COMMERCIAL GUIDE TO PANAMA
by
The Commercial Staff of the U.S. Embassy in Panama
I. EXECUTIVE SUMMARY
COMMERCIAL OVERVIEW
Panama has always been a country of traders. In the 1600s,
the Atlantic city of Portobelo was Spainžs major port and a
marketplace for gold, silver, and other goods being transported
from the Americas. The Transisthmian Railroad, built by American
investors in the 1850s, established Panama as the principal
location to transport goods between the Atlantic and the Pacific
Oceans. The inauguration of the Panama Canal in 1914 ensured
Panama's position as a major trading nation for the twentieth
century. Since 1948, when the first free zone of the Americas
was opened in the Atlantic city of Colon, Panamanian businesses
have continued supplying larger markets north and south with just
about everything from toys and fragrances to advanced electronics
and major appliances.
Given Panama's central geographic location in the Western
Hemisphere, its government and business community actively
promote this country's long-standing reputation as an
international trading, banking, and services center, and as a
site for Foreign Direct Investment (FDI). Panamanian business
people and officials can point to Panama's dollar-based economy
as offering low inflation and zero foreign exchange risk.
Due to the evolution and composition of Panama's economy,
the extent and nature of local competition is very limited in
most of the non-service sectors. Although the United States is
Panama's most important trade partner and U.S. products have a
high degree of acceptance in Panama, competition from third
countries is particularly strong in certain sectors such as:
telecommunications equipment, automobiles, heavy construction
equipment, consumer electronics, computers, apparel, gifts and
novelty products.
Panama's merchandise impots grew in 1994 by 11.3 percent
over 1993 to a total of US$ 2,202 million, up significantly from
the yearly growth rate of 7.6 percent registered in 1993. The
value of Panama's total merchandise exports in 1994 climbed 4.9
percent over 1993 to a total of US$ 531.9 million. Increased
export earnings from bananas, fishmeal, shrimp and sugar
accounted for most of the increase. Bananas accounted for 38.7
percent of total merchandise exports.
Panama's economy is based primarily on a well-developed
services sector that accounts for 70 percent of GDP. Services
include the Panama Canal, offshore and domestic banking, the
Colon Free Zone, insurance, government, and the transisthmian oil
pipeline. Manufacturing, mining, utilities, and construction
together account for 19 percent of GDP. Manufacturing is
principally geared to production of items such as processed
foods, clothing, chemical products, and construction materials
for the domestic market. Agriculture, forestry and fisheries
make up the remaining 11 percent of GDP.
BUSINESS TRENDS AND OPPORTUNITIES
Business practices and attitudes in Panama are similar to
those in the U.S. American television and radio programs, and
U.S. magazines are all available and popular in Panama.
Panamanians frequently travel to the U.S. for vacation, study,
and business. Their buying patterns and tastes are similar to
ours.
U.S. products and services are well accepted and remain
competitive in the local market. Panama has the highest per
capita GDP in Central America. The majority of income is skewed
to a relatively small, consumer goods-oriented, economically
powerful class. Their upper-middle and upper-class families have
high levels of disposable income. They are interested in
purchasing high quality, trend-setting goods; price is less of a
factor in purchasing an item for this class than for the middle-
to-lower income classes.
The availability of the U.S. dollar as legal currency and
somewhat lower import duties have helped U.S. products remain
price competitive in recent years. Other foreign imports,
however, are slicing a greater market share of the pie because of
their increasingly higher quality at competitive prices. Growth
prospects for U.S. goods and services for the next three years
correlate directly with continued growth of the Panamanian
economy, which recently has shown signs of weakening.
The Panamanian economy has potential for substantial growth
in the areas of: electric power generation, health care services,
mining exploration and operations, port construction and
operation, land development, road construction and
rehabilitation, telecommunications and tourism.
TRADE AND INVESTMENT CLIMATE
Panama has no restrictions on the outflow of capital or outward
direct investment. The Government of Panama (GOP), has
demonstrated its commitment to trade liberalization since taking
office in 1994. President Ernesto Perez Balladares has pressed
for trade liberalization in the National Assembly and has
advanced negotiations for Panama to join the General Agreement on
Tariffs and Trade (GATT/WTO). The current governmentžs economic
reform program, begun by the previous administration in 1990
after agreement with the International Financial Institutions,
has faced legal obstacles. Attempts to eliminate import permits
and reference prices were challenged in the Supreme Court.
Efforts currently underway to reform Panamažs antiquated, pro-
union Labor Code have provoked controversy. The Perez Balladares
government has pressed forward with reforms but continues to face
formidable opposition from some industrial, agricultural, and
labor organizations. The GOP has supported its GATT/WTO
negotiations by submitting draft legislation to lower tariffs,
remove non-tariff barriers to imports, reduce producer subsidies,
prohibit anti-competitive and monopoly practices, and strengthen
intellectual property protection. The passage in June, 1995, of
the "Universalization of Tax Incentive Bill" was an important
step forward in Panama's progress towards GATT/WTO membership.
Government regulation and occasional intervention in the
Panamanian economy have tended to reduce transparency, hinder
competition and hamper the efficient allocation of investment.
The government's economic liberalization program has been
designed to reduce these distortions and increase competition and
competitiveness, but has fallen short in some areas.
Modification of Panamažs Labor Code, one of the most pro-
organized labor regimes in the world, is currently (as of July
1995) the subject of a vigorous dialogue between labor
representatives and the Perez Balladares government , which is
pressing for a more business-friendly labor code. The
combination of relatively high costs for both utilities and labor
makes unit production costs higher than average for the region.
Also, investors complain of burdensome and excessive registration
and licensing requirements, although the Government of Panama is
trying, via the "one-stop shopping" concept, to make its
regulations more investor-friendly for those producing for
export.
II. ECONOMIC TRENDS AND OUTLOOK
MAJOR TRENDS AND OUTLOOK
The Perez Balladares government is attempting to implement
key economic policy reforms to liberalize the trade regime,
privatize state-owned enterprises, and foster job-creation
through labor code reforms. Despite this, the rate of economic
growth is declining, due in part to hemispheric-wide impact of
the Mexican peso crisis.
During 1994, Panama's rate of growth followed a downward
trend from the high rates of 1990-92. The Panamanian
Comptroller-General's office estimates Panama's 1994 Gross
Domestic Product (GDP) grew 4.7 percent in real terms, to an
estimated nominal level of US$ 6.96 billion. This is down from
growth of 5.4 percent in 1993, 8.6 percent in 1992, and 9.6
percent in 1991 when the economy was rebounding from the Noriega
crisis. The construction sector (6.5 percent growth), the Colon
Free Zone (CFZ) (10.6 percent growth), and financial services (6
percent growth) continued to fuel the economy. In the first half
of 1995, the rate of growth has continued decelerating, with
construction starts off significantly and CFZ re-exports showing
no growth for the first 4 months of the year. Real GDP growth of
2.3 percent is projected for 1995 and 2.4 percent in 1996. These
growth rates, while substantially less than GDP growth in 1990-
1994, are in line with Panamažs trend-growth rate of 2.5 to 3.0
percent in real terms. Panama needs a real growth rate of 5.0 to
address the country's chronic unemployment problem adequately.
Private construction and capital goods spending will
continue to be keys to growth in the near-term. Decisive policy
reforms to change the balance of incentives in the economy and
lay the foundation for sustainable long term growth through 1996
and beyond are expected to continue to be the central theme of
the Perez Balladares administration. Many of the needed reforms
could take shape in the context of Panama's accession to the
GATT/WTO, which has been the subject of active negotiations with
the U.S. and other GATT members since April 1994. The Government
of Panama hopes it will be able to become a full GATT/WTO member
as early as the end of 1995. One major piece of legislation
designed to remove barriers to Panamažs GATT/WTO accession, as
well as reorder the balance of incentives in the economy was
passed by the Legislative Assembly in June 1995. The bill,
awkwardly titled the "Universalization of Fiscal Incentives to
Production," removes some of the market fixing mechanisms that
Panamažs protected, monopolistic industry used to exclude foreign
competition. The bill also reforms the tax subsidy and
incentives regimes, granting any producer, regardless of size,
the same tax breaks on imports of inputs and capital goods. It
creates tax breaks for investments in high technology fields and
for investment in infrastructure improvements and training of the
workforce.
In addition to the GoPžs need to reform its economy, two
other huge challenges face the Perez Balladares administration
during its five year term: utilizing efficiently the 70,000 acres
of land and roughly 4800 buildings which will be reverting to
Panama from the U.S. military during the 1995-1999 period; and
laying the groundwork to assume full control of the Panama Canal
in the twenty-first century.
PRINCIPAL GROWTH SECTORS
Panama's economy is based primarily on a well-developed
services sector that accounts for 70 percent of GDP. Services
include the Panama Canal, banking, insurance, government, the
Colon Free Zone, and the transisthmian oil pipeline.
Manufacturing, mining, utilities, and construction together
account for 19.5 percent of GDP. Manufacturing is principally
geared to production of items such as processed foods, clothing,
chemical products, and construction materials for the domestic
market. Agriculture, forestry and fisheries account for the
remaining 10.5 percent of GDP. Principal primary products
include bananas, shrimp, sugar, coffee, meat, dairy products,
tropical fruits, rice, corn, and beans. The sectors of the
Panamanian economy with the greatest potential for substantial
growth are mining, tourism and maritime services.
The Primary Sector
Agriculture, livestock, forestry, fisheries and mining grew
3.9 percent in 1994. Agricultural production declined 1.1
percent; value added in banana production increased 6.0 percent.
A fall in Honduran banana production favored Panamanian bananas.
Despite this increase, prospects for growth remain bleak as
import restriction enacted by the European Union have diminished
exports to that traditional Panamanian market and flooded other
markets with cheap produce. Bananas remain Panama's primary
agricultural product and merchandise export, accounting for 45
percent of agricultural value-added. Exports of non-traditional
products, especially melons, have increased substantially in
percentage terms, and continue to show significant potential for
growth. Production is, however, on a small scale and suffers
from lack of significant capital investment. Panama's mining
sector has the potential for substantial growth, too. Panama has
large copper reserves and boasts two of the largest undeveloped
copper deposits in the world. Other minerals with commercial
potential are gold, silver, and manganese. During 1995 an
abandoned gold mine in the Veraguas province was returned to
service using new leaching technology. Mining investments in
Panama are aided by a favorable mining law, drafted in 1988,
which encourages participation by foreign investors.
Manufacturing and Construction
Geared largely for domestic consumption, manufacturing
activity is concentrated in the production of food products,
beverages, construction materials, clothing, consumer products,
and intermediate goods. Panamažs manufacturing industry, which
has been protected by decades of high tariffs and fiscal
incentives, is not competitive in the international marketplace.
Production of food products and beverages accounted for 70
percent of 1994 value added in manufacturing. Overall
manufacturing output increased by 4.5 percent in 1994, paced by
continuing demand for construction materials. Construction
activity grew 6.5 percent in 1994, down from 32 percent in 1993
and 56 percent growth in 1992. The rate of growth of new
construction permits issued in the Panama City area in the first
quarter of 1995 was substantially down from 1994, but continues
to show some growth. Continuing demand for construction
materials will stimulate manufacturing output, especially of
cement, steel rebar, concrete block, and related products.
Banking and Finance
Panama's international banking center consists of 108 banks,
of which 62 are general license banks, 30 are international
license (offshore) banks, and 16 are representative offices. Two
of the general license banks -- the National Bank of Panama and
the National Savings Bank -- are government-owned. U.S. banks
with a presence in Panama include Citibank, Chase Manhattan, and
First National Bank of Boston. Total banking center deposits
increased by US$ 4.8 billion (22.4 percent) to US$ 26 billion in
December 1994 from December 1993; external deposits increased
by US$ 3.5 billion, internal deposits by US$ 1.2 billion. Total
assets expanded by US$ 6.7 billion (25.8 percent) to US$ 32.8
billion; external loans increased by US$ 2.4 billion (24 percent)
and domestic lending expanded by US$ 616 million (10 percent).
Lending to the private sector increased by US$ 697 million. The
largest increases in private sector lending went to finance
commerce (US$ 308 million), consumer spending (US$ 108 million)
and housing (US$ 151 million). Total assets of Panama's offshore
banks increased by US$ 1.57 billion (33 percent) as both deposits
and loan portfolios increased. In the first three months of
1995, total assets of the banking center increased by an
additional US$ 208 million.
Panama Canal
Panama Canal business rose in calendar year 1994 compared to
1993. Oceangoing transits increased 2.6 percent to 12,671 or
34.7 vessels daily, and Panama Canal net tonnage, on which tolls
are assessed, jumped 7.9 percent. Toll revenue rose 3.1 percent
to US$ 425. During the first five months of 1995, oceangoing
transits increased 11 percent and toll revenue was up by 12.1
percent relative to the same period of 1994, reflecting economic
recovery in Japan and Europe and strong demand for U.S. grain in
Asia. The outlook for 1995 is for continued strong growth with
more moderate growth (1-3 percent) in both tonnage and toll
revenue projected for 1996. Work on expanding the canalžs
capacity by widening the Gaillard cut to two lanes continues.
Oil Pipeline
Panama's transisthmian oil pipeline (PTP-Petroterminales de
Panama, S.A.) is a joint U.S. - Panama venture. Forty percent is
owned by the Government of Panama while 60% is owned by two U.S.
companies (Chicago Bridge and Northville Terminals). Pipeline
revenues declined 8.7 percent in 1994 after declining 46 percent
in 1993; its contribution to real GDP fell to 0.7 percent in 1994
from 3.0 percent in 1990. Declining revenues from declining
usage of the pipeline reflect a decrease in Alaskan oil
production, an increase in consumption of Alaskan oil in
California and some competition from U.S. pipelines. The outlook
for 1995 and beyond is for further decline as the U.S. Congress
recently rescinded the ban on the export of Alaskan crude,
allowing exports to Japan and the far east. At present PTP is
operating at only 10 percent of capacity. PTP is devising a
survival strategy based on diversification into other activities.
In June 1995, PTP signed a contract with the Government of Panama
allowing it to expand the pipeline's terminal ports at Chiriqui
Grande on the Caribbean and Puerto Armuelles on the Pacific into
general cargo ports. PTP has had some success in obtaining spot
contracts to pump Ecuadoran crude across the isthmus for export
to the U.S. Gulf coast. PTP also uses its installed generating
capacity to sell electricity to IRHE, the Panamanian electricity
utility.
Colon Free Trade Zone
Established in 1948, at the Atlantic entrance to the Panama
Canal, the Colon Free Zone (CFZ) is the largest of its kind in
Latin America and rivals Hong Kong in overall activity.
Laundering of cocaine profits, drug trafficking and piracy of
intellectual property are major problems in the CFZ. Total
imports to the CFZ reached US$ 5.0 billion in 1994, an increase
of 11.5 percent over 1993; total re-exports climbed 11.8
percent to US$ 5.7 billion, up from US$ 5.11 billion in 1993.
CFZ trade continued to grow during the first three months of
1995, though political wrangling over a tax increase brought a
downturn in re-exports during April. Despite this one month
downturn, CFZ trade will likely continue to show solid growth
during 1995 as it has already made many of the adjustments
necessary to deal with market liberalization in Latin America.
U.S. exports to the Colon Free Zone totaled approximately US$ 370
million in 1994. CFZ data for the first four months of 1995 show
imports of US$ 1.65 billion and re-exports of US$ 1.83 billion,
an increase of 15.9 percent over imports during the same period
of 1994 and no increase in exports over the same period of 1994.
Net CFZ contributions to the Panamanian economy (re-exports less
imports) increased to US$ 686.5 million in 1994 from US$ 611
million in 1993 (net CFZ shipments reflect movements in exchange
rates and inventories as well as market conditions). The CFZ's
contribution to real GDP increased to 9.2 percent in 1994 from
8.6 percent in 1993. Itžs contribution to GDP is expected to
remain stable in 1995.
Commerce and Tourism
Commerce and tourism, which include restaurants, hotels, and
wholesale and retail activities, grew 3.4 percent in 1994.
Increases in personal consumption were reflected in brisk sales
by retail businesses, which were up 5.2 percent. Income from
tourist expenditures rose 6.8 percent to US$ 240 million,
although the number of tourists dropped slightly to 325,000. The
tourism industry in Panama has substantial growth potential;
however, a lack of investment in infrastructure and poor
marketing have hampered its development. In 1994, the National
Assembly passed a law granting incentives (primarily tax
exemptions and long leaseholds) to new investment in tourism.
