Technology and Ecommerce in Panama – Panama Silicon Valley

1. SNAPSHOT

• Key Government Entities: Autoridad Nacional de Servicios Públicos (ASEP), Autoridad Nacional Para la Innovación Gubernamental (AIG), Autoridad Nacional de Transparencia y Acceso a la Información (ANTAI)
• Digital Strategies: Digital Agenda 2020; Strategic Plan of the Government 2019–2024
• Telecommunications: General Telecommunications Law, Law No. 31, 1996; ASEP, Law No. 10, 2006; Universal Services Fund, Law No. 59, 2008; AIG, Law No. 65, 2009
• E-government and data protection: Executive Decree No. 511, 2017 of open data transparency; Law No. 81, 2019 of personal data protection; Law no. 83, 2012 of public sector database interoperability; National Cybersecurity Strategy, 2013
• Digital Economy: Panama Digital Hub Strategy 2018; Law on the Seat of a Multinational Company, Law No 41, 2007; Telework Law, Law No. 126, 2020; Law on Electronic or Digital Means for Carrying out Government Procedures Online
• Tech startup environment E-commerce Law, Law No. 51, 2008; Entrepreneurship Companies Law, Law No. 186

2. INFRASTRUCTURE

Panama offers many advantages to tech companies looking to set up in an ideal country, including:

• • US dollar-based economy.
  • Earthquake-free.
  • No hurricanes.
  • No active volcanoes.
  • No taxes on foreign source income.
  • Excellent living conditions.
  • Fully bilingual certified engineers.
  • Best submarine fibre optic access of the region.
  • No pollution.

Panama boasts excellent access to multiple high-bandwidth continental fiber optic networks in telecommunications infrastructure.  The extremely low risk of natural disasters such as hurricanes and volcanoes give Panama’s telecom sector security and reliability of service as well as a competitive advantage over other offshore jurisdictions.

And because of its central location in the heart of the Americas, Panama is extremely easy to access from almost anywhere.

Panama’s long history as an international banking and services jurisdiction has also resulted in the availability of know-how in Internet technology and information technology, as well as sufficient human resources to install and maintain e-commerce operations.

Because of these advantages, Panama is an ideal location for:

• • Internet service providers.
  • E-commerce providers.
  • Broadband content providers.
  • New media content providers.
  • Exchange traffic.
  • Data Centers
  • Others

Panama is positioned to be a regional digital hub, but structural constraints may limit the country’s digital transformation. Private sector actors and the Government of Panama (GoP) are modernizing the country’s mobile networks, including the deployment of 5G. Publicly and privately funded digital literacy initiatives offer upskilling opportunities across the country. Over the past few years, the GoP has unveiled robust regulatory measures for public sector transparency, open government data, and personal data protection. The COVID-19 pandemic also accelerated the growth of digital financial services (DFS) and e-commerce in Panama. Despite these improvements, bottlenecks remain. An outdated legal framework and bureaucratic roadblocks have restricted the evolution of the network.

3. BUSINESS & INVESTMENT OPPORTUNITIES

3.1 Free Tech Zones

At the beginning of 2023, the Cabinet Council of Panama issued a favorable concept to the National Commission of Free Zones of the Ministry of Commerce and Industries to authorize the establishment and operation of two new free zones, Tech Valley Free Zone and Panama Digital Gateway, which seek to increase the strategic potential of Panama as a digital hub in the region.

Tech Valley Free Trade Zone

Through Cabinet Resolution No. 7 of 2023, the Cabinet Council issued a favorable concept to authorize the establishment and operation of the free zone called Tech Valley Free Zone, which will be developed on a total land area of more than 75 hectares, projecting a total investment of US$100,000,000.00, which includes the development of research centers, commercial areas, and data centers, among others.

Through incentives and special conditions, this new free zone will seek to attract and establish 120 companies aimed at the services, technology, and the creativity sector, estimating a minimum generation of 1140 direct jobs and 3570 indirect jobs.

Panama Digital Gateway

On the other hand, through Cabinet Resolution No. 8 of 2023, the Cabinet Council issued a favorable concept to authorize the establishment and operation of the free zone called Panama Digital Gateway. For its development, a total investment of US$19,500,000.00 is contemplated, with the figure of US$11,500,000.00 as an initial investment.

Panama Digital Gateway is a state-of-the-art neutral data center with a cable landing station and free zone in Panama that aims to become the digital hub for all of Central America, the Andean region and the Caribbean. Integrated with Sparkle’s global infrastructure, Panama Digital Gateway is the arrival point of Curie, the cable system developed by Google and Sparkle that connects California with Chile.

