Developed Vs. Developing Country Comparison: Report On Ireland And Panama

Different countries around the world have different economies. International investors will classify these countries based on their economic development levels. Two of these classifications are developed countries and developing countries respectively. A developed country is one that is considered to have high growth, while a developing country is one that is seeking to become more socially and economically advanced (What Is a Developing Country?, n.d).

For this week’s paper I decided to write about Ireland as a developed country and Panama as a developing country. I feel that the current economy in Ireland is a perfect example of what the term developed embodies. Ireland is a very open economy and very dependent on international situations. Their main imports are machinery and equipment, oil and petroleum products, textiles and clothing. Their main exports are computers, chemical and pharmaceutical products, live animals and animal products. Ireland's main trade partners are the European Union and the United States.

Panama is a country that has actually been doing quite well in the last thirty years and that I feel may be on its way to being considered a developed country. Panama is a generally liberal country. When it comes to trade, they have low tariffs and a few non-tariff barriers. Panama has a service-oriented economy and it acts as a hub for activities, such as Maritime transport, distribution, services in banking, and the production of a number of agriculture and manufactured goods.

Economic indicators are put in place to measure the health of the economy, the latest business cycles, and the spending habits of the consumers (The Top 10 Economic Indicators: What to Watch and Why, 2013). Four indicators of how well/poor an economy is doing are gross domestic product (GDP), employment rate, Government debt, and Government consumption.

GDP is calculated as the dollar value of all goods and services produced over a specific time period (Kramer, 2019). The employment rate is measured by the number of people that are currently available to work. Government debt is measured by the amount of money the Government owes in bonds and intragovernmental debt. Government consumption is measured by the amount in which the Government is spending on goods and services for the economy.

These four indicators show whether there is a balance in the economy. By reviewing these numbers, one can get a better sense on exactly how an economy is doing financially. When it comes to a country’s classification, the data retrieved from these indicators will aid in determining whether a country is considered to be developed or developing.

By understanding the economic indicators, one can get a better understanding of how a new business might fare. Questions can be answered to help make an educated decision on whether or not the business will be profitable and help the economy in question. The indicators the I chose will allow me to better see exactly how the monetary situation lies in the country that I choose.

In Ireland, GDP has been on a near constant rise over the course of a decade. In 1995, Ireland’s GDP was at 13171.0 (measured in millions). By 2017, Ireland had peaked at 81420.7 (measured in millions). Their numbers have continued to grow showing that in this area, Ireland’s economy was faring pretty well. Panama’s GDP has also been on a rise. In 1995, their numbers were at 9365.2 (measured in millions) and peaked at 61838.1 (measured in millions) by 2017. For Panama, one can also see that their GDP levels are also doing pretty well (U.S. Bureau of Economic Analysis, n.d).

The employment rate in Ireland has fluctuated a bit, but has remained fairly well over the years. In 1999 the rate was sixty three percent, in 2007 it peaked at seventy one percent, and by 2018 it was back down to sixty eight percent. Panama’s employment rate has been on a steady rise since 1991. At that time it was at fourty nine percent and by 2017 it had made its way up to sixty three percent. Again, these are fairly decent numbers for employment (U.S. Bureau of Economic Analysis, n.d).

Ireland’s Government debt is not too bad, all things considering. They have fluctuated here as well. In 1995, they were at seventy eight percent of GDP. They spiked to one hundred and nineteen percent in 2012 and 2013, but dropped down to sixty eight percent by 2017. Panama’s Government debt also has been too bad. In 2010, they were at thirty eight percent of GDP. By 2013, they dropped to thirty three percent and by 018 went back up to thirty seven percent (U.S. Bureau of Economic Analysis, n.d).

Government consumption has been on a rise in Ireland. In 1995, the levels of consumption were around four billion., a very large overal increase. Since then, it has been on a steady rise and by 2018 it rose to nine billion. Government consumption in Panama has been at an average of around forty percent over the exchange rate between the years of 1990 and 2010 (U.S. Bureau of Economic Analysis, n.d).