GOVERNMENT ROLE IN THE ECONOMY
From 1968 until 1989, Panama was governed by a military
regime which implemented a statist plan of economic development.
The government nationalized various private enterprises,
including among others, utilities companies, sugar mills and
cement companies. Price controls on many goods existed, and are
still applied to several staple products considered part of a
basic "market basket." The level of state involvement, however,
was generally less pervasive than that in many countries that
pursued a statist, import substitution model of economic
development. In 1990, under the Endara government, Panama
embarked on a policy reform program to liberalize trade and
modernize government operations. Political opposition from
entrenched special interest groups, however, diluted the
substance of reforms. In 1992, the government re-negotiated its
debt with the International Financial Institutions and bilateral
creditors. In 1994 a deal was struck to reschedule US$ 400
million in senior bonds and floating rate notes.
The Perez Balladares government took office in September, 1994,
with an even more ambitious program of reforms, including
GATT/WTO accession, renegotiation of Panama's US$ 3.5 billion
foreign commercial bank debt and labor code reform. The
government pushed a bill through the Legislative Assembly in late
1994 which is the first step towards partial privatization of the
state-owned telecommunications company, INTEL. Other legislation
partially revoked the government-owned electricity utilityžs
monopoly on electricity generation for commercial resale.
Legislation to modify the balance of incentives in the economy
through reform of the tax code and the trade regime was passed in
June 1995. The governmentžs ruling Democratic Revolutionary
Party (PRD), true to its roots in the Torrijos era, however,
retains a slightly statist orientation. Add to that a slowing
economy and it is unlikely that dramatic progress towards
privatization of INTEL or of the state-owned electric utility
(IRHE) or water company (IDAAN) will occur in the next eighteen
months.
The use of the U.S. dollar as Panama's currency means that
fiscal policy is the government's principal macroeconomic policy
instrument. Because Panama does not issue its own currency,
government spending and investment are strictly bound by tax and
non-tax revenues (including Panama Canal receipts) and the
government's ability to borrow. The government's ability to use
fiscal policy as a tool has been further constrained by declining
resources. Lending from the International Financial Institutions
(IFIs) has been slow, as Panama tries to meet the loan programs'
policy reform conditionality.
The general state budget (including various public
enterprises) for 1995 totals US$ 4.44 billion (63.8 percent of
projected 1995 GDP), US$ 1.86 billion of which is allocated to
the central government, and US$ 2.57 billion to various
decentralized agencies (i.e. the port authority, INTEL, IRHE,
IDAAN, and the national mortgage bank). The central government
projects current (tax and non-tax) revenues of US$ 1.5 billion in
1995, up 5.9 percent from actual 1994 current revenues of just
over US$ 1.4 billion. Capital revenues are projected at US$
361.1 million for 1995, including US$ 287.3 million in income
from credit. Although the Government of Panama received US$ 50
million in bilateral credits from the Government of Japan in June
1995, Panama must meet conditionality to obtain disbursement of
the remaining US$ 235 million in credits from the International
Financial Institutions.
Given the prospect of continued decline in oil pipeline
earnings and the U.S. military withdrawal from now until 1999,
Panama is under pressure to implement structural adjustment
measures that will both strengthen exports of non-factor services
based on its comparative advantage -- such as international
transportation (ports) and related services (ship supplies and
tourism) -- and encourage efficient substitution of high value-
added industrial and/or commercial activity to replace foreign
exchange earnings from the departing U.S. military. The
government has implemented such measures slowly thus far,
however, and exports of goods and non-factor services exports are
expected to grow less than 5 percent in 1994.
BALANCE OF PAYMENTS
Panama's goods and non-factor services export earnings have
traditionally been among the largest in the world relative to GDP
(35-40 percent). This is because the country profited from its
geographical location and dollar-based economy to develop a
strong services sector. Net non-factor services surpluses have
traditionally financed large merchandise trade deficits. In
1994, a net non-factor services surplus of about US$ 1.17 billion
partially offset a US$ 1.67 billion merchandise trade deficit.
Services: After the crisis years of 1988-1989, growth of
non-factor services exports was strong. In 1994, growth of non-
factor services exports slowed a bit, increasing only by US$ 80.5
million (3.4 percent) to US$ 2.42 billion: Canal toll earnings
increased 3.1 percent, net Colon Free Zone shipments rose 10
percent; U.S. Department of Defense (DOD) expenditures in Panama
(for the purchases of local goods and services) remained
unchanged at US$ 143 million; and, earnings from tourism grew 6.8
percent to US$ 243 million. By contrast, oil pipeline earnings
declined 8.7 percent and net external interest earnings by the
banking sector declined slightly to US$ 179.8 million.
Merchandise: Panama's merchandise imports grew in 1994 by
11.3 percent over 1993 to a total of US$ 2,202 million, up from a
yearly growth rate of 7.6 percent registered in 1993. The value
of Panama's total merchandise exports in 1994 climbed 4.9 percent
over 1993 to a total of US$ 531.9 million. Increased export
earnings from bananas, fishmeal, shrimp and sugar accounted for
most of the increase. Bananas accounted for 38.7 percent of
total merchandise exports.
Debt: Panama is current on interest and principal payments
due to the International Monetary Fund (IMF), World Bank, Inter-
American Development Bank, and International Fund for
Agricultural Development. It cleared US$ 645.8 million in
arrears with these institutions during February/March 1992.
Panama also remains current on interest and principal payments to
U.S. Government creditor agencies and is current in its
obligations to its foreign bondholders, after a May 1994 bond-
swap agreement. In May 1995, Panama announced a Brady-style
Agreement-in-Principle to reschedule the roughly US$ 3.5 billion
it owes to foreign commercial creditors. The deal is expected to
close by March 1996. Panama budgeted US$ 644.9 million to
service internal and external debt in its 1994 budget.
Panama's current account has accrued small positive balances
in each of the last three years. In 1994, income from official
transfers (credit from the International Financial Institutions
and bilateral creditors) offset a deficit of US$ 73 million in
merchandise, services and investment income, resulting in a net
positive position of US$ 55.7 million.
INFRASTRUCTURE SITUATION
In comparison to many lesser developed countries, Panama has
a quite well-developed infrastructure. Goods and services are
able to move with relative ease, electrical power generation is
sufficient to meet current demand and port facilities, while
aging and somewhat inefficient, are able to cope with current
usage. However, Panama is in need of significant public sector
investment in new roads, sewer and water treatment systems and
more education and health facilities. It has been estimated that
the cost of cleaning up the Bay of Panama alone will exceed one
billion dollars. Presently, semi-treated sewage flows directly
into the bay at one of its most picturesque points, damaging
prospects for tourism development. The basic services of Panama
City and Colon and the country's major highways (the Pan-American
and the Trans-Isthmian) as well as its biggest bridge (across the
Panama Canal) were built either directly by the U.S. or with
substantial financial assistance from it. The Perez Balladares
administrationžs emphasis on private development appears to be
bearing some fruit in the areas of port construction and highway
development.
III. POLITICAL ENVIRONMENT
NATURE OF POLITICAL ENVIRONMENT WITH THE UNITED STATES
The U.S.-Panamanian relationship dates to 1903, when a
bilateral treaty gave the U.S. the right to build and
unilaterally control the transisthmian canal that was completed
in 1914. That relationship was altered by mutual agreement in
the 1977 Panama Canal Treaties, signed by President Jimmy Carter
and General Omar Torrijos, which stipulate that Canal
administration will pass to Panamanian control and that all U.S.
troops will withdraw from Panama by December 31, 1999. The
current U.S.-Panamanian relationship is cooperative and
businesslike as both partners work to prepare for the U.S.
withdrawal and the Panamanian takeover of the Canal and U.S. base
properties. Managing the Treaty implementation process is one of
the prime challenges of the administration of President Perez
Balladares.
President Perez Balladares is a U.S.-trained businessman.
Foreign Minister Gabriel Lewis Galindo is a former Canal Treaties
negotiator who spent years in exile in the U.S. during the
Noriega era. Both understand the U.S. political system, speak
fluent English, and have easy access to the highest levels of the
U.S. government.
Immediately upon taking office in September 1994, the
Balladares government agreed to a U.S. request to allow the
temporary lodging of up to ten thousand Cuban migrants (then
overcrowding U.S. facilities at Guantanamo Bay in Cuba) on U.S.
defense sites in Panama. Over 8,500 Cuban boat people were given
safehaven in Panama between September 1994 and March 1995. At
OAS President Gaviria's request, Perez Balladares agreed to offer
asylum to Haitian military leaders in October 1994 in order to
help pave the way for the return of Haiti's democratic
government.
MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE
During the years leading up to the transfer of the Canal and
the bases, the government of Panama faces two interrelated
problems: attracting foreign investment, and managing the vast
properties that Panama will receive as the U.S. withdraws.
In 1993 the Endara government established the semi-
autonomous Inter-Oceanic Regional Authority (ARI) to manage the
reversion process. Perez Balladares, who had criticized the ARI
for ineffectiveness and inefficiency, pushed through legislation
in early 1995 that provided for presidential oversight of the
Board's more important personnel and policy decisions. He
approved the board's selection of former Panamanian President
Nicolas Ardito Barletta as day-to-day administrator of the ARI.
Barletta took office in June 1995. Expressing dismay over the
government's lack of preparations for reversion and concern for
the security and maintenance of the properties the U.S. was
preparing to transfer to Panama, Barletta asked for some delays
in reversions to give the government more time to decide how best
to protect and to promote the properties. ARI has hired Nathan
Associates to prepare a "Master Plan" for use of the properties.
BRIEF SYNOPOSIS OF POLITICAL SYSTEM, SCHEDULE FOR ELECTIONS, AND
ORIENTATION OF MAJOR POLITICAL PARTIES
An independent nation since 1903, Panama is a representative
democracy with three branches of government: executive and
legislative branches elected by direct secret vote for 5-year
terms, and an independent, executive-appointed judiciary. The
U.S. military intervention of December 1989 brought the
legitimately-elected government to power and ousted narco-
dictator General Manuel Noriega's military regime. This move
ushered in a period of democracy-building and national recovery
that culminated in May 1994 with the first free and fair national
elections in almost three decades. Panama abolished its military
by constitutional amendment in late 1994. Its democratic
institutions are continuing to develop to meet the social and
economic needs of Panama's 2.5 million ethnically diverse
citizens.
Ernesto "Toro" Perez Balladares was sworn in as president on
September 1, 1994. Stressing "national concilliation" after the
election, President Perez Balladares gave about a third of his
cabinet posts to figures from outside the ruling Democratic
Revolutionary Party (PRD).
The president has broad powers under Panama's constitution,
but must work with a 72-member unicameral legislative assembly in
which his party, the PRD, and its political allies have a bare
majority. Although the assembly lacks strong budgetary
authority, it does play a crucial role in shaping political,
economic, and social initiatives; Perez Balladares is wooing
shifting constellations of the dozen-plus parties represented in
the assembly to build consensus for important legislative
projects.
"Toro's" PRD, the political arm of former dictators Generals
Omar Torrijos and Manuel Noriega, has a chequered history. On
the one hand, the party in the 1970s championed the cause of the
poor in a rigid and static society, empowering an otherwise
disadvantaged lower class. On the other hand, the party's
misuses of its governmental privileges during the 1970s and
1980s, coupled with its disregard of human rights and its
penchant for official corruption, have generated widespread
concerns about its commitment to democracy and good governance.
Perez Balladares promised during the elections that the PRD had
reformed following Operation Just Cause and would adhere to
democratic and fair business practices.
During the first year of the Perez Balladares
administration, the opposition parties in the assembly have been
subdued and quiescent. Demoralized by defeat in the election,
and politically fragmented, the opposition has not managed to
organize a united front against Perez Balladares' more
disciplined and united PRD. The opposition will probably not
become a more important political force until roused by the 1999
national election campaign.
IV. MARKETING U.S. PRODUCTS AND SERVICES
DISTRIBUTION AND SALES CHANNELS
Business practices in Panama are very similar to those in
the U.S. i.e., business tends to be direct and straightforward.
On average, Panama City accounts for 65% of total national sales
of consumer goods, the remaining 35% is distributed among the
principal cities of David, Santiago, Chitre and Colon.
Generally, the marketing channel structure in Panama is
simple. Direct importers act as wholesalers and in some cases
also as retailers. This situation is common in the case of
apparel, automotive parts and hardware products. In the case of
consumer goods and food and medicines, the retail operation is
separate from the wholesale operation. In the industrial goods
sector, sales are normally handled by local exclusive agents or
distributors. In other cases, local firms order directly from
U.S. brokers or the manufacturer.
Some of Panama's major importers are also regional
distributors located in the Colon Free Zone (CFZ). Generally,
CFZ importers/distributors have affiliated stores in Panama City
for retail sale to the local market.
USE OF AGENTS/DISTRIBUTORS; FINDING A PARTNER
According to Panama's constitution, nationals and foreigners
are equal under the law. Both Panamanian and foreign companies
must fulfill the same basic requirements to organize and operate
most types of business activities in Panama. However, there are
restrictions on foreigners operating retail trade activities and
practicing certain professions.
Agents and distributors in Panama are regulated only by the
private agreements made between the parties involved. In cases
of contract termination or disputes, the private contract clauses
prevail over any other document or practice.
Individuals may engage in business activities in their own
names or through legal entities. The most commonly adopted form
of legal entity is the corporation (sociedad anonima). Other
types of legal entities commonly used in Panama are: general
partnerships, simple limited partnerships, joint stock
partnerships and limited liability companies.
FRANCHISING
Panama is receptive to U.S. style franchising. The market
for both specific and general franchising opportunities is
attractive, since Panama maintains no control on royalty payments
or transfers. Under the Panamanian Constitution, however, retail
outlets, can only be owned by Panamanian citizens. Recreation,
entertainment services, automotive, as well as hotel and motel
franchising operators will find a fertile market as the local
market demands better facilities and services. The U.S. Embassy
recommends consulting a local attorney for details on how to set
up a franchise in Panama.
DIRECT MARKETING
Key factors for market success in Panama are: high quality,
customer service, brand-name recognition and attractive
packaging. Panama is a country of 2.5 million. U.S. products
targeting along the middle to upper-middle income markets compete
well, since these Panamanians have a penchant for high quality
U.S. products.
Those with high disposable income follow sophisticated U.S.
and European consumption patterns. Most high-end U.S. and
foreign brand names are represented in Panama. An aggressive
marketing strategy improves the level of success in meeting the
needs of a trend-conscious market.
JOINT VENTURES/ LICENSING
Joint ventures are not common in Panama. Joint ventures are
formed for a specific period of time, such as for a specific
construction or technology transfer contract/concession, rather
than a long-term business venture. The profits from joint
ventures are to be distributed annually to each joint venture
partner, and are taxed in the same manner as any other income.
Panamanian law does not regulate the registration of license
agreements. Nevertheless, common practice is to accept license
agreements over registered trademarks. The agreements must be
attached to the registered trademark and filed with the
Industrial Property Department in the Ministry of Commerce and
Industry. The agreements become part of the file on said
trademark.
Panama offers a unique condition for licensing, distribution
arrangements and joint ventures as well as routine buy/sell
operations. The CFZ offers the U.S. exporter looking for a share
of the region's market a convenient one-stop distribution center
covering the entire region. The problems of money laundering,
intellectual property piracy and drug trafficking in the CFZ,
however, are such that U.S. companies must be wary.
STEPS TO ESTABLISHING AN OFFICE
Panama has one of the most modern and flexible corporate
laws in Latin America. The following are some of the advantages
offered to Panamanian "Bearer Share" Corporations:
1. Two or more persons of any nationality, even though not
domiciled in Panama, may organize a corporation for any
lawful purpose. The articles of incorporation may be
executed anywhere, even outside of Panama, and in any
language.
2. There are no requirements regarding the amount paid in
capital.
3. Ownership of a Panamanian corporation may reside in a single
individual or corporation and no part of the capital needs
to be held by a Panamanian.
4. There are no nationality or residence requirements for
shareholders.
5. Neither the directors nor the officers are required to be
shareholders.
6. The Board of Directors must be composed of at least three
directors, but one person may hold more than one position.
7. Meetings of shareholders or directors may be held outside of
Panama. Proxies may be used by shareholders/directors.
In order to form a corporation in Panama, the client must
furnish the following information:
1. The name of the corporation. It may be in any language, but
it must terminate in a word or abbreviation indicating that
it is a corporation.
