Isthmus of Opportunity

What were your biggest achievements in 2016?

2016 was an excellent year for Panama’s continued regional leadership as the principal investment destination in the region, resulting in a projected increase of between 15-18% of incoming foreign direct investment (FDI). The country once again received close to half of all FDI in Central America. We managed seven effective missions abroad, resulting in over 800 new potential business contacts and more than 100 real investment prospects, which was well above our target. Beyond that, we attended over 125 additional investors, with on-target responses to their requests for assistance and information. This has resulted in very important investment projects in our country, generating high-quality jobs, knowledge, and technology transfer, and more demand for goods and services from the local economy. For example, 2016 was a record-breaking year for the Multinational Headquarters Regime, Law 41 of 2004, which tallied 24 new multinationals operating from Panama. The previous record year was 21, which was in 2012. The projected incoming FDI stock for 2016 may be above USD6 billion, which corresponds to about 11% of our country’s GDP. This has a real impact on sustainable development, and that is how we measure success. 2016 was an important year for Proinvex Panama. We honed our focus on effectively promoting the principal strategic sectors and growth areas of Panama’s economy in a more ambitious and effective manner, ramping up the country’s investment attraction activities and strategies both locally and abroad. We also worked on delivering the right resources to the right activities. We did a lot of internal work on advancing skills and processes that add value to the broader development goals of the Ministry of Trade and Industry, other state institutions, and, of course to our client: the investor. We focused mainly on ironing out a coherent, relevant, compelling, and most importantly, unique value proposition for foreign investors in Panama. These were some of our broader goals for 2016. Now, in 2017, we are taking everything we learned in 2016 to the next level by becoming a LEAN organization, applying the best management practices for continuous improvement to deliver results that add value to investors and key stakeholders, while boosting our capabilities to pinpoint the key markets for potential inflows of FDI.

A stable investment climate is all-important. What actions should Panama take to improve its transparency among the international community of investors?

At Proinvex Panama, we facilitate investments coming into Panama and help integrate new business operations that are productive, and which have a positive impact on our future development goals, and that in turn enhances the competitive advantages that our country offers. Panama has been a competitive destination for FDI and transparency. The country has advantageous special economic regimes, and it is in our country’s best interests, and in the best interests of the foreign investor, that the laws are clear and that there is confidence in the rule of law. Transparency is of paramount importance for guaranteeing an attractive and sustainable business climate, as this is one of the main factors that companies consider when investing abroad. Panama is an important player in international trade and a major global commercial hub. Therefore, the very important steps that our government has undertaken to further advance the roadmap toward international cooperation in transparency matters and good governance will enable Panama to remain competitive in the global arena, and will ensure that we are bringing the right kind of investment to the country, mainly investment that generates jobs, broadens opportunities, attracts talent from all corners of the world, and closes the inequality gap for future generations.

The big multinationals investing in Panama are mainly from the US, Venezuela, Mexico, Spain, Luxemburg, Germany, Sweden, and the Netherlands. Which of these has the potential to turn into a strategic ally?

Beyond the US and several markets in Europe that have historically important investments in Panama and our key partners in Central and Latin America, we should see substantial investment inflows from South America, particularly Peru, Chile, and hopefully Colombia, Ecuador, and Brazil. Panama is a natural place for the exportation of services and the establishment of transnational operations to service not just the region but global markets. We are also a natural distribution and value-added logistics hub for capturing logistics corridors and trade routes. The newly-expanded Panama Canal, linked with our multi-modal platform is certainly a major factor in our unique value proposition. This is how Panama is cementing its position not only as a key transnational transshipment hub but also as a value-added center for international trade, both for goods as well as services. I don’t believe any other country in our region has this particular strategy because they don’t have the broad-reaching connectivity that we do, which is among the best in the world. Geographically, Panama is blessed. We are the only country on the planet, that has one terminal that connects to two oceans. Connectivity is the name of the game and we are playing to our strengths. Each and every one of the countries mentioned is already a strategic ally for the simple reason that Panama’s platform works to their benefit, providing market access for cheaper goods, more efficient value chains, and an ideal location for services that have a transnational reach.