On 2023, InteRed  signed an agreement with Panama Digital Gateway for the installation of an Internet Exchange Point (IXP) in Sparkle‘s data center in Panama.

Through the establishment of these two new free zones, Panama seeks to fully exploit its geographical position by consolidating itself as the digital hub of the region, thus seeking to attract companies that are at the forefront of technology and innovation, which will mean a significant improvement in the competitiveness and connectivity of the country.

3.2 Semiconductors

The State Department will partner with the Government of Panama on exploring opportunities to grow and diversify the global semiconductor ecosystem under the International Technology Security and Innovation Fund (“ITSI” Fund), created by the CHIPS Act of 2022. This partnership will help create a more resilient, secure, and sustainable global semiconductor value chain and underscores the significant potential to expand this global industry between the United States and Panama.

The United States views Panama as a partner in ensuring the semiconductor supply chain is diverse and resilient. Products ranging from vehicles to medical devices increasingly rely on semiconductors as the building blocks of today’s economy. This collaboration strives to build new opportunities that attract industry investments and expands the technical workforce in both countries.

This partnership will begin with a review of Panama’s current semiconductor ecosystem, regulatory framework, and workforce and infrastructure needs. The outcome of this review will inform potential future collaboration on developing this critical sector to ensure that both countries benefit from state-of-the-art technology.

In August 2022, President Biden signed the CHIPS Act of 2022, a new U.S. law that appropriated new funding to boost domestic manufacturing and research of semiconductors in the United States. The CHIPS Act created the ITSI Fund, which provides the U.S. Department of State with $500 million ($100 million per year over five years, starting in Fiscal Year 2023) to expand global semiconductor manufacturing; secure semiconductor supply chains; and develop and deploy secure and trustworthy Information and Communications Technology networks and services through new programs and initiatives with our allies and partners.

4. CRYPTO CURRENCIES, VIRTUAL ASSETS, BLOCKCHAIN, NFTs IN PANAMA

Currently, there is no law or regulation applicable to virtual assets, cryptocurrencies or virtual currencies in Panama. In this context, both the SBP and the securities regulator (the Superintendencia del Mercado de Valores or SMV) have issued public notices and opinions (respectively) stating that they do not supervise cryptocurrencies in general.

As a result, there is no prohibition to create or operate as a company dedicated to the commercialization of crypto assets. One of the latent risks in Panama, due to the lack of legislation, is what to do in case of a legal dispute or conflict. Without the necessary legislation, there is no proper jurisdiction where parties can go to trials trying to solve crypto asset´ disputes. In addition, it is unknown whether the provenance of these crypto assets is born in a lawful manner and whether it complies or not with the mechanisms to prevent and control the risks of money laundering, terrorist financing, and financing the proliferation of mass destruction weapons.

Notwithstanding the foregoing, Panama is one of the top jurisdictions to create the legal structures for crypto ventures through Panama foundations to regulate the DAO and NFTs. For more information, please contact us.

5. TAXATION

Panama is especially attractive to foreign investors for its tax benefits, particularly those involving income tax, which is not applicable to foreign source income.  This concept of territoriality is one of the determining factors that make Panama a center of international operations. It is also an important consideration for Technology or Ecommerce companies looking for somewhere to set up a permanent establishment for their sales and payments for future tax planning.

The government motivates potential investors to base their e-commerce operations in Panama as a virtual nation with an environment where international business is welcomed.  Panama continues to encourage foreign capital to enter its domain.

Of course, Panama’s imperviousness to change cannot be attributed to accident or chance.  There are several foundations on which Panama’s extraordinary stability as a base for foreign investment continues to rest.

For example, a company with its headquarters in the US, its manufacturing facility in Mexico, its distribution from Panama Pacifico and its ecommerce and payment transactions based in a provider such as Panama Digital Gateway can serve customers in North and South America, Europe and Asia.

The extraordinary facilities Panama affords to foreign investors for various hi-tech industries complement the country’s investment incentives designed to prevail in a very competitive regional environment.  This, together with the strong growth of Panama’s international maritime and financial centers, can be seen as heralds of a second Singapore in the middle of the Americas, a point of reference not to be ignored in the new economy of the 21st century.

If you want to Set Up your Tech Business in Panama, in the BusinessPanama Group, we have licensed real estate agents, lawyers, investment advisors and we work closely with Pardini & Asociados, a law firm with 40 years of experience for all legal matters to assist you on all your business and legal needs.

The BusinessPanama Group provides a convenient One Stop Shop offering the following services /

• • Setting up the company or branch
  • Locating office and living premises for the company and its executives
  • Setting up all operations, contracts, permits, etc.
  • Accessing special tax incentives
  • Applying for visas, work and residence permits
  • Relocation services
  • Others

For more information, please contact us.

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