2. The objectives and purpose of the corporation.
3. The amount of the authorized capital. Usually the authorized
capital will consist of US$ 10,000 divided into 100 shares
of US$ 100 each.
4. The types of shares, may be nominative or bearer share.
5. Duration of the corporation, usually perpetual.
6. The full names and addresses of three or more directors
and/or officers.
7. The domicile of the corporation.
The time period usually involved in setting up a corporation
is from one to two months. Attorney fees range from US$ 600
to US$ 1,500.
In order to engage in commercial or industrial activities,
all corporations, partnerships or individuals must obtain proper
authorization from the Ministry of Commerce and Industry. There
are three basic types of licenses involved:
a) Commercial License Class A is required for wholesale
operations, commercial and mortgage banks, financial
companies, international financial brokers, insurance and
reinsurance companies, international transportation
companies, mutual funds, public utilities, and high-
technology service companies.
b) Commercial License Class B is required for retail
businesses; including representation agencies, service
companies, bars, restaurants, drugstores, real estate
agents, gas stations, local transportation, distributors and
others. This license is only granted to Panamanians or
corporations owned solely by Panamanians.
c) An Industrial License is required for extractive and
manufacturing industries, as well as construction companies.
(Refer to Appendix E for the contact at the Ministry of
Commerce and Industry).
Exemptions for business license requirements are granted to
persons or legal entities engaged exclusively in agriculture,
cattle, bee, or poultry raising, or in the manufacturing and sale
of handicrafts, provided that the work is not performed by hired
workers. Licenses must be kept at all times in a visible and
accessible place. The cost for obtaining a license ranges from
US$ 250 to US$ 750. Also, an annual tax is levied based on the
net worth of the company, as stated in the income tax return.
SELLING FACTORS/TECHNIQUES
Panama has the highest per capita income in Central America.
The majority of income is skewed to a small, consumer goods
oriented economic class. These upper-middle and upper-class
families have high levels of disposable income. They are
interested in purchasing high quality, trend-setting goods; price
plays less of a factor in purchasing an item for this class than
for the middle to lower income classes. The majority of
Panamanians remain interested in quality but price plays a more
important role in the purchase decision.
The use of the U.S. dollar as legal currency and consumer
preference for high quality products at a good price are two
reasons for high acceptance of U.S. products in Panama. Overall,
U.S. products compete well in the market and are considered of
good quality. However, in many instances, in order to maintain
their market share, U.S. products must compete against often
lower priced products especially from the Far East. For example,
as in the U.S. itself, Japanese and Korean electronics dominate
that market because of aggressive market entry techniques and
good quality at competitive prices.
ADVERTISING AND TRADE PROMOTION
Television and newspaper advertising are the promotion tools
of choice for the majority of distributors of U.S. products.
Panama has a very competitive advertising market, with standard
prices and very good production quality. Additionally, trade
show and exhibitions have proven to be effective tools for trade
promotion. Special sale prices are usually advertised in
newspapers during weekends.
Most foreign manufacturers of consumer products also keep a
high profile presence in the country through large billboards,
sponsored sports events and T.V. advertising. Radio advertising
is mainly utilized outside of Metropolitan Panama City.
Major Newspapers:
El Panama America
Advertising Chief - Margaret de Ucar
P.O. Box B-4
Panama 9A, Republic of Panama
Tel: (507) 230-1666
Fax: (507) 230-1033
Daily Circulation: is 22,000
Format: standard
Advertising prices: US$ 7.00 per columnar inch, each page has 126
columnar inches.
La Estrella de Panama
Advertising Manager - Angie de Ochy
P.O. Box Q
Panama 4, Republic of Panama
Tel: (507) 227-0555
Fax: (507) 227-0723
Daily Circulation: 21,200
Format: standard
Advertising prices: US$ 8.00 per columnar inch, each page has 126
columnar inches.
La Prensa
Advertising Manager - Adela Mendoza
P.O. Box 6-4586, El Dorado
Panama, Republic of Panama
Tel: (507) 221-7222
Fax: (507) 221-7328
Daily Circulation: 38,000
Format: standard
Advertising prices: US$ 11.00 per columnar inch, each page has
126 columnar inches.
Major advertising agencies are associated with international
advertising firms. (Refer to Appendix E for contact information
on advertising agencies).
PRICING PRODUCT
The price structure for import goods in Panama depends on
the level of competition for a product. The costs of
transportation and import duties vary from item to item. In
general, prices for consumer products and food are higher than
world average because of protectionism and cartelization of the
local market. For the sake of illustration, however, the sample
below offers average costs added to the product as it reaches the
consumer. The percentages average 20% for import duties and 20%
each for wholesale and retail markups.
Average Pricing Schedule
$ Price
CIF Panama $100.00
Import Duty 20.00
Total Landed Cost $120.00
Wholesale Price 150.00
Retail Price $187.50
Note: A 5% value added tax over CIF value is assessed at the
time of customs liquidation. Since this tax is placed on all
goods, domestic and imported, and is passed through to the
consumer, it is not included in this calculation.
SALES SERVICE/CUSTOMER SUPPORT
Competition among distributors is reflected in the training,
counseling and support they can provide to their customers. U.S.
companies should focus on providing U.S.-level training and
technical assistance to their distributors and making sure they
have the resources to provide after-sales support, including
spare parts, service equipment, etc.
SELLING TO THE GOVERNMENT
Panama does not have a Central Procurement Office such as
the U.S. General Services Administration (GSA). All purchases of
goods and services of any significant value are by law advertised
as a public bid. Any company wishing to participate in public
bids (amounting to US$ 1 million and above, in the case of
infrastructure projects and US$ 500,000 and above, in goods and
services) must be registered with the Ministry of Treasury. This
Ministry, by law, keeps a register of prequalified companies that
are potential suppliers to the Government. Lack of transparency,
excessive delays and bureaucracy in the bid selection process
have caused problems for U.S. and other bidders in important
government bids in the past. It is important that your firm
register. (Refer to Appendix E for contact information on the
Ministry of Treasury - Registry of Prequalified firms).
PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT
Panama is a member of the World Intellectual Property
Organization (WIPO), the Geneva Phonograms Convention, the
Brussels Satellite Convention, and the Universal Copyright
Convention. Although Panama is not a member of the Bern
Convention for the Protection of Literary and Artistic Works, the
Government of Panama has submitted to its National Assembly
legislation for Panama to accede to the Paris Convention for the
Protection of Industrial Property. (Refer to Section VII:
Protection of Property Rights, for more information).
NEED FOR A LOCAL ATTORNEY
The law requires that every corporation organized pursuant
to the laws of Panama have a resident agent within Panama, who
must be an attorney. The annual fee for this service is about
US$ 200. It is estimated that over 400,000 corporations are
registered in Panama.
Legal fees for professional services in connection with the
organization of a corporation normally range from US$ 600 to US$
1,500.
Registering a national trademark, patent or a sanitary
registration application requires a power of attorney.
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES
Rank of Sector: 1
Name of Sector: Electrical Power Systems
ITA Industry Code: ELP
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 70.0 80.0 92.0
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 70.0 80.0 92.0
Imports from the U.S. 17.5 19.2 26.8
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: In early 1995, the Government of Panama passed
legislation allowing the private sector to generate electricity
for commercial purposes. Private firms will be allowed to
generate electricity for commercial resale to IRHE, the state
electrical utility, or to third parties. This situation opens
opportunities for U.S. electric power system exporters. Panama
has a relatively high electricity rate (62 percent), compared
with the rest of Central America (average of 51.4 percent).
Panama's production costs are also the highest in the region
(11.12 cents per kwh) as compared with the average in the region
of 9.19 cents. Panama has an installed base of 892 MW, of which
550.5 MW is hydro electric and 341.7 MW is thermo electric.
Although Panama is not currently facing electrical energy
shortages, the demand is growing at an estimated rate of 40 MW
per year and IRHE is not in the position to make the required
investment to meet it. IRHE recently announced a bid to
purchase energy from a 100 MW plant to be constructed and
operated by the private sector. Additionally, IRHE is
negotiating with the International Development Bank (IDB) the
construction of a 120 MW hydro electric plant (Esti project).
Main companies competing in the local market come from the USA,
Japan, Italy, England and Germany.
Rank of Sector: 2
Name of Sector: Computers and Peripherals
ITA Industry Code: CPT
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 35.0 40.0 46.0
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 35.0 40.0 46.0
Imports from the U.S. 21.0 24.0 28.0
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: A number of factors support the positive outlook
for the computers and peripherals sector in Panama: (1), even
though the economy has slowed in 1995 the demand for office
automation remains high among the principal growth sectors of the
economy; (2), import duties for computers (average of 7 percent
over C.I.F. value) are relatively low; (3), there remains an easy
access to computer suppliers locally and abroad, particularly in
Miami; (4), there exists a growing computer culture, as a result
of the high number of Panamanian graduates from U.S. schools, and
the local availability of computer magazines, journals and other
literature from the U.S. Computer products from the U.S. enjoy a
high receptivity and are perceived as incorporating state-of-the-
art technology. The U.S. keeps a strong position in this market
with a market share above 60 percent. Prices for U.S. computers
are competitive against competing products from Japan, Korea and
Taiwan. Sub-sectors with highest growth potential are: personal
computers, mid-range computers and non-impact printers. Most
promising end-users are banks, commercial establishments,
universities and government organizations.
Rank of Sector: 3
Name of Sector: Medical Equipment
ITA Industry Code: MED
1994 1995 1996
(US$ millions, unless otherwise
noted)
Total Market Size 18.0 20.7 23.2
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 18.0 20.7 23.2
Imports from the U.S. 13.5 15.5 17.6
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: The medical equipment market will grow at an
estimated average rate of 12 percent during the next 2-3 years.
This growth is supported by the current government's commitment
to upgrade the quality of services offered by the public health
system. In 1995, the government's Social Security System began
building 8 new clinics and hospitals valued at US$ 27 million.
The Ministry of Health is building a 300-bed, US$ 25 million new
hospital in metropolitan Panama City. The Interamerican
Development Bank (IDB) is financing a US$ 52.8 million health
care reform program. In addition, the private sector is making
substantial investments in new clinics and hospitals both in
Panama City and elsewhere in the country. U.S. medical equipment
products have a high receptivity score and are represented by the
best qualified distributors in the country. A great number of
Panamanian doctors have been trained in the U.S. and have
exposure to U.S. medical equipment and technology. There are no
restrictions to importing medical equipment in Panama. Import
duties are in the range of 15 - 27.5 percent over C.I.F. value.
Main competitors come from Italy, France and Germany. Most
promising sub-sectors are: disposable products, imaging equipment
and diagnostic equipment.
Rank of Sector: 4
Name of Sector: Computer Software
ITA Industry Code: CSF
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 12.0 14.5 19.0
Total Local Production 1.5 1.8 3.0
Total Exports 0.0 0.0 0.0
Total Imports 10.5 12.7 16.0
Imports from the U.S. 9.8 11.9 15.8
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: The market outlook for computer software improved
significantly with the passage in early 1995 of a copyright bill
that covers computer software products. Software piracy by
individuals and corporations has been the biggest problem faced
by the computer software industry. The new bill provides the
legal framework for fighting piracy practices at all levels,
although as of July 1995, the new law had not been implemented.
Many corporations have suspended the practice of copying
software, and computer hardware distributors are refraining from
giving away free software to their clients. Best opportunities
are for software productivity tools, i.e. data base software,
oriented to the mid range/mainframe environment. This type of
software has traditionally represented over 80 percent of the
market. Another important market here is for personal computers.
Office automation software, including word processing,
spreadsheet, graphics and data base and telecommunication
applications will be in high demand for the PC-oriented market.
Another emerging market is the multimedia market, including
games, educational and other CD Rom-based applications. U.S.
software publishers are well-known in Panama. Some software
companies from Chile, Venezuela and Costa Rica have targeted
Panama for the introduction of some spanish-language products,
mainly business applications, e.g., payroll, accounts
payable/receivable, etc. There are no restrictions for
importing/marketing foreign software into Panama.
Rank of Sector: 5
Name of Sector: Automotive Parts and Service Equipment
ITA Industry Code: APS
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 43.0 47.0 52.0
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 43.0 47.0 52.0
Imports from the U.S. 13.0 14.2 16.1
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: The market for new automobiles has boomed since
1990. This situation creates a derived demand for automotive
parts and service equipment. The car population in Panama is
estimated at 260,000 units. Approximately 8,000 new cars will
be sold in 1995. U.S. cars sales have shown a constant growth
during recent years, as Japanese products become less competitive
because of the Japanese yen appreciation against the U.S. dollar.
As the market for new cars appears to be reaching saturation
levels, market prospects for automotive parts and service
equipment will increase proportionally to the decline in new car
sales. Car owners will be paying more attention to maintaining
and servicing their cars. U.S. participation in the automotive
parts and service equipment is relatively low (a market share of
30-35 percent). Main competitors are Japan, Korea and Taiwan.
However, the U.S. market position will improve as the demand for
U.S. cars increases. Demand will remain strong for those U.S.-
made car parts and accessories which fit Japanese models. Import
duties for automotive parts range between 10-15 percent over
C.I.F. value. There are no import restrictions for importing and
marketing these products. Sub-sectors offering best market
opportunities are: servicing equipment, tubes and tires, and
engine parts.
Rank of Sector: 6
Name of Sector: Management Consulting Services
ITA Industry Code: MCS
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 13.0 15.5 18.2
Total Local Production 3.0 3.5 4.2
Total Exports 0.0 0.0 0.0
Total Imports 10.0 12.0 14.0
Imports from the U.S. 8.0 9.7 11.6
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: Three factors provide favorable conditions for
the development of the management consulting services market in
Panama. First, under the 1977 Panama Canal Treaties, there are
vast amounts of land and other infrastructure resources reverting
to Panama which are currently occupied by U.S. military
facilities or are former Canal Zone property. Panama will need
to implement a number of projects to make an efficient use of
these resources. The World bank, the UNDP and the Inter-American
Development Bank have expressed interest in financing specific
projects in these areas. Second, the Government of Panama is
committed to increasing the quality and efficiency of public
utility services, including telecommunications, water resources,
energy generation, etc. Much help will be needed to
modernize/privatize the government organizations providing these
services. Finally, as Panama accedes to the World Trade
Organization, Panamanian companies will have to participate in a
more competitive environment. This situation will create the
need for consulting services aimed at increasing their
competitiveness and efficiency levels. The above factors will
generate market opportunities for U.S. consulting companies in
the following areas: land development, environment, marketing,
tourism development, privatization, energy generation, etc.
Rank of Sector: 7
Name of Sector: Telecommunications Equipment
ITA Industry Code: TEL
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 37.0 44.4 58.0
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 37.0 44.4 58.0
Imports from the U.S. 6.2 8.0 14.5
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: The telecommunications sector in Panama is
undergoing a radical change. The government national
telecommunications company (INTEL) was converted into a
corporation and 49 of its shares is scheduled to be offered to a
private company, which will administer and operate INTEL S.A.
The other 49 percent will be retained in the hands of the
Government of Panama (GOP). The remaining 2 percent will be
placed in trust for INTEL's employees. The question of effective
majority control remains unresolved. Furthermore, the GOP is
committed to offering the cellular telecommunications systems in
two bands, A and B. Band A will be wholly operated by the
private sector under a government concession, and B will be
operated under a joint venture arrangement between INTEL and a
private company. All of these changes will open the doors to
modernization and eventual competition in this sector. This
situation will represent increased market opportunities for U.S.
exporters. There are approximately 323,000 telephone lines in
the country and a line penetration rate of 10.9 per 100
inhabitants. INTEL is in the process of upgrading its
transmission lines to fiber optics. There is also an ongoing
process to fully digitalize and increase the switching network.
The private sector demand for PABX systems, radio trunk systems
and paging systems has been constantly growing, as well as
satellite-based IBS/teleport telecommunications facilities. Main
competitors in the market place are from Japan, Sweden France and
Canada.
Rank of Sector: 8
Name of Sector: Hotel and Restaurant Equipment
ITA Industry Code: HTL
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 8.0 9.9 11.3
Total Local Production 0.0 0.0 0.0
Total Exports 0.0 0.0 0.0
Total Imports 8.0 9.9 11.3
Imports from the U.S. 4.0 4.8 6.0
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(The above statistics are unofficial estimates.)
