Doing Business Report

In Spanish, we refer to Panama as the 3P´s “puente, paso, puerta” (bridge, passage, and door). Panama is the bridge between Central/North America and South America, the passage that links the Pacific Ocean and the Caribbean Sea and an open door for everyone. We are truly the crossroads of the world. From the moment Vasco Nuñez de Balboa discovered the South Sea (Pacific Ocean), we became a logistics hub. Our Pacific Coasts were used as embarkation ports for all exploratory missions to Central and South America, while our Caribbean Coasts were used as trading posts and departure spots for the Old Continent. Later on, the first inter-oceanic railroad was built, by the US, and proved to be the fastest link between the West and East Coast cities. Panama is also the place that the King of Spain, Charles V, originally recognized as a potential site for creating a water passage, and which was chosen by France in 1881 and later taken over by the US in 1904 for the construction of the Panama Canal. Officially opened on August 15, 1914, the Panama Canal greatly reduced the amount of time ships took to travel between the Atlantic and Pacific Oceans, enabling them to avoid the lengthy, hazardous Cape Horn route around the southernmost tip of South America. This route opened new markets and possibilities and helped integrate the nations in and around the Pacific Ocean into the world economy. Recently, the Panama Canal inaugurated a third Set of Locks, which allows the passage of larger sized ships which can carry over twice as much cargo as the previous maximum allowed ships.

Gross Domestic Product

With an upper-middle income and an estimated gross national income per capita of $ 15,089.3 (INEC - 2017) Panama is the fastest growing economy in Central America and Latin America. Transportation and logistics activities linked to the expansion of the Panama Canal and public and private investment projects underway, including the new copper mine in Colón, support economic growth.

Inflation Rate

Panama's inflation closed 2017 with an accumulated of 0.9%. Regarding the INEC indicators until December 2017, education and health were the groups with most influence on the year-on-year percentage variation of the CPI.

                                                                            

                                                                                                                                     Foreign Direct Investment

According to the General Comptroller’s Office of the Republic of Panama between 2016 and 2017 the direct foreign investment grew by $ 94 million, rising from $ 5,226 million to $ 5,319 million. The percentage distribution of foreign capital income, which in absolute terms had an increase of B / .93.7 million, was constituted in 67.5% of reinvested earnings, 20.3% corresponded to the Other capital item and 12.2% to shares and capital participation.

Investment Climate

Over the past decade, Panama has been one of the fastest growing economies worldwide. Average annual growth was 7.2 percent between 2001 and 2013, more than double the regional average. The Panamanian economy grew by 6.1 percent in 2014, coming down to 5 4.9 percent in 2016. For 2017 there was a rebound to 5.5, and for this year and 2019 the forecast continues to rise with 5.6 percent, the highest in Latin America. Panama is ranked 79 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings.

The rating agency Fitch Ratings maintained the investment grade of Panama in 'BBB' with a stable outlook, its February 2018 report standed out this rating is supported by a "solid" and "stable" macroeconomic performance, this good performance has driven also the sustained increase in per capita income. In addition, it reflects the policies, the strategic and active position (Panama Canal) of the country, which support a high investment rate. On September 29, 2017, Moody has rated Panama's sovereign debt as Baa2 with a positive outlook. On February 16, 2018, Standard & Poor's Ratings Services confirmed its long and short-term sovereign debt ratings with "BBB / A-2" for the Republic of Panama. The outlook for this rating is stable. The evaluation of the transfer and convertibility remains unchanged in "AAA".

 

 

Investment Incentive Laws

In Panama, you will find a great variety of investment incentives. The following are the main Foreign Direct Investment Incentive Laws.

   

Click on each subtitle to access the different laws.

Export & Strategic Sectors

Panama exported around $ 660 million in 2017, an increase of 3.8% compared to the previous year. Panama's most important export products ares bananas (14%), shrimp (11%), waste and scrap from iron and steel (5.8%), and flour of fish (3.6%). Other notable products include: meat from bovine animals, boneless, frozen (3.0%), waste and scrap of aluminum (3.0%), waste and scrap copper (2.6%), palm oil and its crude fractions (2.6%), pineapples (2.2%). The main commercial partners of Panama are the United States of America, with 18% of its total exports, followed by the Netherlands (17%), Mainland China (6%) and China Taiwan (5%).

Export Incentive Laws

The Trade Promotion Agreement between The United States of America and Panama has set a new commercial phase, increasing the ease of doing business between these countries.

As for Panama, the government has enacted “Free Zones” governed pursuant to Law N° 32, April 5th, 2011, “Through which a Special, Integral and Simplified Regime for the Creation and Operation of Free Zones is Established and Dictate Other Provisions”.

The Free Zones law establishes several Fiscal, Migratory and Labor incentives.

The permitted activities, previous to the export procedure, within these Zones are:

  • Manufacturing
  • Assembly
  • Processing
  • Sale of goods and services
  • Telecommunications (Call Centers)

Click on the link below to download the complete law:

Export Processing Zones: Law N° 32, April 5th, 2011 (in spanish)