Panama's Deputy Economy Minister Frank De Lima said ratings agencies responded favorably to tax hikes and fiscal discipline under Martinelli, who took office last July. "Our policy has also been to strengthen our own domestic market, issuing notes, letters in Panama to diversify our debt ratio between external and internal debt," De Lima told Reuters, noting Panamanian debt has been 90 percent external. "We want to change that ratio and have a more diversified debt profile. That's something that the ratings agencies also have viewed very positively," he added. Panama, which uses the U.S. dollar as its currency and straddles a narrow strip between the Atlantic and Pacific oceans, has been a big winner from the growth in global trade. About 4 percent of international commerce flows through the Panama Canal, and the country also ships goods by rail from ports on one coast to another. Shipping prowess helped Panama average 8 percent annual growth between 2000-09 -- the fastest pace in Latin America.

Panama's economy even grew during the global recession and a $5.25 billion project under way to expand the canal bodes well for future growth. "The ongoing expansion of the Panama Canal, an ambitious public infrastructure investment plan and an expanding services sector that benefits from the country's emerging role as a regional hub for trade, finance and transportation will support Panama's growing economic resilience and diversification," said S&P.