Comments: The market outlook for hotel and restaurant
equipment in Panama has improved as a result of a tourism
incentive law, passed in 1994. It allows for a number of fiscal
and other incentives to those companies investing in tourism-
oriented facilities such as hotels, restaurants, tourist resorts,
etc. The GOP is interested in attracting new foreign and
domestic investment. There are currently 3 major hotels under
construction in Panama and 4 more are planned in other parts of
the country. The Panamanian Tourism Institute (IPAT) is
considering a number of applications for new projects that will
benefit from the new law. Additionally, the current land
reversions of primarily U.S. military facilities to Panamanian
hands, should generate further tourism projects for Panama. The
hotel and restaurant equipment market is very competitive. The
U.S. maintains a strong leadership position. Main competitors in
the kitchen equipment market are from France, Italy, Spain and
Brazil. In other product lines, such as refrigeration and air
conditioning equipment, competitors come from Japan and Korea.
Best prospects in this sector are: kitchen equipment, decoration
equipment, e.g., draperies, furniture, air conditioning
equipment, and elevators. No import restrictions exist for these
products and import duties are in the range of 10-25 percent over
C.I.F value.
Rank of Sector: 9
Name of Sector: Franchising
ITA Industry Code: FRA
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size (1) 70.0 77.0 85.0
Total Local Production 5.0 6.0 7.0
Total Exports 0.0 0.0 0.0
Total Imports (2) 65.0 71.0 78.0
Imports from the U.S. (3) 65.0 70.0 75.0
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(1) total sales generated by franchises
(2) sales by local franchises
(3) sales by U.S. franchises
(The above statistics are unofficial estimates.)
Comments: Panama has a number of special conditions which favor
further development of the franchise market. The U.S. dollar is
legal tender in Panama. Therefore, there are no exchange
restrictions and royalties and fees can be freely remitted.
There is a high U.S. cultural affinity in Panama, as a result of
the U.S. construction and operation of the Panama Canal, and the
presence of U.S. military bases. Panama has one of the highest
per capita income in the region, and a well-established, well-
trained and well-educated middle class. These factors create an
excellent environment for the development of the franchise
market. Except for the Constitutional ban on foreign ownership
of retail outlets, there are no major restrictions to the
establishment of franchises in Panama. The franchiser-franchisee
relationship is entirely regulated by their private contract,
with no government intervention. U.S. franchises enjoy a high
receptivity and have a clear leadership in the market, especially
in the fast food and car rental areas. There are a few
Colombian, Canadian and Central American franchises that are
exploring the Panamanian fast food market, especially in the
pizza, yogurt and fried chicken sub-sectors. Best prospects for
new franchises are: Hotels and campgrounds; sports & recreation;
retail: shoes & clothing; food: ice cream & yogurt; restaurant
and quick service; and photo framing & art.
Rank of Sector: 10
Name of Sector: Financial Services
ITA Industry Code: FNS
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size (1) 32,800 39,000 46,000
Total Local Production (2) 7,000 8,000 10,000
Total Exports 0 0 0
Total Imports (3) 25,000 31,000 36,000
Imports from the U.S. (4) 1,300 1,500 2,000
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
(1) total assets of the bank system
(2) total assets of local banks
(3) total assets of foreign banks
(4) total assets of U.S. banks.
(The above statistics are unofficial estimates.)
Comments: Panama is an international banking center. There
are 109 banks operating in Panama. Of these banks, 61 have
general licenses, i.e. provide a full range of banking services.
A total of 29 banks have international license, i.e. deal only
with overseas operations. The remaining 19 banks have only
representational offices. The majority of banks are foreign;
about 10 banks are Panamanian. In 1994, the banking system
granted credits amounting to US$ 6.5 billion in the Republic of
Panama. There is a deficit of 250,000 housing units in the
country and the Government is committed to reducing this deficit.
This sector will represent excellent financing opportunities for
local and foreign banks. Investment banking is another promising
area as large local companies are increasingly looking at non-
traditional financing sources such as corporate bond issues.
Banks usually act as issuing agents. The Panamanian stock
market, founded in 1990, is another area of growth within the
financial services market. In 1991 stock market transactions
were US$ 30.6 million; in 1994 the figure rose to US$ 290.2
million, of which 85% were debt instruments. There is an ongoing
project, financed by the Inter-American Development Bank, to
unify all the stock exchanges in Central America. This may
enhance market opportunities in this area. Panama is considered
a haven for financial operations; government intervention is
minimal.
BEST PROSPECTS FOR AGRICULTURAL PRODUCTS
Name of Sector: Agricultural Consumer Oriented Products
PS/D: HVP
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 161.7 170.3 179.2
Total Local Production 1/ 329.7 347.1 365.4
Total Exports 285.0 300.0 315.9
Total Imports 117.0 123.2 129.7
Total Imports from U.S. 51.9 54.6 57.5
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
1/ Includes production for exports.
Comments: U.S. exports of agricultural consumer-oriented
products reached a record US$ 51.9 million in 1994. Major
products exported include: processed fruit and vegetables (US$
9.2 million), wine and beer (US$ 8.4 million), snack foods (US$
6.3 million), fresh fruits (US$ 4.3 million), breakfast cereals
(US$ 3.2 million) and fruit and vegetable juices (US$ 3.8
million). Main competitors are: Guatemala, Costa Rica, Chile,
Denmark, Ecuador.
Best prospect sub-sectors (est. 1996 market size): Breakfast
cereals (US$ 10.0 million). Fresh fruits (US$ 9.5 million).
Canned sardines (US$ 7.0 million).
Name of Sector: Bulk Agricultural Products
PS/D: G&F
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 120.0 130.8 142.6
Total Local Production 71.0 77.4 84.4
Total Exports 1/ 2.0 2.2 2.4
Total Imports 51.0 55.6 60.6
Total Imports from U.S. 34.7 37.8 41.2
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
1/ Includes domestic tobacco exports which reached US$ 1.3
million in 1994.
Comments: U.S. exports of bulk agricultural products
totaled US$ 34.7 million in 1994. Major bulk commodities were:
wheat (US$ 18.0 million) and yellow corn (US$ 13.8 million).
Main competitors come from: Germany, Belgium, Denmark, France.
Best prospect sub-sectors (est. 1996 market size): Wheat (US$
20.0 million). Yellow corn (US$ 15.6 million). Malt (US$ 5.5
million).
Name of Sector: Intermediate Agricultural Products
PS/D: O&P
1994 1995 1996
(US$ millions, unless otherwise noted)
Total Market Size 105.0 110.3 115.7
Total Local Production 1/ 80.5 84.6 88.7
Total Exports 28.5 29.9 31.4
Total Imports 53.0 55.6 58.4
Total Imports from U.S. 39.0 41.0 43.0
Exchange Rate 1 U.S. Dollar = 1 Balboa (Fixed Rate)
1/ Total includes domestic sugar exports which reached US$ 17.1
million in 1994.
Comments: U.S. exports of intermediate agricultural
products reached a record high of US$ 39.0 million in 1994.
Major products exported were: soybean meal (US$ 14.7 million,
record high), corn gluten (US$ 3.8 million) and corn oil (US$ 1.5
million). Main competitor is Argentina.
Best prospects sub-sector (est. 1996 market size): Soybean
meal (US$ 15.5 million). Soybean oil (US$ 15.0 million). Corn
gluten (US$ 4.2 million).
SOURCES
Non-Agricultural Goods and Services
- Computer and Peripherals: AT&T, Grupo Informatica
- Automotive Parts and Services: Grupo Ford
- Medical Equipment: La Casa del Medico
- Telecommunication Equipment: INTEL, S.A.
- Financial Services: Asociacion Bancaria de Panama
- Franchising: Franquicias Paname¤as
- Consulting Services: USAID, Consultores Financieros
- Electric Power Systems: IRHE
- Hotel & Restaurant Equipment: Diversiones Panama
- Computer Software: ADR Software
Agricultural Products
- Ministry of Agricultural Development
SIGNIFICANT INVESTMENT OPPORTUNITIES
The following areas offer excellent investment opportunities
for U.S. companies.
Electric Power Generation
In February, 1995, the GOP passed legislation that allows IRHE,
the government electric utility to purchase energy from private
suppliers. IRHE recently announced plans to purchase electric
energy from a 100 M.W. plant to be constructed and operated by a
private company. Companies investing in a power plant can also
sell energy to other Panamanian companies. The Inter-American
Development Bank (IDB), is studying the possibility of financing
a 120 M.W. hydroelectric plant to be constructed and operated by
IRHE in the province of Chiriqui, although some observers believe
the project will not be cost effective. Panama's demand for
electricity grows by 40 Megawatts per year. Since IRHE does not
have the investment capability to meet it, a growing
participation of the private sector, particularly foreign
investors, is necessary. (For more information refer to Appendix
E for the contact at IRHE.)
Health Care Services
The Inter-American Development Bank (IDB) is co-financing a US
$52.8 million program aimed at: improving the operating
efficiency of health care institutions; improving the health of
the general population; and, advancing the reform of the service
sector.
The program includes the construction of 16 health care centers.
A number of studies will also be conducted, and substantial
amounts of medical equipment will be acquired. (For more
information refer to Appendix E for the contact at the Ministry
of Health and the Panama office of the Inter-American Development
Bank.)
Mining Exploration and Operation
Panama has vast amounts of minerals resources, located in the
central provinces of the country. There is significant potential
for gold, silver, copper, zinc, lead and, molybdenum
exploitation. No government restrictions exist for foreign
companies to participate in mining explorations and operations,
except for the requirement that 90% of all employees be
Panamanians. A few mining companies from Canada have made
sizable investments in the mining sector. The two largest are
Adrian Resources Corp., and Greenstone Resources, Inc. These two
companies have invested over US$ 100 million in mining
explorations during the last three years. Several mining sites
have easy access by road. For information on mining investment
opportunities, contact the Ministerio de Comercio e Industrias,
Direccion de Recursos Minerales. (For more information refer to
Appendix E for the contacts at the Ministry of Commerce and
Industry, Minerals Division and the Mining Chamber of Panama.)
Port Construction/Operation/Privatization
The GOP is interested in increasing the efficiency of its port
system. In achieving this purpose, the National Port Authority
(APN), is promoting the construction of new ports and privatizing
some operations of the country's major ports. A new container
port, the Manzanillo International Terminal, began operations
last year, on the Atlantic side, under a joint venture
arrangement between Stevedoring Services of America of Seattle,
WA, and Motores Internacionales, a Panamanian distributor of
Russian-made cars and trucks. Half of this project financing
comes form the World Bank's International Finance Corporation.
The Taiwanese company, Evergreen, is negotiating with the GOP the
construction of a second container port on the Atlantic side.
Petroterminal de Panama, a joint venture between the GOP and
Northville Industries of New York, NY., is planning to construct
a new port facility in Chiriqui Grande on the Atlantic side. APN
announced recently that many port operations will be privatized
in the Atlantic Port of Cristobal, Panama's most important port,
and in the Pacific port of Balboa. (For more information refer
to Appendix E for the contact at the National Port Authority.)
Reverted Areas
As a result of the Panama Canal Treaties of 1977, the United
States is in the process of transferring to Panama 70,000 acres
of lands, more than 4,000 buildings, numerous bridges, and other
infrastructures located in the former Canal Zone and the U.S.
military bases. The reversion process concludes in the year
2000. Panama is committed to incorporating these resources to
enhance the country's economic and social development. A number
of projects will have to be developed in these areas in the very
near future. The Inter-American Development Bank is co-financing
a US $9.2 million study that will define the plans for the
efficient use these resources. The GOP chartered the
Interoceanic Regional Authority (ARI), to administer the reverted
resources and to create a development strategy. Projects to be
considered include manufacturing, assembly, tourism, warehousing,
education, scientific research, energy generation, etc. (For
more information refer to Appendix E for the contact at the
Interoceanic Regional Authority.)
Road Construction and Rehabilitation
In 1994, the Government of Panama, in conjunction with the Inter-
American Development Bank and the World Bank, began a US $420
million, five-year, road construction and rehabilitation program,
to be completed in 1997. The program includes road construction
in rural areas, rehabilitation of major existing roads, bridge
construction and maintenance, urban road maintenance and over
pass construction.
Additionally, the GOP is seeking to expand the road network
in metropolitan Panama City via administrative concessions.
Under this scheme, private companies would make the necessary
investment to construct and operate a road. They would be
permitted to recuperate the investment through a toll system. A
US $300 million (Corredor Norte and highway Panama-Colon) road
project has been awarded to the Mexican company PYCSA. Another
US $150 million project (Corredor Sur) is in process of being
awarded.
(For more information refer to Appendix E for the contact at the
Ministry of Public Works.)
Telecommunications
Panama is restructuring its telecommunications sector in
order to make it more efficient and competitive. Significant
investment opportunities will open as the modernization process
is developed.
The government telecommunications company (INTEL) has been
converted into a corporation and 49 percent of its shares will be
sold to the private sector. Another 49 percent will be retained
by the GOP. The remaining 2 percent will be kept in a trust fund
for INTEL employees. The company acquiring the 49 percent of
INTEL will also become the operator of INTEL S.A. How it would
operate while owning less than 50% of the stock remains to be
worked out.
INTEL S.A. will operate a cellular telecommunications system
in band B, in association with a private company. A parallel
cellular service will be offered to a private sector company in
band A. INTEL is currently engaged in expanding its switching
network. The digitalization of the system and the implementation
of fiber optics are two important ongoing projects. (For more
information refer to Appendix E for the contact at INTEL S.A.)
VI. TRADE REGULATIONS AND STANDARDS
TRADE BARRIERS (TARIFFS, NON-TARIFF BARRIERS AND IMPORT TAXES)
Traditional policies on trade and economic incentives
directed agricultural and manufacturing production toward import-
substitution until the end of the 1980's. Today, Panama's
nominal tariff duties remain the highest in the region. Panama
averages 40% in tariff rates, whereas, its Central American
neighbors average 20%.
The country has made some progress in lowering its duties
and restrictions. From 1991 to 1994 the Government of Panama
enacted a trade liberalization program, with the following
objectives:
- To reduce the ceiling on import tariffs to 40 percent for
industrial products and to 50 percent for agro-industrial
products.
- To eliminate all specific import tariff rates.
- To eliminate quantitative import restrictions for
agricultural products and replace them with tariff
protection.
The Government met the majority of these objectives.
However, there are still some products subject to tariffs outside
these limits such as processed tomato products, beer and
cigarettes. Other products, such as textiles and shoes, continue
to have specific import duties. Various other agricultural
products remain subject to quantitative restrictions e.g., dairy
products and certain grains.
Panama is currently negotiating its accession to the World
Trade Organization (WTO). Tariff duties are expected to decline
and most of the non-tariff barriers will be eliminated.
CUSTOMS VALUATION
Panama assesses most import duties on an ad valorem basis,
except for a number of products that are still using a dual ad
valorem and specific system. The Government is, however, still
in the process of eliminating this dual system. The ad valorem
system uses the declared C.I.F. value as the basis for import
duty calculations and utilizes historical price information as a
reference. This method has been criticized by major private
business organizations in the country.
In addition to the import duty, all imports into Panama are
subject to a 5 percent transfer or value added tax (ITBM) levied
on the C.I.F. value, plus import duty and other handling charges.
Pharmaceutical, food products and school supplies are exempt from
ITBM tax.
Panama has recently changed its international trade
classification system from the Customs Cooperation Council
Nomenclature (CCCN) and Brussels Tariff Nomenclature (BTN) to the
Harmonized System (HS). Also, entry into the WTO will improve
the present situation to provide a customs valuation system that
conforms to international standards.
IMPORT LICENSES
No import licenses are required in Panama to engage in
import activities. Any company holding a commercial license can
freely import goods into Panama. A commercial or industrial
license is issued to individuals or companies engaged in
commercial or industrial activities.
EXPORT CONTROLS
The Fiscal Code regulates all matters concerning the
country's exports. The Code establishes that all national
products may be exported, except:
- drugs, with the exception of those having pharmaceutical or
scientific purposes.
- staple products determined by the Government on a temporary
basis due to scarcity in the country; and,
- those products the GOP determines not for export for reasons
of convenience or in the economic interest of the country.
Exports subject to the payment of export taxes require an
Export Authorization, which is issued by the National Customs
Directorate, Ministry of the Treasury. (See Appendix E for
contact information.) Exports subject to taxes are: bananas,
metals, raw sugar, natural resources and foreign currencies.
Exports of textiles are also subject to an export authorization.
IMPORT\EXPORT DOCUMENTATION
Import Documentation
The processing of customs documents in Panama for the
purpose of importing raw materials or finished goods is fast,
efficient and reliable. Merchandise imported into Panama must be
cleared through customs by a customs broker licensed by the
Government of Panama. Exceptions are made for goods which are
imported duty free, consigned to national and municipal
governments, imported by foreign diplomats, for sales to the
authorities of the Canal Area, sold to vessels transiting the
Canal, or intended for reexportation.