Panama attracts half of all FDI in the region. What sectors of the national economy are considered particularly appealing to international investors?

Our national strategic plan highlights four main growth sectors, which are logistics, regional services, tourism, and energy, as well as opportunities in other pillars of the economy, like infrastructure development, maritime services, agroindustry, real estate, and more. We have seen exponential growth in headquarters and shared services delivery centers. The Multinational Headquarters Regime now has 130 multinationals, generating close to 9,000 jobs. We hope to see growth both in new investments in that particular sub-sector of the economy as well as re-investments and growth from existing operations. We should see substantial investments in distribution activities such as value-added activities to cargo for re-distribution. Third party logistics services from Panama are capturing economies of scale as a result of the expanded Panama Canal, and the world-class maritime and air infrastructure in the interoceanic region, which are ranked as the 6th and 5th best in the world, according to the World Economic Forum. This competitive multi-modal hub helps companies generate efficiencies in international supply chains. We consider Panama as a natural place for this and are expecting continued growth. Future development in a cargo hub adjacent to the Panama Canal and a new free trade zone in Tocumen International Airport, as well as new roadways and corridors to better connect the interior of the country to the exportation nodes will also contribute to this. The other sector where we should see growth in Panama is in energy, as the National Energy Plan for 2050 will be a catalyst for transformation of the energy matrix to one that is based on over 70% on renewable and alternative sources. Modern infrastructure and sustainable energy projects, with a focus on wind and solar generation, are not only generating new jobs and investments, they are also making Panama’s business environment more attractive and competitive. This also includes potential future investments in LNG power plants that will both supply the local market but also create a hub for distribution of this particular type of energy source.

How would you evaluate the performance of the existing free trade area and economic zones as platforms for attracting foreign investment?

Panama has a unique advantage in that the investment regimes it offers are designed, developed, and tailored as solutions to particular economic activities. Proinvex Panama and the government at large can continue to generate new investments by focusing on the particular strengths of our investment regimes and playing to our attractiveness factors. In the Panama Pací­fico Special Economic Area, we hope to see further investments in advanced manufacturing and third-party logistics operations, as well as value-added multi-modal logistics activities. Investments in headquarters, shared service activities, and high added-value services are a growth area in Panama Pací­fico that will bring the most sophisticated business processes to our country, and create a multicultural community that fosters creativity, growth, and value. We hope to see the further development of new free trade zones based on the advantages that Law 32 offers to private developers and investors, mainly in logistics, distribution, processing, and exportation activities. We are making a concerted effort to channel investors to our catalog free trade zones, as they provide advantageous solutions to their business needs. The Colón Free Trade Zone, the second-largest free trade zone in the world and a pillar of our national economy, is a competitive distribution center for serving Central America, the Caribbean, and the Andean pact region, with well over 3,000 companies. Working with the administration as well as the association of the users of the free trade zone, we are developing strategies to penetrate new markets for the redistribution of goods and new value-added activities from multinationals like Payless Shoes, Hewlett-Packard, Diageo, Adidas, Huawei, GSK, Bayer, and nearly every major pharmaceutical firm, either through captive activities or through third-party service providers. The City of Knowledge continues to be a bastion of cultural exchange, academic endeavors, pioneering research, and development activities. We expect this sustainable city to grow in 2017 and further contribute to making Panama an effervescent environment for new ideas, entrepreneurship, investigation, and human development.

What are your main goals and ambitions for 2017?

The main ambition is to continue the rhythm of growth in investment attraction. There was nearly 17% growth between 2015 and 2016, a milestone that was replicated last year. We are integrating our promotion and attraction efforts with other key government agencies, academia, and private-sector stakeholders to foster the growth our country needs to meet our strategic development plans. If Panama sustains the rhythm of year-on-year FDI growth until 2025, we could experience a transcendental transformation, as our economy shifts from one that functions on the basis of services, to one that is based on innovation. I firmly believe this is one of many paths that will contribute to securing a brighter future for all Panamanians.