Panama Welcomes Commercial Opportunities

by Diplomatist Bureau - 12 May, 2022, 12:00 1413 Views 0 Comment

Considered the Hub of the Americas for our flight connections, maritime routes, and logistics centres, Panamá is much more than that. Business and Investment also locates Panama on the spot.

A stable democracy, political, and dollarized economy, with standard inflation since 1904, has helped Panama to achieve a solid financial position, backed by a well-developed and long-established international banking system with over 60+ licensed well-known international banks.

The Economic Commission for Latin America and the Caribbean (CEPAL) estimated 7.3% of economic growth in our Gross Domestic Product (GDP) and the World Bank has forecast 7.8% in 2022 for Panama.

Special Economic Zones & Regimes Geared Toward Attracting Foreign Direct Investment

Colon Free Zone: Established in 1948, is one of the most important on the American Continent and one of the leading logistic centers for multimodal redistribution in the world. Located adjacent to three major shipping ports on the Atlantic side, it is an ideal hub to access markets of Central America, CARICOM, and the Andean Community. It is home to many multinational companies that established headquarters in Panama and utilize the free zone to redistribute their products to the rest of the region. It currently harbors over 2,700 companies, employing over 18,000 people.

Panamá Pacifico: Taking advantage of an old United States Air Force base, in agreement with a master private developer, Panama created one of the largest, most ambitious mixed-use developments, located right next to the Pacific entrance to the Panama Canal. With a total area of 1,400 hectares, it offers an integrated solution for companies, providing at the same time an integrated solution of housing and commercial amenities to their expat executives, although its not a closed environment. It is the ideal location for activities such as high-tech manufacturing, logistics and distribution, maritime & aviation services, regional headquarters, and the filming industry amongst others. Over 300 companies have established their operations there, including some Fortune 500’s & Forbes Global 2000 Firms such as Dell, FedEx, and 3M.

Free Trade Zones: Panamanian law allows for an individual or company to establish a Free Zone anywhere in the country if it meets certain criteria such as a minimum area of two hectares. Some of the permitted activities are as follows: manufacturing, agroindustry, assembly, processing, logistics, high-tech research, environmental services, and health services.

Special Regimes: These are laws that are structured to provide multinational companies with attractive tax, migration, and labour incentives that, together with Panama´s natural competitive advantages, provide a business environment bred for success.

The MHQ (Multinational Headquarters) regime, was created in 2007 and has attracted over 170 multinational companies with an estimated investment of $1.2B. To be eligible to apply for this regime, the company needs to have a net worth value of $200M or more in total group assets or have at least seven subsidiaries. From this option, companies can provide services to their parent company or subsidiaries.

Through the years, companies such as Procter & Gamble, Nestlé, Samsung, Dell, Estée Lauder, and many more have thrived under the MHQ regime, establishing regional and global headquarters in Panama.

With the current geopolitical trade situation and the supply and demand shocks brought on by Covid-19, the Republic of Panama saw the opportunity to establish its newest regime called Manufacturing Services for Multinational Companies (MSM), to promote all the competitive advantages that Panama offers to companies looking to conduct nearshoring operations. Companies that want to apply for the MSM regime need to have $75M or more in total group assets or have at least three subsidiaries.

A well-trained labour force is essential for the success of the MSM regime, and as such, the law contemplates a component in which companies can have their in-house training centers or develop local training programs with local universities and training institutions. Companies such as Korean electronics LG have established successful training programs in Panama with positive results.

Other Legal incentives:

The Film Commission of Panama, a division of the Ministry of Trade and Industry, is responsible for providing producers around the world with services that meet their production needs. The Commission has also created the Panama Film Incentive, which offers film production companies a cash refund of 25% of production costs for filming in our country. Therefore, many filmmakers consider Panama —complete with historic colonial cities and exuberant natural landscapes— the best setting for their projects.

In March 2022, during the celebrated EXPOCOMER fair in Panama City, Indian businessman, actor and filmmaker Prabhakar Sharan signed an agreement with Eros International Media to shoot the first ever five films of Bollywood in Panama. The first one will start in mid 2022 under the title “Borders without life, the Immigration Files”, an important story that will benefit from the advantages of filming in Panama.

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