Basic import documentation required by the Panamanian Customs
office is:
- Import Declaration (Prepared and signed by a Customs
Broker),
- Commercial Invoice (To be presented in English or Spanish in
quadruplicate),
- Airway Bill,
- Bill of Lading (To be presented in triplicate),
- Commercial License Number,
- Tax Clearance Certificate (Stating that the importer does
not owe any taxes to the Government),
- Phytosanitary Certificate (In case of meat and meat
products, to be obtained from the U.S. Department of
Agriculture), and,
- Certificate of Free Sale (if required)
Any food product or other items used for human consumption
(including for use on human skin or clothes may be subject
to the Certificate of Free Sale (CFS) documentation
requirement. The main purpose of the CFS is to prevent the
dumping of inferior goods, especially for human consumption,
to the Panamanian market. The CFS must verify that a
product is sold freely and used widely in the U.S.
Potential exporters of items subject to the CFS
documentation requirement may wish to either contact:
(1) their trade association which may provide the service
issuing the documentation, or,
(2) the Food and Drug Administration, Division of Programs
and Enforcement Policy, 200 C Street, SW, Washington, DC
20204.
If for any reason the bill of lading or any other required
document cannot be presented within 24 hours after the shipment
has arrived, clearance of the goods will be permitted by posting
a bond equal to the amount of import duties. The bond is
cancelled if the prescribed documents are presented in due form
within a period of 90 days. The bond may be extended, extendable
in justified cases, an additional 90 days.
Export Documentation
A licensed customs broker is also required to handle the
export paperwork related to merchandise exports. The Panama
Trade Development Institute (IPCE), a government organization,
was created in 1984 to promote exports and investment. IPCE
facilitates the processing of export documentation through a "One
Stop" (ventanilla unica) office which can reduce the export
process to a few hours from a process that can take days or
weeks. (Refer to Appendix E for contact information on IPCE).
Export documentation required by Panamanian Customs
authorities is:
- Commercial Invoice,
- Export Declaration (Prepared and signed by a Customs
Broker),
- Certificate of Origin (Issued by the Chamber of Commerce,
Industry and Agriculture of Panama or the Panama Trade
Development Institute),
- Bill of Lading,
- Airway Bill,
- Veterinary, Sanitary or Phytosanitary Certificate (when
applicable).
TEMPORARY ENTRY
The Panamanian Fiscal Code establishes a temporary entry
regime, up to one year, for all types of merchandise. There are
two options. First, the goods can enter the country under a
guarantee payment equivalent to the total value of the import
duty. This payment will be reimbursed at the time the goods
leave the country. Second, an insurance company issues a bond
guarantee covering the import duty value if the goods fail to
exit the country in a pre-determined period of time.
Special temporary provisions apply in the case of trade
shows and exhibitions taking place at the Atlapa Convention
Center, Panama's exhibition and convention center. Goods can
enter the Atlapa Convention Center with no warranty payment or
bond required.
Samples with commercial value are subject to temporary entry
requirements. Samples with no commercial value are admitted duty
free. If samples arrive in large containers, they will be
dutiable even though they may be marked as free sample.
LABELING, MARKING REQUIREMENTS
Panama has no special regulations for labeling and marking.
Labels are required to have basic information regarding the name
and address of the manufacturer, expiration date, list of
ingredients, lot number, and the product form, e.g. powder,
liquid, etc.
Labels in English are accepted, except medicines, household
products and special foods which require special instructions.
In these cases instructions regarding dosage, usage, warnings,
etc., must be in Spanish.
All goods arriving in Panama intended to be reexported
immediately must be marked "PANAMA IN TRANSIT" on each box or
outside container.
In general, products which comply with U.S. labeling and
marking requirements, will also meet local requirements and are
suitable for sale in Panama.
PROHIBITED IMPORTS
The following products cannot be imported into Panama:
- Counterfeit coins or printed material that imitates monetary
currencies,
- Equipment or instruments for manufacturing coins,
- Liquors, wines, beers or medicines with labels that describe
false or deceiving contents, or of any kind of harmful
preparation,
- Certain firearms or war materials,
- Foreign lotteries or raffle tickets,
- Opium in the form of gum or for smoking,
- Obscene brochures, books, newspapers, magazines, or
postcards containing negative portrayals of the country's
culture, civilization or dignity, and,
- Plants, seeds, or animals when determined by the Ministry of
Agriculture.
STANDARDS (E.G. ISO 9000 Usage)
While the Government of Panama has not designated a domestic
registering authority for participation in the International
Standards Organization ISO-9000 program, there is no legal
limitation in Panama on participation in ISO-9000 by firms doing
business here. Panama is a member of the Pan American Standards
Commission (COPAN), headquartered in Venezuela.
FREE TRADE ZONES/WAREHOUSES
The Colon Free Zone
The Colon Free Zone (CFZ), the largest in the Western Hemisphere
and second to Hong Kong's, is located in the City of Colon, five
kilometers from the Port of Cristobal on the Atlantic side of
Panama and 90 kilometers from Panama City. Goods (except
firearms or petroleum products) may be imported, stored,
modified, repacked and re-exported without being subject to any
customs regulations.
Generally, most merchandise is transshipped from Panama
to other parts of the Western Hemisphere and Europe. Imports
into the CFZ come mainly from the Far East. The largest
individual supplier of the CFZ in 1994 was Hong Kong, followed by
Japan, the United States, Taiwan and South Korea. These five
countries supply 67.5 percent of all imports through the CFZ. In
descending order of exports from the CFZ, Colombia is the largest
purchaser of merchandise, comprising nearly one quarter of all
CFZ exports. Other principal buyers are Ecuador, Panama
(domestic market), Venezuela, Aruba, the United States, Costa
Rica and Chile. These countries buy 60% of all exports from the
CFZ.
The CFZ is administered as an autonomous institution of the
Panamanian Government. It has been in operation since 1953.
Today it is completely developed, and covers 300 hectares,
including 45 hectares designated as an industrial zone.
The CFZ offers free movement of goods and complete exemption
from taxation on imports and re-exports. There are no taxes on
the export of capital or the payment of dividends. In addition,
there are reduced income tax rates on earnings from re-export
sales. Furthermore, firms located in the CFZ are exempt from
import duties as well as from guarantees, licensing, and other
requirements and limitations on imports. Due to its geographic
location, the CFZ is a major factor in facilitating the supply of
goods from large industrialized countries to the consumer markets
in Latin America. Unfortunately, the CFZ is also used by the
Colombian drug cartels for money laundering and drug trafficking.
Other suspicious CFZ transactions include trade in pirated
intellectual property and stolen vehicles.
The CFZ is operated and managed by its Board of Directors,
an Executive Committee and the General Manager of the
institution. Corporations or individuals of any nationality may
establish operations in the CFZ without requirements of a
commercial license or a minimum investment of capital. Firms
interested in operating in the CFZ must file an application and
provide a copy of its articles of incorporation and bank
references.
There are four basic ways of doing business in the CFZ:
1. Leasing lots on which the firm builds a warehouse or other
facilities as designed by the firm. The land lease
arrangements are granted for a 20-year period;
2. Purchasing an existing facility from the Zone
Administration;
3. Reaching an agreement with a company already established in
the CFZ as the operator's representative. The cost of this
service is set by mutual agreement between the parties
concerned. Representation agreements shall be subject to
the approval of the Zone Administration; or,
4. Leasing a public warehouse operated by the Zone
Administration. The firm receives its goods and stores them
like any other company there. There are no fixed costs and
the payment of services is based according to the weight or
volume of the goods stored.
Companies operating in the CFZ are engaged in four types of
sales operations:
1. Foreign Trade Operation, involving the re-exportation of
goods from CFZ warehouses;
2. Internal Trade Operation, consisting of sales to clients
located within Panama's customs territory;
3. Direct Sales, those made to foreign clients in which goods
are shipped from the manufacturing sources without
physically arriving in the CFZ territory; or,
4. Transfer Operation, in which sales are made to other CFZ
firms.
Companies operating from the CFZ enjoy numerous trade
advantages along with special tax incentives such as tax credits,
depending on the number of Panamanian employees, and special
income tax rates on foreign trade operations. Companies in the
free zone pay a maximum corporate income tax rate of 15.0 percent
on income derived from export sales. Dividends paid on profits
from foreign trade operations and from direct sales are not
subject to the dividend tax. Merchandise arriving at, stored in,
or leaving the CFZ destined for a foreign country is exempt from
taxes, charges or any type of fee. Also, CFZ companies are not
subject to any type of federal or municipal tax.
Contact the CFZ Administration and the Users Association for
more information. (Refer to Section II of this report for key
statistical information on the CFZ and to Appendix E for contact
information).
Export Processing Zones
On November 30, 1992, Panama passed a Law No. 25 allowing
for the establishment and development of Export Processing Zones
(EPZ) within the country.
EPZs are well-defined areas for the establishment of
industrial, commercial and service facilities which operate in a
free trade system. All its production is export-oriented and a
range of incentives has been created to attract companies into
the EPZ.
Companies allowed to establish operations in EPZ are those
engaged in: manufacturing, assembly (maquila), high technology,
and specialized and general services, e.g. computer data entry,
reinsurance.
The EPZ law defines two different parties associated with
the zone. The first is as developer of the EPZ. The second is as
the tenant company located in the EPZ.
The GOP offers the developer the following tax incentives:
Tax exemption during the life of the contract (the maximum
is 20 years), from taxes, duties and other charges related
to the importation of machinery, equipment, accessories and
material used in the construction of the facilities. Exempt
from property and income taxes, and taxes on capital or
assets for the first ten years of operation. From the 11th
year until the end of the contract, the developer is exempt
from income tax on net earnings reinvested in the
development and expansion of the EPZ, provided that the
amount reinvested exceeds 20 percent of the net taxable
income for the fiscal year the reinvestment is made.
Lastly, the developer may carry over losses from the year
the loss takes place.
The tenant companies exporting from an EPZ are offered the
following benefits:
Exempt from taxes, duties and other charges related to the
importation of machinery, equipment, raw materials, semi-
processed goods and other materials such as packaging, fuel
and lubricants used in the manufacturing process.
Exemption from income tax on profits arising from exports,
and exemption from export sales taxes, as well as from taxes
on capital and assets of the export industry.
The EPZ law also includes specific labor and migratory
provisions for employees of EPZ firms which are more favorable
than the current Panamanian Labor Code.
Presently, there are four EPZs approved by the GOP. Each is
in various stages of development. Contact the Panama Trade
Development Institute (IPCE) for information on EPZs. (Refer to
Appendix E for contact information on IPCE).
Petroleum Export Zones
The Government of Panama enacted Decree No. 29 (Executive
Decree) dated July 14, 1992, allowing the creation of Petroleum
Export Zones (PEZ) in specially-designated areas in Panama.
Decree No. 29 allows any foreign or national company to
establish operations in a PEZ to produce, refine and export
petroleum products. It also permits direct sales to foreign
vessels transiting the Panama Canal, and to foreign airlines.
Companies operating out of these PEZs are exempt of any municipal
or federal taxes and are not subject to government regulations
affecting the local market.
The Government of Panama has authorized the following four
PEZ: Petroterminal de Panama (PTP, the transisthmian pipeline),
Refineria Panama (TEXACO), Autoridad Portuaria Nacional (APN, the
Port Authority), and Aeropuerto Internacional de Tocumen.
Contact the Ministry of Commerce and Industry, Direccion Nacional
de Hidrocarburos for more information. (Refer to Appendix E for
contact information on the Ministry of Commerce and Industry).
SPECIAL IMPORT PROVISIONS
Special import permits are required for all types of
firearms and ammunitions. Import permits can be obtained from
the Ministry of Government and Justice. Also, certain
agricultural and agroindustrial products are subject to import
authorization by the Ministry of Agricultural Development (MIDA).
Examples are: wheat, flour, animal fats, vegetable and animal
oils, soybean protein, and frozen corn. (Refer to Appendix E for
contact information on the Ministry of Agricultural Development).
MEMBERSHIP IN FREE TRADE ARRANGEMENTS
Panama is not a party to any agreements providing completely
free trade, but does have bilateral preferential trade agreements
with Costa Rica, El Salvador, Honduras, Guatemala, and Nicaragua;
these accords are quota-based and deal with a limited number of
specific products. A more inclusive preferential agreement has
been signed with Colombia. There is also a limited preferential
agreement with Mexico. Negotiations are under way to sign a
preferential agreement with Ecuador.
Panama is a beneficiary of the Caribbean Basin Economic
Recovery Act, better known as the Caribbean Basin Initiative
(CBI), which provides for one-way free trade access for specific
Panamanian exports to the U.S. Recently the U.S. government has
been contemplating new legislation (e.g. the Crane-Gibbons bill)
that would enhance the CBI program. In return for NAFTA-like
treatment for textiles and other miscellaneous items to the
Caribbean Basin nations, the ITP would require from the Caribbean
Basin Countries, on a bilateral basis, to make commitments mainly
in the following areas: bilateral investment treaties,
intellectual property rights, workers rights, and the
environment. The interim Trade Program bill, the NAFTA Parity
Resolution is still in committee in the House of Representatives
and the Senate as of June, 1995.
VII. INVESTMENT CLIMATE
OPENNESS TO FOREIGN INVESTMENT
On the one hand, taking its cue from Panama's central
geographic location and its limited manufacturing and
agricultural sectors, the Government of Panama and the business
community actively promote this country's long-standing
reputation as an international trading, banking, and services
center, and as a site for foreign direct investment (FDI).
Panamanian business persons and officials can point to Panama's
dollar-based economy as offering low inflation and zero foreign
exchange risk. The Panamanian Trade Development Institute (IPCE)
provides investors with information, expedites specific projects,
leads investment-seeking missions abroad, and supports foreign
investment missions in Panama.
On the other hand, as the new Minister for Planning and
Economic Policy has noted, no major foreign investment has been
made in Panama for at least 10 years. The Perez Balladares
government which took office September 1, 1994, has embarked upon
a vigorous campaign to improve Panamažs international image
(e.g., on money laundering) and its infrastructures to attract
FDI. A major test for the new government regarding its intention
to improve Panama's attraction of FDI, will be how it employs the
former military areas being reverted under the Canal treaties.
Major properties will revert to Panamanian control in September
1995 and September 1996. The largest U.S. bases are scheduled to
revert to Panama between 1997 and 1999.
Government inattention to basic public infrastructure and
public services, combined with slow progress on economic reforms
that would establish clearer "rules of the game," undermine the
generally welcoming stance toward foreign investment. Cumbersome
legal procedures sometimes delay resolution of contract and other
business disputes. Setting up shell corporations, however, is
not cumbersome.
Colon Free Zone: Official support for investment and
business activity is especially strong in the Colon Free Zone
(CFZ). There are special tax incentives to encourage investment
in the CFZ and the international banking center. Companies in
the free zone pay a maximum corporate income tax rate of 15.0
percent on income derived from export sales; income from purely
offshore operations is not taxable; there are no taxes on the
repatriation of profits or the payment of dividends. Banks in
Panama pay no tax on interest or other income earned outside
Panama and withhold no tax on savings or fixed time deposits in
Panama. Several locations designated export processing zones
(EPZ's) offer tax-free status and special immigration privileges,
and license and customs exemptions to manufacturers who locate
there. (Refer to Section VI for more detailed information on
CFZ).
Privatization: Panama has a program to privatize a number of
state-owned enterprises. To date there has been privatization of
the state cement company and a state owned fruit company.
Partial privatization of the state telephone company is currently
underway.
Possible medium term privatizations may also occur in refuse
collection services and some water utility operations. The
government is also open to private investment in cellular
telephone and other high-tech telecom services. Treatment of
potential foreign investors in this process has been non-
discriminatory, at least on the surface.
Panama offers all investors (domestic and foreign) tax and
other financial advantages if they invest in manufacturing
ventures, export-oriented ventures, or tourism, or if they locate
in certain regions of Panama. These advantages include tax-
exemption of export income, exemption from import duties and
accelerated depreciation. Many of these subsidies and special
incentives are scheduled for elimination or modification by
virtue of the GATT/WTO negotiations. Investors require
substantial legal and accounting advice to take advantage of
these incentives. (Refer to Right to Private Ownership and
Establishment in Section VII for more information).
