B) THE SOLUTION:

DOING BUSINESS IN PANAMA IN A FREE ZONE

We pointed out that the Channel and its location have always driven the Panama  economy. Thanks to these two factors Panama is a prime destination for foreign investments that often make their way to the extensive Panamanians Free Zones;  one of the most notably is the Colon Free Zone located on the Atlantic side and equipped with good infrastructures that are well suited for storage and merchandise handling.

The Ministry of Trade and Industry (MICI) approved a total of 19 licenses of Free Trade Zones, 11 of whom are currently active with a concentration around the cities of Panama and Colón. In these Free Zones are registered and settled 122 companies, which are mainly operating as follows: in  Corozal – Marpesca, SA (30), in Panexport (21), in Vaguil S.A. (26) and in Zona Franca of Albrook (19).  Most of the companies installed in the Free Zones are dedicated mainly to the Export.

The more attractive tax benefits offered for the investors to carry out activities within the Free Zones, are well specified by the law 32 of 2011, and reported on page 18 of this presentation.

PANAMA: THE MACROECONOMIC SCENARIO

After closing 2013 with a GDP growth of 8.4%, the GDP in the first quarter 2014 decreased and the growth was limited to 5.8% compared to the one recorded in the same period of 2013 .

The sectors that registered a strong growth are those of fishing (+ 22.8%) and building construction (+15.9%): the first one has also determined an increase of 57% in exports of fish and 34% of shrimps. Also increased milk production (8.1%).

Negative results are reported to sugar production (-3.8%), bananas (-4.9%) and pineapple (-25.6%). With regard to the exports to the European Union, Panama records a + 3.8%. According to reports, currently Panama exports to overseas markets approximately 80% of its agricultural production.

According to forecast in the medium to long term from the IMF, World Bank and CEPAL, the development of the Panamanian economy is expected to consolidate in the coming years, largely thanks to the major infrastructure projects that will be completed,  and in particular to the Channel expansion that will lead to double the transit operations until now precluded only to the small size of the ships, offering to the huge vessels “post-Panamax” (with a transport capacity of over 12,000 TEU – 20 feet containers) a real transit capability.

We should also mention the subway construction of lines 2 and 3 in Panama City,  and the widening of the Pan-American Highway to four lanes.

Another positive factor for Panama is the launch of the Free Trade Agreement within the United States, its largest trading partner. The Treaty, whose operations began in October 2012 (after some necessary regulatory amendments approved in the Legislative Assembly) foresees the duty-free import of most products that already are imported to Panama and for which it is expected a marked increase in demand because of the most competitive prices.

The same applies to the Panamanians products that will be exported to the US, particularly those agro-food and seafood. In this context it should also be mentioned the recent entry into force of the trade, components of the Association Agreement EU-Central America,  which will lead progressively to the elimination of customs fees and the expected increase in the commercial exchange between the two countries.

   THE TRADE WITH EUROPE

The Panamanian government is basically favorable to the liberalization of the foreign trade and in general applies moderate Customs Duties. Do not exist, with limited exceptions, duties barriers to the introduction of the Italian and European products in this market.

There are still some barriers, however, within the limits allowed by the World Trade Organization especially in the agro-food industry, where for certain products including milk, cheese, rice, processed meats and wines, several customs duties are applyed.

With the entry into effect of the Association Agreement with the EU in August 2013, the existing barriers for the aforementioned products will be gradually cut down.

The main NTBs is the obligation of the animal health certification required by the Panamanian authorities to individual manufacturers of processed animal (meat, sausages, cheeses). However, the prohibition on imports of cold cuts and cheeses, has now been removed thanks to the recent approval by the Panamanian authorities.

Corrado L. Bottazzi

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