Investing In Panama: Export Industries

During 2006, the Panamanian economy kept a continuous growth. The growth peaks happened in categories such as financial intermediation (13,4%), the ports (12.2%), the air transportation (18%, the hotel (15,2%), the commercial activity of the Colon Free Zone (13,1%), the export of agriculture and telecommunication products (15,3%).

In the first 11 months of 2006, Panamanian exports reached US$949.8 million, 5.5% more than in the same period of 2005, according to the Comptroller General of the Republic. The fish flour was the product of most growth in the exports, followed by the watermelon and the pineapple.

43.5% of the Panamanian exports were directed to the US market, becoming the main commercial partner, representing some US$500 million dollars yearly.

The European Union (EU) became in 2006 in the main investor in Panama, with almost US$4,585 million, according to the business office of the European Commission. Spain was the second destination country for Panamanian exports in 2006. In total, trade between both countries reached around the US$150 million.

Europe represented 60% of the non-traditional agro exports of Panama, surpassing the United States.

Free Trade Agreements

With the signature of the Free Trade Agreement between Panama and the United States, a new commercial phase after mid 2007, once the processes of legal review, signature and ratification by the congresses of both countries is completed. This commercial instrument has 23 chapters providing substantial legal security for business, trade and investments between both countries increasing opportunities to investors from the United States.

This treaty:

• Stimulates foreign investment between both countries
• Widens significantly the product market
• Increases the exportations from both countries
• Improves the free customs access of merchandises and services with few exceptions
• Provides higher levels of transparency, accountability, and legal security

For 2007, it is expected that the United States will increase its investment in Panama, in business areas of importance such as:

• Construction
• Technology
• Services for the Panama Canal
• Ports
• Telecommunications
• Tourism
• Areas adjacent to complementary businesses

In 2006, Chile and Panama signed a Free Trade Agreement so that the South-American country opened 92.5% of its tariff lines.

Panama and Singapore successfully negotiated a Free Trade Agreement. This is the first time that the asian country signs an agreement with a Latin-American country. Singapore has a great investment potential that internationally adds up to some 260 thousand million dollars Also, this FTA is considered a strategic alliance that:

• Allows Singapore, with zero tariffs, for all the agricultural and industrial products.
• Stimulates the countries of Singapore to invest mainly in the port sector.
• Opens the telecommunications market to the companies of this country.
• In the agriculture sector it was obtained the exclusion of more than 200 tariff lines of sensitive products such as dairy, rice and pig and chicken meat and others.
• In the industrial sector, the sensitive products were included for a period of non-lineal tariff exoneration of 10 years.
• Establishes a rule for investments in the financial, port, shipyard, and cruise ship services.
• Establishes a rule to promote the bilateral cooperation in commerce, investments, industry, science, technology and education.
• Includes an annex regarding maritime transportation to guarantee the non-discriminatory treatment in access to ports and certain services rendered by ships registered in Singapore and Panama.
• Made Singapore recognize the concept of re-exportation of products through the Colon Free Zone.

Export Processing Zones

Panama offers manufacturers located in an EPZ special tax incentives under Law No. 25 of 1992 and complementary regulations.

The main export industries allowed in the EPZ are:

• Manufacturing
• Assembly (or maquila)
• Processing
• Telecommunications and High Technology Parks

The promotion/development and the operation of the EPZ are well-defined and the Law grants extensive power to the promoter to develop land; construct building and installations for all purposes; construct technical, medical, sporting, public service, transport and other centers; install and operate gas, energy, water, telecommunications and sewage systems, schools and other facilities; and construct and operate airports, ports, docks, cargo facilities, roads and other infrastructure, all subject to the applicable laws of Panama.

The new Law turn the EPZ in 100% tax-free areas. As a consequence, both the promoter/developer and the export industries as well as any activity, operation, transaction, license, procedure, transfer of movable goods and real estate, purchase and importation of all equipment, spare parts, raw materials, and all goods and services required for its operations, shall be 100% exempted from national direct and indirect taxes, duties, levies, right and charges. It is worth mentioning that all tax exemptions are granted for an indefinite period.

Special labor law regulations are also contained in the Law applicable to employment contracts for a fixed period or work, productivity regulations, rotation of employees, vacations and others.

For these companies, there are

• no direct or indirect income tax
• no import tariffs on purchase of equipment or raw materials
• no taxes on the repatriation of profits

Similar incentives exist for oil and petrochemical companies located in the country’s Petroleum Free Zones as well as for Call Centers.

If you want to set up an export industry, in the Business Panama Group, we have licensed real estate agents, excellent lawyers, insurance specialists, mortgage brokers, investment advisors and other professionals to assist you on all your needs.

We can help you with:

• Buying properties in  Panama City , Beaches, Islands or Mountains
• Forming a company to own your property
• Legal services for all aspects of land acquisition and project development
• Title insurance
• All insurance required
• Procuring bank financing
• Others

The Business Panama Group team of realtors, lawyers and other professionals will provide you a variety of services from the purchase of the property to all phases of development including structuring, financing, contractual, environmental, construction, permitting, employment. immigration and more. We also will be glad to provide you access to our “List of Recommended Professionals” formed by first class architects, environmental consultants, builders and others.

For more information, please click here to contact us.