POLITICAL VIOLENCE
Political violence in Panama, prevalent during the later
Noriega years, decreased sharply after Operation Just Cause in
1989 and is now rare. The 1994 national election, which
international and domestic observers agree was the cleanest and
fairest in three decades, was a model of the democratic political
process. Peaceful elections were followed by a calm and
coordinated transition as the Endara administration stepped aside
to let its political rival take over the reins of the government.
To date, the Perez Balladares government has chosen not to use
its "gag law" authority to dampen the full and free expression of
political ideas. Street crime, which has remained high since
Operation Just Cause owing to poverty and weak institutions, is
on the rise again. With the exception of restrained use of force
against indigenous rights activists in April 1995, the police
force monitored but did not interfere with anti-government
demonstrations and strikes during the spring of 1995. Organized
crime score settling and narcotics-related violence are
disturbing elements of the rising crime trend. The overloaded
and cumbersome criminal justice system has been unable to met out
justice in the face of Panama's rising volume of crime.
In June 1994 a grenade was used to bomb the car of a
prominent Jewish businessman. No arrests have been made in this
first-ever event in Panama. In July 1994 a Panamanian domestic
commuter aircraft traveling between Colon and Panama City
exploded, killing 21 people, including three American citizens.
The attack remains under investigation by Panamanian and U.S.
authorities. The attack, which killed several well-known members
of Panama's Jewish community, may have been the work of
terrorists. The alleged perpetrator, who was apparently carrying
a bomb (knowingly or unknowingly) was on the plane when it
exploded; no arrests have been made. The two incidents prompted
the government to tighten airport security and to promise
increased police vigilance against terrorists and their alleged
support networks.
CONVERSION AND TRANSFER POLICIES
Panama has no legal restrictions on transfer abroad of funds
associated with, profits deriving from, or capital employed in an
investment. Panama uses the U.S. dollar as legal tender.
Currency conversion therefore is not an issue. The Government of
Panama has repeatedly emphasized its intention to retain the U.S.
dollar as the national currency (denominated as the balboa); the
U.S. Government has consistently supported Panama's use of the
dollar. There is, therefore, no independent monetary policy in
Panama. Inflation, bound by the dollar, is relatively low and
predictable, thus enhancing foreign investments.
EXPROPRIATION AND COMPENSATION
Panama has no current cases of expropriation of property for
public or any other use. There are no policy shifts or other
indications suggesting that expropriation in the near future is
likely. Although the Government of Panama did decide in 1993 not
to sell publicly owned land (in Bocas del Toro Province) to U.S.
investors, there are no large enterprises at special risk of
expropriation. Beyond the OPIC insurance prohibition discussed
below (Section on OPIC Investment Insurance), the Government of
Panama does not in general discriminate against U.S. or other
foreign investors. There is a constitutional prohibition against
foreign land ownership within ten kilometers of a national border
or on an island. Neither Panamanian citizens nor foreigners may
own beaches or the shores of rivers or lakes. Builders and
investors generally rent the land for 20-30 years, via the
Ministry of Finance. The new tourism incentives law expands this
period for up to 40 years.
DISPUTE SETTLEMENT
Disputes with foreign investors are rare. Where they have
occurred, they have involved special circumstances not likely to
be repeated. Most notable business complaints have involved
individuals who have not fully pursued remedies available to them
via the court system.
Panama has a court and judicial system, like many Latin
American countries, built around a civil code, rather than the
Anglo-American system of reliance upon case law and judicial
precedent. Fundamental procedural rights in civil cases are
broadly similar to those available in U.S. civil courts, although
some notice and discovery rights, particularly in administrative
matters, may be less extensive than in the U.S.; judicial
pleadings are not always a matter of public record. Business,
corporate, and banking laws are relatively modern and
sophisticated and in general are enforced so as to create a
favorable business climate, although there is no modern
bankruptcy law. Mortgages, liens, and other security interests
are recognized. There is a public property registry, now
undergoing expansion and modernization. The judiciary is
independent, in law and practice, of the executive branch of
government. Unique features of Panamanian law and practice in
specific areas (including but not limited to banking, accounting
requirements, formation and functioning of corporations, and
taxation) make retention of local legal counsel advisable in many
cases.
In its bilateral investment treaty with the United States,
Panama recognizes the "additional facility" of the International
Center for the Settlement of Investment Disputes (ICSID) as a
potential means of resolving disputes with foreign investors,
outside of Panamanian courts.
PERFORMANCE REQUIREMENTS/INCENTIVES
There are no performance requirements such as minimum export
percentages or significant local procurement rules. There are
special tax and other incentives for manufacturers to locate in
an Export Processing Zone (EPZ), the only active one of which
currently is at Isla Margarita, outside Colon (notional but
inactive EPZ's exist at Ojo de Agua and Telepuerto). (Refer to
Section VI - Export Processing Zones for detailed information.)
Tax incentives are available to manufacturers, wherever located
in Panama, who produce wholly or partially for export, in
proportion to the percentage of product exported. There may, as
a matter of administrative practice, be an official preference
for local procurement of certain types of business insurance.
Several tourism incentives laws provide, among other
measures, tax exemptions for vehicles and other designated goods
imported for use in, or to construct infrastructure for, the
tourist sector. Tax incentives are still available to small
businesses (less than 10 employees) and to certain types of
agricultural production and investment, especially where
production is for export.
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
With the exception of retail trade and certain professions,
foreign and domestic entities have the right to establish, own,
and dispose of business interests in virtually all forms of
remunerative enterprise. Foreigners need not be legally resident
or physically present in Panama to establish corporations or to
obtain local operating licenses for a foreign corporation.
Business visas (and even Panamanian passports) are readily
obtainable for significant investors. Banking, legal and
financial services and the legal regime are strongly oriented
toward attracting foreign business and banking activity.
Panama's privatization framework law does not distinguish
between foreign and domestic investor participation in
prospective privatizations. The law calls for pre-screening of
potential investors or bidders in certain cases to establish
technical viability, but nationality and Panamanian participation
are not criteria. Foreigners have participated actively in all
privatization to date.
Privatization (in whole or in part) of state-owned entities
such as the National Power and Light Company (IRHE), and the
National Water Company (IDAAN) will require separate laws; in
February 1995 the Legislative Assembly passed separate pieces of
legislation allowing the partial privatization of the national
telephone company (INTEL) (with private ownership limited to 49
percent) and revoking the monopoly of electricity generation held
by the state electricity utility (IRHE). Privatization of these
high-visibility, politically sensitive enterprises has been
debated vigorously. There are likely to be limits on foreign
investor participation if indeed the remaining core utilities are
ever privatized. (Refer to the Privatization portion in this
Section for more information).
PROTECTION OF PROPERTY RIGHTS
Intellectual Property Rights
Panama is a member of the World Intellectual Property
Organization (WIPO), the Geneva Phonograms Convention, the
Brussels Satellite Convention, and the Universal Copyright
Convention. Although Panama is not a member of the Bern
Convention for the protection of Literary and Artistic Works or
the Paris Convention for the Protection of Industrial Property,
the Government of Panama has submitted to its Legislative
Assembly a bill for Panama to accede to the Paris Convention;
accession to the Bern and Paris Conventions will be necessary if
Panama is to join GATT/WTO.
In general, protection for intellectual property rights in
Panama has in the past been less than adequate in several areas.
Panama's adherence to other major international conventions on
intellectual property rights would offer more protection to
foreign rights-holders than is available under current Panamanian
law. The U.S.-Panama Bilateral Investment Treaty, negotiated in
1983 but not put into effect until 1992, does not contain an
intellectual property annex. In the past, representatives of
some U.S. industrial sectors have alleged Panama provides
inadequate copyright and trademark protection.
The National Assembly in August 1994 passed a bill to help
modernize copyright protection. Implementing regulations for the
new copyright law, which took effect January 1, 1995, are still
pending. The Government of Panama is expected to introduce a
draft bill to the National Assembly in September 1995 to
strengthen industrial property protection (patents, trademarks,
and trade secrets). The Government of Panama has stated its
intention to improve customs controls and enforcement of existing
law in the Colon Free Zone, where copyright and trademark
infringing activity have been heaviest. Some U.S. intellectual
property owners have experienced significant delays when they
have sought infringement remedies in the Panamanian judicial
system.
Patents
The current Panamanian draft law on industrial property is
modeled after Mexico's new, world-class industrial property law.
The Panamanian draft law would provide 20 years of patent
protection in place of the current period of 5 to 15 years for
foreigners and 5 to 20 years for Panamanians. The bill would
grant patent protection from the date of filing. Pharmaceutical
patents would be granted for only 15 years, but could be renewed
for an additional ten years, if the patent owner licensed a
national company (minimum of 30 percent Panamanian ownership) to
exploit the patent. Other important aspects of the current draft
law are undergoing review by the government of Panama in light of
GATT (chapter on Trade-Related Aspects of Intellectual Property,
or TRIPS) standards. The bill also provides for protection of
trademarks, simplifying the process of registering trademarks and
making them renewable for ten-year periods.
Although complaints of inadequate intellectual property laws
and enforcement have not focused on them, trade secrets currently
have little formal protection. The draft industrial property
law, however, would provide specific protection for trade
secrets.
Copyrights
The National Assembly in 1994 passed a comprehensive
copyright bill, based on a World Intellectual Property
Organization model. The law modernizes copyright protection in
Panama, provides for payment of royalties, facilitates the
prosecution of copyright violators, protects computer software,
and makes copyright infringement a felony. There is widespread
support for the improvement of copyright protection in Panama,
although some powerful domestic interests opposed the new law.
Even with the new law, however, key implementation issues remain
before copyright owners will be assured of a modern, completely
investment-friendly copyright regime. Necessary elements of such
a regime would include effective enforcement by government
authorities of the new statute, as well as the ability of
Panama's judicial system to provide speedy and effective remedies
for private civil litigants under the law. Panama's current
copyright registration and patent and trademark registration
capabilities need to be upgraded in any case.
REGULATORY SYSTEM
Transparency
Government regulation and occasional intervention in the
Panamanian economy have tended to reduce transparency, hinder
competition and the efficient allocation of investment. The
government's economic liberalization program is designed to
reduce these distortions and increase competition and
competitiveness.
Pending final conclusion of an agreement for Panamažs
GATT/WTO accession, Government-administered price controls remain
on a number of agricultural products, such as feed grains and
poultry, and on a mix of designated food items and other staples
(the basic shopping basket, or "canasta basica"). High nominal
tariff protection, and high effective protection (non-tariff
barriers) keep some product prices artificially high for now and
discourage the development of efficient export-oriented firms.
Incident to Panama's pending application to join GATT, Panama's
tariff structure is being adjusted, and non-tariff barriers are
being tariffized.
Factors Affecting Investment
Overregulation of hiring and firing practices reduces labor
mobility and flexibility. Public enterprises provide high-cost
public services, with no more than partial privatization likely
in the near future. The National Labor Code ranks with the most
pro-labor in the world. The combination of relatively high costs
for both utilities and labor makes unit costs higher than average
for the region.
Although the Panamanian constitution forbids certain kinds
of monopolistic behavior, Panama has no modern competition or
anti-trust laws, policy, or regulatory authority now in place.
As a result of the GATT/WTO negotiations now underway, the
Government of Panama has prepared draft legislation to establish
a competition policy and enforcement authority, along with a
consumer protection regime. Passage is contingent on the outcome
and timing of Panamažs GATT/WTO negotiations. Oligopolistic
distortions in many domestic markets are for now unchecked, and
contribute to continuing support for food price controls.
Consumers have few rights under current law, although the
Ministry of Commerce and Industry has the authority to enforce
the very limited consumer protection laws which do exist. An
accommodating bankruptcy law to facilitate the restructuring of
firms, such as Chapter 11 in the U.S., does not exist in Panama.
Panama's banking sector is regulated by the National Banking
Commission (CBN), which coordinates government policy with bank
executives represented by the National Banking Association (ABP).
The continued success and vigorous growth of the banking sector
is directly attributable to the very business and depositor-
oriented laws, passed in the 1970's, which govern this sector.
In April 1993, a law was passed creating tax incentives for the
creation of voluntary pension funds (IRA's) by individuals or
corporations.
The tax system promotes savings and investment by giving a
wide variety of incentives and maintaining rates which are
comparable to those in the U.S. The maximum personal income tax
rate is 30 percent and the maximum corporate rate is 34 percent
of domestically produced earnings. Other formal legal,
regulatory, and accounting systems are relatively transparent,
but their enforcement is diminished somewhat by certain non-
transparent aspects of legal practice and the judicial process.
Although tax collection methods have been strengthened in 1994
and 1995, the overall regulatory and supervisory framework is
weak.
CAPITAL MARKETS AND PORTFOLIO INVESTMENT
Stock market financing is limited due to the small size
of the national stock exchange, and the limited liquidity which
is therefore available. Bank and non-bank financing is available
on market terms to private domestic and foreign investors.
Panamanian interest rates closely follow international rates
(i.e., the London Interbank Offered Rate - LIBOR), plus a
country-risk premium.
Traditional bank lending from the well-developed banking
sector is relatively efficient and is the most common source of
financing. Some private companies -- including foreign
multinational corporations -- have issued bonds on the fledgling
local securities market. Companies rarely issue stock on the
local market. When they do, investor demand is limited because
there is a 10 percent withholding tax on dividends, although
company earnings on the exchange are tax exempt (Fixed bank
deposits and certain bonds are tax-exempt.). A bill currently
pending before the National Assembly would allow the creation of
and trading by mutual funds on the Panama Stock Exchange.
The private sector does have access to a variety of credit
instruments. International accounting norms apply. Cross-
shareholding or stable shareholder arrangements, designed to
restrict foreign investment through mergers and acquisitions, do
not exist. There are no restrictions on or customary measures to
prevent hostile foreign investor takeovers, nor are there
regulatory provisions authorizing limitations on foreign
participation or control, or other practices to restrict foreign
participation. The constitutional prohibition on foreign
ownership of retail enterprises is discussed above. There are no
government or private sector rules to prevent foreign
participation in industry standards-setting consortia, such as
ISO-9000.
BILATERAL INVESTMENT AGREEMENTS
Panama has bilateral investment agreements with the United
States, the United Kingdom, France, Switzerland, Germany and
Taiwan. Panama is not a party to any agreements providing for
completely free trade, but does have bilateral preferential trade
agreements with Costa Rica, El Salvador, Honduras, Guatemala, and
Nicaragua; these accords are quota-based and deal with a limited
number of specific products. A more inclusive preferential
agreement was recently concluded with Colombia.
OPIC INVESTMENT INSURANCE PROGRAM
OPIC is supporting several U.S. investments in Panama. In
general, modest expansion of OPIC programs is possible. Panama
has not yet eliminated its requirement that Panamanian Government
approval be obtained for any OPIC-insured investment in Panama.
President Endara vetoed a bill which would have eliminated this
investment barrier in June 1994. Panama thus retains a major
bureaucratic burden on investment here, complicating what remains
a largely favorable national investment climate. Panama has
approached the World Bank to join its Multilateral Investment
Guarantee Agency (MIGA), which provides investment guarantees
similar to OPIC, but has been unable to join to date due to
budgetary limitations; a government proposal to fund MIGA
membership is pending.
LABOR CODE
The Government of Panama is in the process of revising its
labor code, which has heretofore been highly pro-labor union.
New proposals would create more flexibility in the labor market,
making termination of workers easier and less costly. Greater
labor flexibility on the shop floor also would be included in the
proposed revisions, along with lifting many constraints on
productivity-based pay. A revised code is expected to be enacted
into law by mid-to-late summer, 1995.
Even with the proposed changes, the Government would still
play a major role in the labor market and the Panamanian minimum
wage will remain the highest in the region. (Refer to Section
III for information on the Labor Force.)
FOREIGN DIRECT INVESTMENT
Tables in Appendix D provide data on the value of foreign
direct investment (FDI) in Panama for the years 1980 - 1992
(preliminary for 1992), FDI by country of origin for 1992, and
FDI by industry sector destination for 1979 and 1992.
The sources are the office of the Comptroller-General and the
IMF. There are no comparable data on Panama's direct investment
abroad.
MAJOR FOREIGN INVESTORS
- Adrian Resources
- American Airlines
- American Hospital Supply Co.
- American Life Insurance Co.
- AOKI Corporation
- AT&T
- Banco Do Brasil
- Banco Exterior, S.A.
- Becton Dickinson & Co.
- Black and Decker International Corp.
- Borden Co.
- Braswell Service Group
- Bristol Laboratories International Corp.
