Panama's economy has become largely service-based, with the operation of the Panama Canal, banking, insurance, container ports, flagship registry, and tourism all playing important roles. Less than a quarter of the land is used for agriculture. On the upland savannas cattle are grazed and subsistence crops such as rice, corn, coffee, and sugarcane are grown. Bananas are grown on the Pacific coast. The country has various light industries, including construction, brewing, and sugar milling. The Colón Free Zone, established in 1953, is a center for foreign investment in manufacturing.

Bananas are the leading export, followed by shrimp, sugar, coffee, and clothing. Capital goods, foodstuffs, consumer goods, and chemicals are imported. Much of the trade is with the United States. In recent years the country has become a nexus for the shipment of illegal drugs from Colombia to the United States, as well as a center for drug-related financial transactions.

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