Economic Factors

Why Panama
Panama breaks records in Latin America, for example: fastest growing tourism market by the World Tourism Organisation; fastest growing economy by the International Monetary Fund; third (after Chile and Mexico) for economic competitiveness; largest number of international bank offices; largest shipping registry and second largest free-trade zone in the world, after Hong Kong. GDP growth in the first three months of 2007 was an astounding 9.4%, surpassing most private and government projections and the robust growth seen in 2006 and 2005, which was 8.1% and 6.9%, respectively. This growth has been fuelled by the construction sector, transportation, port of Panama Canal-related activities and tourism.

Panama is the second largest banking center in the world, boasting more than 150 different banks from no less than 35 countries. In addition, the nation ranks second only to Hong Kong both as a Freeport and as a provider of foreign registration for corporations. The hand-over of the Canal and military installations by the US has given rise to new construction projects, precipitating increased activity in the real estate sector.

One such project is the USD 5.25 billion Canal expansion, currently underway to construct a third set of locks, which is expected to near completion within eight to ten years. This will provide 7,000-9,000 new jobs during peak construction time (2009-2011) and is expected to set a positive economic tone for years to come. Located at the Caribbean entrance of the Panama Canal, the Colon Free Trade Zone (CFZ) is the largest free zone in the Americas and the second largest in the world. It houses 1,751 merchants and annually receives over 250,000 international visitors, mainly from Haiti, Jamaica, Costa Rica, Venezuela, Colombia, United States and Ecuador.

With Panama’s large banking center, a well-developed insurance industry and several state-of-the-art container ports on its doorstep, the Free Zone provides an ideal center for the transshipment of merchandise to other parts of the Western Hemisphere. Furthermore, companies located in the CFZ are exempt from import duties as well as guarantees, licensing, and several other requirements and limitations on imports.

Panama’s Law 41 is set to boost an already strong real estate market, encouraging the establishment of more multinational companies with the incentive of income tax exemption in Panama for all services provided to any entity domiciled outside Panama. In addition, it allows licensed corporations to hire trusted foreign employees to fill management positions, bringing an influx of international professionals moving to Panama to live and work. As the fastest growing tourism market in Latin America, Panama’s economic growth has been greatly assisted in recent years.

The government continues to pour money into tourism investment programmes, largely for the construction of new hotels in the City, while other important projects include the promotion of Panama as an exquisite eco-tourism destination.