- Challenge Air Cargo
- Chase Manhattan Bank, N.A.
- Cheesebrough Pond's Int. Ltd.
- Chiriqui Land Company (Chiquita)
- Chevron Corp.
- Citibank, N.A.
- Coca-Cola Bottling Co.
- Colgate Palmolive (Central America), Inc.
- Cyprus Minerals Co.
- Del Monte Corporation
- Dole Foods Co.
- Eastman Kodak Company
- Environmental System Research Institute
- Exxon Corp.
- Esso Standard Oil, S.A.
- First National Bank of Boston
- Freeport Exploration Co.
- General Mills Inc.
- Georgia Pacific Corp.
- Glidden - Durkee
- Greenstone Resources
- Griffith Laboratories, Inc.
- Grupo Carvajal
- Goldstar Corp.
- GTE
- Hong Kong Shangai Bank
- Hospital Corporation of America
- IBM
- International Proteins Corp.
- Jenny Manufacturing, Inc.
- Johnson and Johnson
- Kendall Company
- Ketchum Public Relations
- Kimberly-Clark International, S.A.
- Kraft Foods, Inc.
- Lanier Worldwide, Inc.
- Lykes Line
- Marine Midland Bank
- McDonald's Corporation
- Merrill Lynch, Pierce, Fenner & Smith Int'l
- Minnesota, Mining & Manufacturing
- Nabisco Brands Inc.
- Nestle Company
- Northville Industries Corp.
- Otis Elevator Company
- Chas. Pfizer & Company, Inc.
- Panasonic Latin America
- Phelps Dodge Corp.
- Phillip Morris, Inc.
- PYCSA, S.A.
- Revlon Inc.
- Rubbermaid Inc.
- Samsung Electronics
- Schering Corp. International
- Seaboard Marine Ltd.
- Sherwin Williams
- The Gillette Co.
- Shell Co. (WI) Ltd.
- Sony Corporation
- Sterling Drugs International
- Swift and Company
- Swiss Bank
- Syntex Corporation
- Technoserve Inc.
- Texaco Inc.
- TRT Telecommunications Corp.
- Twentieth Century Fox
- United Brands
- United Parcel Service
- UNYSIS USA
- Warner Lambert Co.
- Xerox Corp.
VIII. TRADE AND PROJECT FINANCING
BANKING AND FINANCING
Panamažs banking sector is one of the most dynamic areas of
the economy (Panama's 108 banks registered total deposits in 1994
of US$ 26 billion, and US$ 32.8 billion in total assets, a 25.8
percent increase from 1993). Panama opened its banking sector to
foreign competition in 1971 under legislation with places high
priority on banker-depositor confidentiality. This has permitted
the banking system to be exploited by drug money launderers. The
banking legislation distinguishes between General license banks,
which operate full service operations in Panama competing for
domestic deposits and loans, and International License or
"Offshore" banks, which only accept deposits from persons or
organizations located overseas. Foreign and Panamanian banks
compete on equal terms. Banks are organized into two
representative organizations, the Panamanian Banking Association
(ABP) and the Association of Panamanian Banks (APB). Banks are
licensed and regulated by the National Banking Commission (CBN),
a relatively weak, semi-autonomous regulatory/oversight body
whose oversight board includes private bankers. Panamanian banks
dedicate a significant portion of their loan portfolio to finance
commerce, including imports.
FOREIGN EXCHANGE CONTROLS
Trading is unaffected by foreign exchange controls, since
the U.S. dollar is used as the national currency and there are no
restrictions on capital flows in or out of the country. There is
therefore, no foreign exchange risk.
GENERAL FINANCING AVAILABILITY
In mid-1995 the banking sector had a high level of
liquidity. Private financing is readily available. The
Government of Panama does not maintain statistics on the sources
or level of privately-financed investment or trade and is not
itself an important lender.
HOW TO FINANCE EXPORTS/METHODS OF PAYMENT
A number of local banks provide financing for exports.
Additionally, the Latin American Export Bank (BLADEX) provides
export financing through the local banking system. Being an
international banking center there are a number of financing
options for Panamanian exporters/importers.
TYPES OF AVAILABLE EXPORT FINANCING AND INSURANCE
The Overseas Private Investment Corporation (OPIC), the U.S.
Export-Import Bank (EXIM), the International Finance
Corporation(IFC) of the World Bank, and the Inter-American
Development Bank (IDB) have a number of projects in Panama. OPIC
in recent years has provided insurance or financing for over 30
projects in Panama, 10 of which are still current and provide
insurance for ventures in manufacturing, agriculture, and
infrastructure (totalling some US$ 7 million). Currently there
are no projects in Panama large enough to require multi-
institutional "bundling" arrangements. The Commodity Credit
Corporation's (CCC) GSM Credit Guarantee program in Panama for
fiscal year 1995 totalled US$ 20 million for exports of U.S.
rice, feedgrains, protein meals, wheat, solid wood products and
barley malt. Credit from any bank in Panama approved by CCC will
be guaranteed. Significant lines of commodity credit guarantees
were still available at the time of this writing.
PROJECT FINANCING AVAILABLE
Exim in 1993 participated in the financing of the Government
of Panama's purchase of a Westinghouse aviation radar system, and
currently is providing financing in excess of US$ 121 million in
insurance and guarantees (short, medium and long-term) in a
number of sectors in Panama. The Inter-American Development Bank
has several major current projects, including the financing of a
study for GOP development of the U.S. military bases reverting to
Panamanian control under the Panama Canal Treaties, between 1994
and 1999. The World Bank (IBRD) has a number of small social-
sector-oriented projects, and is currently cofinancing with IDB
and the Government of Panama a USD 406 million road construction
and rehabilitation project. Release of further tranches of the
IBRD's economic recovery loan for Panama is dependent upon
significant improvements in the government's economic
liberalization and privatization program. As noted above, Panama
has held discussions with IBRD about membership in MIGA, but has
no application to join at present. The Perez Balladares
government has pursued financing from the IFI's for a number of
new infrastructure and social sector investment projects (see
also Section II, Infrastructure Situation).
LIST OF PANAMANIAN BANKS WITH CORRESPONDENT U.S. BANKS
Banco Comercial de Panama, S.A. (BANCOMER)
P.O. Box 7659
Panama 5, Republic of Panama
Tel: (507) 63-6800
Fax: (507) 63-8033
General Manager: Emanuel Gonzalez-Revilla
U.S. Correspondents:
Citibank N.A., New York
The Bank of New York, New York
The Chase Manhattan Bank, N.A., New York
Marine Midland Bank, N.A., New York
Barnett Bank of South Florida, N.A., Miami
Banco Continental de Panama, S.A.
P.O. Box 135
Panama, 9A, Republic of Panama
Tel: (507) 63-5955
Fax: (507) 64-3359
General Manager: Paul Smith
U.S. Correspondents:
Chemical Bank, New York
Citibank, New York and Miami
Credit Suisse, Miami
Nations Bank, Miami
Standard Chartered Bank PLC, Miami
Banco de Latinoamerica, S.A. (BANCOLAT)
P.O. Box 4401
Panama 5, Republic of Panama
Tel: (507) 64-0466
Fax: (507) 63-7368
General Manager: Ramon Gilberto Perez
U.S. Correspondents:
Banco Atlantico, New York
The Chase Manhattan Bank, New York
Extebank, New York
AmTrade Bank International, Miami
Barclays Bank PLC, Miami
Capital Bank N.A., Miami
Hamilton Bank N.A., Miami
The International Bank of Miami, Miami
Republic National Bank of Miami, Miami
Popular Bank of Florida, Miami
Banco del Istmo, S.A.
P.O. Box 6-3823, El Dorado
Panama, Republic of Panama
Tel: (507) 69-5555
Fax: (507) 69-5168
General Manager: J. Montague Belanger
U.S. Correspondents:
Capital Bank, Miami
Nations Bank, Miami
Standard Chartered Bank, Miami
Banco Atlantico, Miami
Barclays Bank PLC, Miami
The Chase Manhattan Bank N.A., New York
Brown Brothers Hamman & Co., New York
Banco del Pacifico, S.A.
P.O. Box 6-3100, El Dorado
Panama, Republic of Panama
Tel: (507) 63-5833
Fax: (507) 63-7481
Operations Manager: Luis E. Hernandez
U.S. Correspondent:
First Chicago International Bank, New York
Banco Disa, S.A.
P.O. Box 7201
Panama 1, Republic of Panama
Tel: (507) 63-5933
Fax: (507) 64-1084
Manager: Rafael Endara J.
U.S. Correspondents:
The Chase Manhattan Bank N.A., New York and Miami
Marine Midland Bank, New York
Nations Bank International, New York
Dadeland Bank, Miami
National Westminister USA International, Miami
Banco General, S.A.
P.O. Box 4592
Panama 5, Republic of Panama
Tel: (507) 27-3200
Fax: (507) 27-3427
General Manager: Raul Aleman Z.
U.S. Correspondents:
Citibank N.A., New York
The Chase Manhattan Bank N.A., New York
Marine Midland Bank, New York
Bank of America N.T. & S.A., San Francisco
Nations Bank, Atlanta
Dadeland National Bank, Miami
First Union Bank, Miami
Banco Internacional de Costa Rica, S.A. (BICSA)
P.O. Box 600
Panama 1, Republic of Panama
Tel: (507) 63-6822
Fax: (507) 63-6393
General Manager: Jose Francisco Ulate
U.S. Correspondents:
Citibank N.A., New York
BankAmerica International, New York
Banco Atlantico, New York
The Bank of New York, New York
Banco Internacional de Panama, S.A. (BIPAN)
P.O. Box 11181
Panama 6, Republic of Panama
Tel: (507) 63-9000
Fax: (507) 63-9514
General Manager: Rene A. Diaz A.
U.S. Correspondents:
Nations Bank International, Miami
Barclays Bank, Miami
Banco Internacional de Costa Rica, Miami
Banco Latinoamericano de Exportaciones, S.A. (BLADEX)
P.O. Box 6-1497, El Dorado
Panama, Republic of Panama
Tel: (507) 63-6766
Fax: (507) 69-6333
Chief Executive Officer: Jose Castaneda
U.S. Correspondents:
The Chase Manhattan Bank N.A., New York
Citibank N.A., New York
Credit Lyonnais, New York
Swiss Bank Corporation, New York
Barclays Bank PLC, Miami
Banco Panamericano, S.A. (PANABANK)
P.O. Box 1828
Panama 1, Panama
Tel: (507) 62-0881
Fax: (507) 69-1537
VP of Operations: Ruth B. de Arauz
U.S. Correspondents:
American Express Bank, New York
Marine Midland Bank, New York
Hong Kong and Shanghai Bank, New York
Popular Bank of Florida, Miami
Hamilton Bank N.A., Miami
Barclays Bank PLC, Miami
Nations Bank International, Miami
Note: This list is intended to be representative and not
complete. Further detailed information on these banks and other
banks in Panama can be located in the Polk Register or by
contacting the Asociacion Bancaria de Panama (Panamanian Bank
Association), P.O. Box 4554, Panama 5, Republic of Panama; Tel:
(507) 63-7044, Fax: (507) 23-7630 or 63-7783.
(Refer to Appendix E for the three U.S. Banks with operations in
Panama).
IX. BUSINESS TRAVEL
Foreign visitors should use the same precautions while
traveling in Panama as in any metropolitan U.S. city.
BUSINESS CUSTOMS
Business practices and customs in Panama are a unique blend
of North American methods and traditional Latin style. The large
number of international banks that operate in Panama also bring
their business practices and customs, which are emulated and
assimilated by Panamanian businesspersons. Foreign corporations
operating in Panama are important forces in shaping the style and
manner of doing business.
Most private business offices are open from 8:00 a.m. until
5:00 p.m., Monday through Friday, and Saturdays from 8:00 a.m. to
12 noon. Banks are open from 8:00 a.m. to 1:00 p.m., Monday
through Friday. Most government offices are open from 8:30 a.m.
to 4:30 p.m., Monday through Friday.
TRAVEL ADVISORY AND VISAS
U.S. Citizens are subject to the laws of the country in
which they are traveling. Penalties in Panama for possession,
use and trafficking in illegal drugs are strict.
Electronic Bulletin Board: In 1987, the State Department's
Bureau of Consular Affairs established the Consular Affairs
Bulletin Board or (CABB), as a means to keep the international
business community informed about security or crime problems
abroad. Access to the CABB is free of charge to anyone with a
computer and a modem. Callers dial 202-647-9225 from their
modem. Both Consular Affairs and the Bureau of Diplomatic
Security update the CABB daily.
Also, the Travel Advisory Service of the Department of State
can provide information in verbal and fax form for any travel
warnings on traveling to foreign countries. For verbal
information contact tel: (202)647-5225. To receive a facsimile,
the interested traveller can call (202)647-3000.
U.S. citizens may enter Panama with a passport or a
certified copy of a U.S. birth certificate and an official
picture I.D., (e.g. driver's license) and a Tourist Card
purchased for US$ 5.00 from an airline serving Panama. The
Tourist Card is valid for 30 days and may be extended for two
more 30-day periods. The following are three types of Visas
available to businesspersons wishing to spend extended periods of
time in Panama:
1. Inversionista (Investor): A minimum of US$ 50,000 must be
invested and US$ 600 must be deposited in advance (US$ 500
with the Ministry of Government and Justice and US$ 100 with
the Ministry of Treasury).
2. Visa de Visitante Temporal (Temporary Visitor's Visa): For
executives or technicians working with a company in Panama
for a limited time. The Visa is valid for one year and is
renewable.
3. Temporal Especial (Working Permit): For professional or
skilled personnel transferred from an overseas office to
work in Panama. The applicant must prove his earnings will
come from outside of Panama. The Visa is valid for one year
and is renewable.
Further information can be obtained from the Consular Section of
the U.S. Embassy in Panama, Unit 0945, APO AA 34002, Tel: (507)
227-1777, Fax: (507) 227-0239.
HOLIDAYS
All private, government, municipal and U.S. Embassy offices
are closed during holidays. In addition the U.S. Mission
observes all U.S. holidays.
The national holidays typically are (check for exact dates for a
particular year):
January 1 New Year's Day
January 9 Mourning Day
February 20 Carnival
April 15 Good Friday
May 1 Labor Day
November 3 Independence Day from Colombia
November 4 Flag Day
November 10 The Uprising of Los Santos
November 28 Independence Day from Spain
December 8 Mother's Day
December 25 Christmas Day
There are a large number of Jewish establishments, which
observe all Jewish holidays.
BUSINESS INFRASTRUCTURE
Panama's official language is Spanish. However, English is
widely spoken as a second language in the main cities. Panama
has excellent local and international telephone services. Direct
dialing is available to more than 150 countries worldwide with
fast, high density telephone communications systems. Other forms
of communications include 170 radio stations and 27 television
channels, five of which transmit locally.
Health conditions in Panama are good, especially in the
urban centers. Running water is available in almost all parts of
the country. Some rural areas and small towns in the provinces
may require boiling water before drinking.
There are several hotels that maintain international
standards and facilities. Facilities usually include: swimming
pools, tennis courts, fitness centers, clothing and souvenir
shops, casino, restaurants, coffee shops and bars. Furnished
apartments are available for longer stays. A wide variety of
restaurants offer international cuisine, such as: Chinese,
Italian, Mexican, Spanish and Japanese. Several specialize in
seafood. All large hotels offer American, European, and local
cuisine. There are some hotel coffee shops that are open around
the clock.
Transportation from the International Airport into Panama
City is by a special taxi service, and the price ranges from as
low as US$ 12 per trip for small taxis to US$ 20 for the large
taxis. There is no bus service to and from the international
airport; however, taxis may be shared with other passengers. Car
rental companies are also available.
Transportation services within the city are readily
available by bus or taxi. Taxi fares are low and may range from
one to five dollars depending on the trip's length.
The official currency of Panama is the Balboa (symbol B/.)
which is on par with the U.S. Dollar. The Balboa exists only in
coin form of the same denomination and size as U.S. coins. Both
U.S. dollar bills and coinage are used for all tenders.
Both the U.S. system of weights and measures and the metric
system are used in Panama. Speed limits are posted in miles per
hour in some places, kilometers per hour in other places and some
signs have both miles and kilometers per hour limits given.
APPENDIX A
COUNTRY DATA
Population: 2.58 Million
Population Growth Rate: 1.8 Percent
Religion: Predominantly Roman Catholic, complete
religious freedom
Government: Constitutional Democracy
Language: Spanish, English widely spoken
Work Week: Monday - Friday
APPENDIX B
DOMESTIC ECONOMY
(millions of U.S. Dollars, except as noted)
1992 1993 1994 1995 1996
(preli.) (esti.)(proj.)
