On Thursday, April 3, 2014, Mexican President Enrique Peña Nieto signed a free-trade agreement with Panamanian President Ricardo Martinelli. The official signing of this agreement occurred during the Latin American World Economic Forum in Panama City. This free-trade agreement is expected by some to improve the amount of opportunities for smaller businesses within the Mexican private sector. These improvements could also lead to the acceptance of Panama into the Pacific Alliance free-trade region. Mexico, Peru, Colombia, and Chile are all a part of the Pacific Alliance. Although Panama is not yet included in the Alliance, they are still involved and receive exports from Mexico such as medicine, televisions, steel, and automobiles.
This new agreement can be related to the broad economic concepts of supply and demand. The agreement will promote a substantial increase in the level of trade between Mexico and Panama. For smaller businesses especially, this is an opportunity for significant growth. “Without a doubt [the amount of trade] will be widely increased once the productive sectors in both countries can start taking advantage of this commercial opening; it will be easier to move people, goods and capital into both countries.” This relates directly to supply and demand. With more options for suppliers as part of the free-trade agreement, both the supply and demand graphs could be affected.
Before this agreement was signed, however, Mexico and Panama were not necessarily frequent trade partners. Therefore, this lack of trade frequency was problematic. This led the leaders of each country to realize the potential of a free trading system between their respective industries. The solution to this problem was to author a trade agreement between the Mexican and Panamanian government. Due to the free-trade agreement, these countries may experience significant economic improvement.
