PANAMA - Economy
Alberto A. Alemán A. is the Director of PROINVEX. Previous positions have included Manager of Business Development in London and Regional Panama and Master Developer of Panama Pacifico. He was also a political advisor of the Mission of the Republic of Panama to the United Nations. He is a representative in the Second Committee of the General Assembly of Economic and Financial Affairs. He studied telecommunications and media at Texas A&M University.
Our overarching mission is to sustain Panama’s leadership in Central America in attracting FDI, namely to identify and promote investments in strategic sectors that are growing or will grow exponentially in our country. Some are evident, such as the array of services that will further grow as a result of the Panama Canal expansion project. There should be heavy investments in logistics, a doubling down on increasing Panama’s capacity as a transshipment hub for the Americas, as well as attracting foreign investment in the diversifying logistics activities within the country, mainly value-added activities. This means moving beyond transshipment and looking into developing value-added logistics services, as well as increasing the country’s capacity to attract and develop multi-model services going beyond 3PL into a 4PL full-service spectrum.
Connectivity factors, along with a stable and dynamic, dollarized economy, strong democracy, competitive incentives regimes, investment protection laws, pro-business environment, free-market and open economic policies, and, of course, its ecological beauty and diversity, make Panama a prime investment destination. The numbers reflect this: Panama captures almost half of all FDI in Central America, and it is the only country in this region with an increasing number of investments. Between 2014 and 2015, FDI grew by about 17%, of which 50% was reinvestment. This means that not only are companies flocking to Panama, but that those that are already here are expanding, hiring, growing, and diversifying.
The financial center in Panama is huge, in the sense that the relation of its assets to Panama’s GDP was 218% in 2014. Panama is a services-based economy and international finance will continue to be a pillar of growth, and the sector will also continue to be competitive, with a positive growth outlook in the short and medium term. The solidity of the financial sector is an important reason that all three main ratings agencies—Standard & Poor’s, Moody’s, and Fitch Ratings—have all ratified our country’s investment grade. A safe and secure investment environment is a crucial determinant in a multinational’s decision to invest in a country. Panama leads the region in this regard.
The government has a strategic investment plan of $20 billion over a five-year period. That is $10 billion in social programs designed to increase the quality of life of Panamanians, create opportunities, and make Panama a sustainable place for investors, creating the conditions for Panamanians to be active participants in future developments of key strategic development sectors. Over 30% of public investments are in infrastructure development, which provides a large array of opportunities for international contractors to participate in large-scale public tenders. Panama is diversifying its electricity grid and there are similar projects that are $100 million and above. The development of those projects will further establish opportunities for investments in greenfield projects for alternative energy production. That is tied to Panama’s development of its national electricity plan, which is designed to reduce the country’s reliance on thermal energy—the idea is that over 70% of Panama’s mix will come from renewables.
One of the key growth sectors is not just to establish regional HQs. Many multinationals are diversifying their operations, growing into global business services or consolidating regional operations in Panama and importing new business units. Panama is one of the leading countries in absorbing technology through FDI. We want to attract companies that train the local workforce in advanced and sophisticated processes and innovative management practices or vocational and technical activities. It is easy for foreigners to come and invest in Panama and train the local workforce, which is what makes our FDI-friendly policies sustainable in the long term.