Economy

BUSINESS AS USUAL

DOING BUSINESS

Largely known for being the hub of the Americas, its canal, and its ease of doing business, Panama continues to go from strength to strength. The country jumped an impressive […]

Largely known for being the hub of the Americas, its canal, and its ease of doing business, Panama continues to go from strength to strength. The country jumped an impressive eight spots in the World Economic Forum’s Global Competitiveness Report 2016-2017, moving up from 50 to 42 out of a total of 138 countries. It is second only to Chile in the region (ranked 33rd) and leads Latin America in terms of its macroeconomic environment, the efficiency of its goods market, its financial market development, and level of business sophistication. Among the advantages of doing business in Panama, respondents from the World Bank’s Executive Opinion Survey cited its foreign currency regulations, stable government, the lack of inflation, and stable policies as the top factors, while corruption, inefficient government bureaucracy, and an inadequately educated workforce were cited as the top issues facing businesses there. Indeed, Panama has much to do to improve its reputation in the wake of the Panama Papers and Waked scandals.

The country was largely built upon the tenets of international trade and commerce, business-friendly initiatives, and a growing reputation as the region’s business hub, and it continues to enhance its global and regional prominence though trade liberalization and free trade agreements (it can also add double taxation treaties to that list thanks to recent efforts). The vast majority of its economic activity—almost 80% of GDP—is based on its services sector, which includes the canal, activities in the Colón Free Trade Zone, banking, container ports, and flagship registry. With the completion of the USD5.25 billion expansion of the canal in 2016, it has become more viable to ship cargo from Asia directly to the east coast of the US instead of the west coast. In addition, Panama has had to introduce better container handling, truck scheduling, and container sequencing to minimize wait times and cost. With the increase in shipping volumes, more and larger cargo will almost certainly jumpstart economic activity in the maritime sectors as well as in logistics, infrastructure, services, energy, and tourism. The expansion of the canal has also benefited the country’s Colón Free Zone (CFZ), a key trading and transshipment center serving the region and the world that resells, repackages, and reships imports from around the world to regional markets. It is the second-largest free zone in the world, there are over 2,000 companies either represented or operating in CFZ, and 92% of Panama’s exports and 64% of its imports—estimated to be worth USD20 billion—go through the zone annually. Tocumen Airport is Panama’s main airport and the largest transfer hub in the region, where major airlines serve 73 destinations in 30 countries, with the number of direct flights growing every day. The main Panamanian airline, Copa Airlines, offers about 355 flights to 69 destinations in North, Central, and South America, and the Caribbean.
Panama is heavily dependent on foreign investment, and the government actively promotes Panama as a first-rate place to do business in, working hard to ensure the investment process is smooth and attractive for investors. There are almost no distinctions between domestic and foreign companies for investment purposes, and there is support and advice provided at all stages of the process of opening an office in the country. Establishing an office in Panama is a straightforward process, as its legal framework is one of the most modern and flexible in Latin America. Laws were also recently enacted to make it easier for foreigners to relocate to Panama. There are numerous tax advantages for international businesses located there, and more than 400,000 companies are registered in Panama. The country’s low crime rate, tropical climate, modest personal tax rates, and competitive educational and healthcare systems also make Panama an attractive destination for expatriate executives, particularly those with families.

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