Panama Investment Opportunities
In recent years, the Republic of Panama has witnessed a significant increase in foreign investment. The country’s rapid modernization, combined with its competitive tax regime and flexible labor laws are reason enough for entrepreneurs from around the world to make an investment in this Central American country.
The International Monetary Fund (IMF) estimates that by 2020 Panama will have an economy worth more than $160 billion dollars, ranking it as one of the fastest growing economies in Latin America. Perhaps best known as a hub for global financial services, this small nation is also home to a diverse array of international companies such as Citigroup Global Markets (Asia), Delphi Corporation (Detroit), and Tableau Software (Seattle).
Panama’s economy is primarily service-oriented and the country’s GDP growth rate has consistently outpaced neighboring countries, most notably Costa Rica (about 2.8% in 2014), Colombia (2.7%), Peru (3.8%), Chile (2%), and Mexico (1.5%).
Interest rates are at an all-time low as well, as Panama is now considered one of the very few countries with a triple A rating from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service.
Panama boasts a well-educated labor force and its people have a reputation as hardworking and sophisticated, which is why the country has been able to attract so many multinational corporations. The Panamanian government has also made investing there extremely attractive by reducing its corporate tax rate from 30% in 2012 to 22% in 2014.
Even more attractive with regards to taxes is Panama’s Significant Benefit Certificate program, which allows foreign investors to have their profits exempted from local taxation if they can prove that they are creating new jobs or opening an office or infrastructure project. Since this program was implemented in 1997, it has brought over 25,000 jobs and over $11 billion dollars in investments into the country.
The Panamanian government has also passed a law that allows foreign investors to be exempt from paying commercial tax if they can prove that their business is R&D-oriented. The country is also attractive for its small and medium sized businesses, because it is one of the few nations in the region that has developed an extensive infrastructure for these companies.
"Panama's economy has performed very well in the last 2 years and will continue to do so for the next several years," says Luis Eduardo Camacho, CEO of Corporacion Multi Inversiones S.A, one of Panama’s largest private investment firms. "Panama is a dynamic country with stable political leadership, a well-educated, motivated workforce, favorable labor laws and an excellent infrastructure. This was the reason why Citigroup chose Panama in the first place and then moved to Hong Kong due to limitations under the current tax regime."
"Panama is an attractive destination for foreign investors because of its political stability as demonstrated by the support given by the tourism and infrastructure sectors," agrees Arturo Castellanos, President of BHIC Abogados S.A., Panama's largest law firm. "Moreover, it has a number of tax incentives for investors, including a significant tax exemption program; and the commercial laws are internationally recognized."
"Panama is a great place for American businesses to invest because it offers them the trifecta of stability, growth, and economic prosperity," explains Anthony Neubaum, President & Founder of Opportunities Panama. "The country provides investors with very strong protection of property rights, excellent infrastructure and a political system that is stable."
Grandview Corporate Services (GCS), one of Panama’s leading providers of legal support services to international companies in its early stages, states that they have “seen tremendous interest from US companies in Panama” since their founding in 2009. GCS has worked with some of the biggest banks and law firms in the United States for more than a decade to provide top quality legal representation and help them obtain foreign investments.
For example, GCS’ more than 50 employees are currently advising a financial institution in Panama as it seeks to establish a presence in the country through its acquisition of a bank.
"Panama has all of the ingredients that generate growth," states Lorenz Gomrich, Chief Operating Officer at GCS International Inc. "Its emerging economy status, low cost base, adaptability, political stability, tax benefits and strategic location are all features that attract investors. We see a lot of opportunity in Panama and it is only going to get better. We are currently dealing with a large volume of inquiries from foreign companies interested in investing in Panama."
"GCS has all the right ingredients for success," agrees Marco A. Casap, Member of the Board at GCS International Inc. "It is an excellent, global company that is focused on serving their clients; they are well-respected and have an excellent reputation."
For decades, Panamanians have been living off tourism, fishing and its centralized location between North and South America. However, it is also one of the most important financial centers in Latin America due to its stable economy and low tax regime.
"Panama is a great place for US business to invest because of its political stability, excellent infrastructure and its low cost base," states Camacho. "It has a very stable government which has been able to attract several international companies and we have seen this trend continue for the next several years."
Panama has one of the most stable economies in Latin America and is now home to some of the world’s most famous companies. An increasing number of foreign companies are recognizing that Panama’s business climate is excellent, its workforce is educated, it offers state-of-the-art technology and it has all the infrastructure needed by international corporations.
According to the Panama Trade and Investment Promotion Agency (ProPanama), many international companies have already invested in Panama, including Citigroup Inc., DHL, FedEx, IBM, Motorola, Samsung, Sherwin Williams and others. These multi-nationals have enjoyed a great deal of success in this Central American country. When foreign companies invest in Panama, they tend to stay for decades.
"Panama is a stable and growing country that has the infrastructure needed by investors," states Castellanos. "It is safe and has an educated workforce that is diverse enough to address the demands of any overseas corporation.
Conclusion
After a decade of unprecedented growth, Panama has come of age, shedding its image as an obscure, third world Central American nation. Today, it is a financial center for Latin America and a global powerhouse in the shipping and banking arenas. This tiny country also enjoys strong trade relations with China, Europe and the United States.
The influx of foreign investment is surging in Panama due to the efforts made by its government to improve their business climate for foreign investors. These efforts include lowering tax rates for companies; developing new rules to increase profit margins; investing in infrastructure; creating special laws that benefit foreign investors; and encouraging locals to invest in new businesses. These changes have been very beneficial for the country’s economic growth.