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Located in Central America, Panama sits east of Costa Rica and north of Columbia. Panama City is its capital. Heavily associated with the famous Panama Canal built in the 1900’s as well as former military leader Manuel Noriega, in recent years Panama has become a popular location for real estate investment and retirement.
Panama once used Colombian pesos but now use their own official monetary unit, the balboa. The Panamanian government has not produced paper balboa bills since 1941. US dollars are the paper money used locally. The most current exchange rate is one US dollar for one Panamanian balboa or PNB. Domestic coins minted in Panama bear a close resemblance to American coins. In July of 2011 the Panamanians issued a balboa coin that has exactly the same value as the American dollar, looks similar to an American quarter but is copper not silver colored.
The official bank of Panama is the Banco Nacional de Panam�. It is considered the equivalent of the Federal Reserve Bank in the U.S. Panama is part of a growing trend of world economies moving away from using paper bills and adopting coins as their primary currency.
In the wider economic realm, Panama’s GDP is driven by services that include tolls collected by international vessels that pass through the Panama Canal annually and because of its tropical climate and terrain, tourism. Many believe that Panama’s banking and investment environment is the most attractive in the Latin American region. Foreign investment into Panama during the first two quarters 2008 totaled 1,100 million dollars.
Although the Panamanian government is not linked to the United States treasury, the dollar is the predominant currency in use in Panama. Though prices for goods and services are quoted in balboas, the balboa is generally not used by businesses or consumers. Panama has greater financial stability than other developing countries because of its use of the US dollar. There is some speculation that Panama will, nonetheless, try to reduce the prevalence of the dollar as a major currency and in the future become less economically tied to it. For now, currency traders can treat balboas like dollars and vice versa since they are pegged to one another. Because the US government plays such a a large role in Panama’s monetary policy and the country is so dollarised, there are few to no opportunities for FOREX traders looking to manipulate these two currencies against one another.