Fiscal policy is how the Government sets tax rates and the spending levels. The monetary policy is what the Government uses to influence the money supply (Krugman, 2015). Together, these two policies are used in obtaining economic goals. Currently Ireland uses the euro and therefore, the ECB controls the interest rates. Fiscal policy was more important in Panama as that is what was used to determine their financial stability and international credit standing. Since Panama gained its liberation, they have survived without a central bank. Despite this fact, Panama has a very stable macroeconomic environment. It has also become very successful. They are on a very market driven money supply due to the absence of a central bank (Saied, 2007).

Trade policies are set in place to ensure fair trade between different countries. They outline rules and regulations and set standards and goals that each country should follow (Trade Policy, 2010). All countries that are currently involved in trade have polies in place. In many cases these policies are not equal in all measures however.

Ireland has erected a free trade policy with numerous countries. Most recently, they signed one with Japan. This agreement removes barriers that were previously set, helps shape global trade rules, and sends a signal letting others know that two very powerful countries have come together (EU Japan Economic partnership Agreement, n.d). By erecting such an agreement with Japan, Ireland has openned doors that will allow for trade on a larger scale with a very prominent country. Ireland has also constructed a trade strategy. This strategy will support Ireland’s claim to be an open, globalized trading partner. A main goal of this strategy is to build and strengthen connections both at home, and overseas (Ireland Connected: Trading and Investing in a Dynamic World, n.d).

In 2012 Panama and The United States enacted a trade promotion agreement. This specific agreement removes barriers to US services and eliminates tariffs. The agreement provides opportunities for US manufacturers, farmers, workers, and ranchers (U.S.- Panama Trade Promotion Agreement, n.d). This type of agreement would be beneficial to our cause as an aircraft manufacturer. This agreement allows for US companies to be protected from any discriminatory practices or unlawful treatments.

Other than the US, Panama has numerous FTA’s, partial trade agreements, bilateral investment agreements, and is engaged in several active negotiations with many different countries (Panama - Trade Agreements, 2016).

The various agreements and policies that both of these countries have in place would benefit our cause greatly. We are looking for countries with rising economies and that currently trade on a larger scale. By investing in such an area, we hope to bring work to the area and eventually branch out to other countries as well.

Panama’s agreement with the US is of interest to me. In the last decade, Panama’s economy has been awarded with high economic growth and is expected to have the highest rate of growth in the entire region (Trade Policy Framework: Panama, n.d). By eliminating tariffs and barriers to US services, we now have the options for endless opportunity.

Tariffs are regulations put in place that make goods and services harder to obtain for consumers. Prices of goods are raised on imports from overseas (Kenton, 2019). This then makes trade less attractive and can damage future agreements between countries. Because Panama has lifted the tariff restrictions, they might be the better choice between the two as far as where to invest the aircraft manufacturing business.

Currency and exchange rates are also a big factor when determining which country to invest in. Exchange rates tend to fluctuate which can make trade a little difficult. The currency in Ireland is the Euro. The exchange rate for changing one US dollar is currently.882200. The rate for changing a euro into a dollar is 1.13351. The currency in Panama is the balboa. The balboa measures equally with the US dollar on the exchange market. Panama also accepts US currency so there is no need for an exchange of currency.

There has been talk about a brexit. The UK plans on leaving the EU. This leaves the future of their currency in an unknown and very well could complicate matters of trade. This is scheduled to take place soon and could leave matters in Ireland hanging in a sort of limbo for a while.

After careful review of the two countries, I think that Panama is the better choice for our investment. I plan on showing my findings to the CEO and persuading him to invest in Panama. One factor that has influenced my decision making is the trade agreement that Panama has instilled with the US. Being as to how the main headquarters of this operation will be in the US, having no restrictions and open trade policies enacted will enable us to make a firm business deal.

Another factor in my choice is the currency. Panama currently has no exchange rate with the US and will accept the US dollar as payment. This eliminates the need for exchanges of currency. Another factor is that, while considered a developing country, the economy is on the rise and all of the indicators that I have researched are showing that their economy will continue to bloom.

There is also talk of expanding the Panama Canal. The Panama Canal is a very important waterway for the shipping industries. By expanding the canal, it will enable increased trade by widening it and allowing larger ships to pass through. This will also allow for more job opportunities if there is growth in the shipping industry.

The final cause of my decision is the brexit occuring with Ireland and the UK. This break will cause too many uncertainties and could cause vast issues with international trade. The UK will no longer be a part of the EU free trade. While Ireland is a economically sound country, we can not afford to take such a risk at this time.