: 6.7%
                 1.6%
                 1.4%
  Contribution




                                                                                                                    0.011356599
                 1.2%
                 1.0%
                 0.8%
                 0.6%                                                                           0.004627472
                                                                                                                                                                                       0.003569389
                 0.4%                                                                                                                         0.00256996
                                      0.001556794                                                                                                                                                                                                          0.001882168
                    0.000900489 0.001159183 0.000977279
                 0.2%     0.000551036                                                                                                                                                                                                                0.000948338
                                                                                                                                                                                                                                               0.000309553
                                                                                                                                                                                                                                         0.000149885             0.000230602
                 0.0%
                                                                                                                                                                          Transport, Storage and




                                                                                                                                                                                                                                                                   Social Services and Private Health




                                                                                                                                                                                                                                                                                                                         Government Service Providers
                                                                                                                                                                                                   Financial Intermedation




                                                                                                                                                                                                                                                                                                                                                        Domestic Service Providers
                                                                                                                                                    Hotels/ Restaurants




                                                                                                                                                                                                                                 Real Estate


                                                                                                                                                                                                                                               Private Education
                                                                                                                          Wholesale/ Retail




                                                                                                                                                                                                                                                                                                        Other Services
                                                                           Electricity, Gas and Water
                        Agriculture




                                                           Manufacturing




                                                                                                           Construction
                                      Fishing


                                                  Mining




                                                                                                                                                                             Communications




Adverse factors for economic growth are the fiscal reform, the Social Security reform
and the possible revision of the minimum salary. Also, the increase in oil prices, which
drains local resources abroad.




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