GDP (current prices) 6,001.16,561.96,958.07,222.4 7504
Real GDP Growth Rate 8.6% 5.9% 4.7% 2.3% 2.4%
GDP (1970 dollars) 2,214.12,345.12,441.9 2,498 2,558
GDP per Capita (U.S. Dollars)2,412 2,588 2,697 2,750 2,807
Govt. Spending (as a % of GDP)30.7% 28.0% 22.6% 25.8% 24%
Inflation (%) 1.8% 0.5% 1.3% 1.5% 1.5%
Unemployment (%) 13.1% 12.5% 13.8% 14.5% 15%
Foreign Exchange Reserves* 504.4 597.4 704.3 753.5 700**
Average Exchange Rate
Balboas to U.S. Dollars 1.00 1.00 1.00 1.00 1.00
Foreign Debt 5,204.05,313.45,513.0 5,933 5300**
Debt Service Ratio 28.7% 13.8% 12.8% 18% 18%
(ratio of principal and interest
payments on foreign debt to
foreign income)
U.S. Economic Assistance 187.0 45.0 4.4 3.0 6.3
U.S. Military Assistance 0.0 0.0 0.0 0.0 0.0
Sources: Government of Panama, U.S. Embassy projections
* Corresponds to foreign assets of the National Bank of Panama
** Assumes successful closure of Panama's debt reduction "("Brady") agreement
with its foreign commercial bank creditors, to take effect by February
1996.
APPENDIX C
TRADE
(millions of U.S. Dollars, except as noted)
1992 1993 1994 1995 1996
(prelim.) (estim.) (proj.)
Total Country Exports 474.2 507.6 532.5 540 570
Total Country Imports 1,825.51,979.6 2,202.6 2,345 2,512
U.S. Exports* 1,150.01,298.91,276.3 1,315 1,354
U.S. Imports* 343.0 360.0 354.3 380 386
U.S. Share of Panama
Imports 57% 66% 58% 56% 54%
* Includes Exports to the Colon Free Zone
Sources: Panama Comptroller General's Office, U.S. National Trade Data Bank,
Embassy Projections
APPENDIX D
INVESTMENTS STATISTICS
FOREIGN DIRECT INVESTMENT IN PANAMA STOCK AND FLOWS: 1980 - 1993
(IN US$ MILLIONS AND AS PERCENT OF GDP)
(A) (B) (C) (A)/ (B)/
Year StockFlow GDP (C) (C)
1980 386 -47 3,559 10.8% -1.3%
1981 395 6 3,878 10.2% 0.2%
1982 429 3 4,279 10.0% 0.1%
1983 471 72 4,374 10.8% 1.6%
1984 490 10 4,566 10.7% 0.2%
1985 533 59 4,901 10.9% 1.2%
1986 491 -62 5,145 9.5% -1.2%
1987 534 57 5,310 10.1% 1.1%
1988 501 -52 4,551 11.0% -1.1%
1989 519 36 4,582 11.3% 0.8%
1990 492 -30 5,009 9.8% -0.6%
1991 454 -62 5,476 8.3% -1.1%
1992 469 2 6,001 7.8% 0.0%
1993* 432 -37 6,562 6.6% -0.6%
* 1993 figures were being revised by GOP at publication.
FOREIGN DIRECT INVESTMENT IN PANAMA BY COUNTRY OF ORIGIN 1993*
US$ PERCENT
MILLIONS OF TOTAL
TOTAL 432 100%
United States 321 74%
Costa Rica 24 6%
United Kingdom 17 4%
Japan 16 4%
Other 54 13%
* 1993 figures were being revised by GOP at publication.
FOREIGN DIRECT INVESTMENT IN PANAMA BY SECTOR: 1979 AND 1992
1979 1993*
U$ PERCENT US$ PERCENT
MILLIONS OF TOTAL MILLIONS OF TOTAL
TOTAL 342 100% 432 100%
Agriculture/Forestry/
Fishing 55 16.1% 36 8.3%
Manufacturing 175 51.2% 188 43.5%
Commerce 67 19.6% 74 17.1%
Transport/Storage/
Communication 8 2.3% 52 12.0%
Finance/Real
Estate 36 10.5% 60 13.9%
Services 1 0.3% 10 2.3%
Other 0 0.0% 12 2.8%
* 1993 figures were being revised by GOP at publication.
APPENDIX E
U.S. AND COUNTRY CONTACTS
U.S. EMBASSY TRADE RELATED CONTACTS
U.S. Embassy Mailing Address in the U.S.:
Unit 0945
APO AA 34002
Tel: (507) 227-1777
Fax: (507) 227-1964
The Commercial Service
Senior Commercial Officer, Americo Tadeu
Senior Trade Specialist, J. Enrique Tellez
Commercial Assistant, Jilma A. de Robles
Commercial Secretary, Diana Lozano
Commercial Clerk, Jeane A. de Zu¤iga
Tel: (507) 227-1777
Fax: (507) 227-1713
U.S. Embassy, Economic Section (Trade Policy, Industry Specialists)
Chief, Economic Section, James M. Roberts
Labor Attache, John Mohanco
Economic Officer, Andrew Ericksen
Economic Officer, Robert C. Ward
Tel: (507) 227-1777
Fax: (507) 227-1964
U.S. Agency for International Development
Director, David E. Mutchler
Tel: (507) 263-6011
Fax: (507) 264-0104
WASHINGTON-BASED USG COUNTRY CONTACTS
U.S. Department of State
Desk Officers, Raymond Baca/Raymond Dalland
ARA (Inter American Affairs)/CEN-PAN
2201 C St. NW
Washington, DC 20520
Tel: (202) 647-4986
Fax: (202) 647-2901
U.S. Department of the Treasury
Desk Officer, Dwight Wolkow
1500 Pennsylvania Ave. NW
Washington, D.C. 20220
Tel: (202) 622-1266
Fax: (202) 622-1273
U.S. Department of Commerce
International Economic Policy
Panama Desk Officer, Juan Verde
Room 3025
14th & Constitution Ave.
Washington, D.C. 20230
Tel: (202) 482-5680
Fax: (202) 482-4157
U.S. Department of Commerce
Liaison Office of Inter-American Development Bank
Director, Judith A. Henderson
1250 H Street, NW, 10th Floor
Washington, D.C. 20005
Tel: (202) 942-8260
Fax: (202) 942-8275
U.S. Department of Commerce
Liaison Office to the International Bank for
Reconstruction and Development
U.S. Executive Director's Office
1818 H St., NW, Room D-13004
Washington, D.C. 20433
Tel: (202) 458-0118
Fax: (202) 477-2967
U.S. Department of Commerce
Office of Multilateral Development Banks
Director, Brenda Ebeling
Room H-1107
Washington, D.C. 20230
Tel: (202) 482-3399
Fax: (202) 273-0927
U.S. Department of Agriculture
Foreign Agricultural Service
Trade Policy, Marsha Moke
12th and Jefferson Drive, SW
Washington, DC 20250
Tel: (202) 720-6010
Fax: (202) 690-2079
Overseas Private Investment Corporation
1100 New York Avenue, N.W.
Washington, DC 20527
Insurance Officer, Joan Cezarr
Tel: (202) 336-8472
Fax: (202) 408-5142
Finance Officer, Adrien Seaton
Tel: (202) 336-8472, Fax: (202) 408-9866
Export-Import Bank of the U.S.
811 Vermont Avenue, NW
Washington, DC 20571
Business Development, Paula Swain-Priestly
Tel: (202) 565-3921
Fax: (202) 565-3931
U.S. Trade and Development Agency
Regional Director for Latin America, Al Angulo
Country Desk Officer, Orlando Velez
Room 309, S.A. - 16
Deaprtment of State
Washington, D.C. 20523-1602
Tel: (703) 875-4357
Fax: (703) 875-4009
Office of U.S. Trade Representative
Deputy Assistant USTR for Latin America and the Caribbean,
Ralph Ives
Director for Caribbean Basin Affairs, Sean Murphy
Office of the U.S. Trade Representative
600 17th Street, NW
Washington, D.C. 20506
Tel: (202) 395-5190
Fax: (202) 395-3911
U.S. - BASED MULTIPLIER ORGANIZATIONS RELEVANT FOR COUNTRY
Embassy of Panama
Ambassador Dr. Ricardo Alberto Arias
2862 McGill Terrace NW
Washington, DC 20008
Tel: (202) 483-1407
Fax: (202) 483-8413
Instituto Panameno de Comercio Exterior
(Panama Trade Development Institute)
Regional Director, Rosalinda Pinilla
1477 South Miami Ave., 2nd Floor
Miami, FL 33130
Tel: (305) 374-8435
Fax: (305) 374-1933
Toll Free: (800) 245-1591
MINISTRIES AND GOVERNMENT OWNED AGENCIES IN PANAMA
Ministerio de Comercio e Industrias
(Ministry of Commerce and Industry)
Minister Nitzia de Villareal
P.O. Box 9658
Panama 4, Republic of Panama
Tel: (507) 227-4222
Fax: (507) 227-4134
Ministerio de Comercio e Industrias
Direccion Nacional de Hidrocarburos
(Hydrocarbon Administration)
Director General, Hugo Tovar
P.O. Box 9658
Panama 4, Republic of Panama
Tel: (507) 227-5674
Fax: (507) 227-3927
Ministerio de Comercio e Industrias
Direccion General de Registro de la
Propiedad Industrial
(Industrial Property Registry Administration)
Director General, Luz Celeste R. de Davis
P.O. Box 9658
Panama 4, Republic of Panama
Tel: (507) 227-3987
Fax: (507) 227-2139
Ministerio de Comercio e Industrias
Direccion de Recursos Minerales
(Mineral Resources Department)
Director General, Ing. Francia de Sierra
P.O. Box 3515
Panama 5, Rep. of Panama
Tel: (507) 236-1823
Fax: (507) 236-3173
Ministerio de Comercio e Industrias
Oficina de Comercio Interior
(Local Trade Office)
Director General, Mirta Guevara de Buendia
P.O. Box 9658
Panama, Republic of Panama
Tel: (507) 227-2161
Fax: (507) 227-2139
Ministerio de Desarrollo Agropecuario
(Ministry of Agricultural Development)
Minister, Carlos Sousa Lennox
P.O. Box 5390
Panama 5, Republic of Panama
Tel: (507) 232-5043
Fax: (507) 232-5044
Ministerio de Gobierno y Justicia
(Ministry of Government and Justice)
Direccion de Seguridad Publica
(Public Security Administration)
Director General, Jerry Wilson Navarro
P.O. Box 1628
Panama 1, Republic of Panama
Tel: (507) 262-2929
Fax: (507) 262-3511
Ministerio de Hacienda y Tesoro
(Ministry of Treasury)
Minister Olmedo Miranda, Jr.
P.O. Box 7304
Panama 5, Republic of Panama
Tel: (507) 227-4998
Fax: (507) 227-2357
Ministerio de Hacienda y Tesoro
Direccion Nacional de Aduanas
(Customs Service)
Director General, Ing. Fernando Mendizabal
P.O. Box 1671 Balboa, Ancon
Panama, Republic of Panama
Tel: (507) 232-5355
Fax: (507) 232-6494
Ministerio de Hacienda y Tesoro
Direccion de Proveeduria y Gastos
Departamento de Proponentes
(Procurement Office)
Chief - Neyra de Perez
P.O. Box 1671 Balboa
Panama, Republic of Panama
Tel: (507) 227-4372
Fax: (507) 225-1620
Ministerio de Salud
(Ministry of Health)
Minister, Dr. Aida M. de Rivera
P.O. Box 2048
Panama 1, Republic of Panama
Tel: (507) 225-6080
Fax: (507) 227-5276
Ministerio de Salud
Direccion de Control de Alimentos y Vigilancia Veterinaria
(Food Control and Veterinary Control Administration)
Director General, Rogelio Sinan Dominguez
P.O. Box 2048
Panama 1, Republic of Panama
Tel: (507) 262-1619
Fax: (507) 262-5443
Ministerio de Obras Publicas
(Ministry of Public Works)
Minister, Luis Blanco
P.O. Box 1632
Panama 1, Republic of Panama
Tel: (507) 232-5572
Fax: (507) 232-5776
Autoridad de la Region Interoceanica
(Interoceanic Regional Authority)
Administrator, Nicolas Ardito Barletta
P.O. Box 2097, Balboa
Panama, Republic of Panama
Tel: (507) 228-8044
Fax: (507) 228-8988
Autoridad Portuaria Nacional
(National Port Authority)
Director General, Hugo Torrijos
P.O. Box 8062
Panama 7, Rep. of Panama
Tel: (507) 269-7597
Fax: (507) 264-2727
Administracion de la Zona Libre de Colon
(Colon Free Zone Administration)
General Manager, Victoria Figge
P.O. Box 1118
Colon, Republic of Panama
Tel: (507) 445-1033 or 445-1559
Fax: (507) 445-2165
Direccion de Aeronautica Civil (DAC)
(National Aeronautics Authority)
Director General, Eustacio Fabrega
P.O. Box 7615
Panama 5, Republic of Panama
Tel: (507) 226-1142
Fax: (507) 226-3860
Instituto Panameno de Turismo (IPAT)
(Tourism Institute of Panama)
Director General, Pedro Campagnani
P.O. Box 4421
Panama 5, Republic of Panama
Tel: (507) 226-7414 or 226-3751
Fax: (507) 226-3483
Instituto Panameno de Comercio Exterior (IPCE)
(Panama Trade Development Institute)
Director General, Roy Rivera
P.O. Box 6-1897
Panama 6, Republic of Panama
Tel: (507) 225-7244
Fax: (507) 225-2193
Instituto de Recursos Hidraulicos y Electrificacion (IRHE)
(National Power and Light Company)
Director General, Ramon Argote
P.O. Box 5285
Panama 5, Republic of Panama
Tel: (507) 227-2240
Fax: (507) 262-9294
Instituto Nacional de Telecomunicaciones (INTEL)
(National Telephone Company)
Director General, Juan Ramon Porras
P.O. Box 659
Panama 9A, Republic of Panama
Tel: (507) 223-8620
Fax: (507) 264-5743
Instituto de Acueductos y Alcantarillados Nacionales (IDAAN)
(National Water Works Company)
Director General, Jose Fierro
P.O. Box 5234
Panama 5, Republic of Panama
Tel: (507) 223-8640
Fax: (507) 264-0034
Inter-American Development Bank
(In-country office and representative)
Representative, Bolivar Santa Cruz
Avenida Samuel Lewis, Edif. Banco Union, Piso 14
Apartado Postal 7297
Panama 5, Rep. of Panama
Tel: (507) 263-6944
Fax: (507) 263-6183
TRADE ASSOCIATIONS
American Chamber of Commerce and Industry
Executive Director - Fred Denton
P.O. Box 168, Balboa
Panama, Republic of Panama
Tel: (507) 269-3881
Fax: (507) 223-3508
Asociacion de Comerciantes y Distribuidores de Viveres y Similares de Panama
(ACOVIPA)
(Food Retailers and Distributors Association of Panama)
Executive Director - Jose Ma. Espino
P.O. Box 6-3594
Panama 6, Republic of Panama
Tel: (507) 261-4304
Fax: (507) 261-2346
Asociacion de Distribuidores de Automoviles de Panama (ADAP)
(Automobile Distributors Association)
Executive Director - Simon de la Rosa
P.O. Box 476
Panama 9A, Republic of Panama
Tel: (507) 261-1264
Fax: (507) 261-0906
Asociacion de Usuarios de la Zona Libre de Colon
(Colon Free Zone Users Association)
Executive Director - Galo Pinto de la Ossa
P.O. Box 3118, Zona Libre de Colon
Colon, Republic of Panama
Tel: (507) 441-4244
Fax: (507) 441-4347
Asociacion Nacional de Desarrollo Economico (Fundacion ANDE)
(National Association of Economic Development)
Executive Director - Carlos G. de Obaldia
P.O. Box 6-3390, El Dorado
Panama, Republic of Panama
Tel: (507) 227-7979
Fax: (507) 264-9280
Asociacion Nacional de la Industria Pesquera Panamena (ANDELAIPP)
(National Fisheries Association)
Executive Director - Gustavo Justines
P.O. Box 5062
Panama 5, Republic of Panama
Tel: (507) 251-0317
Fax: (507) 251-1995
Asociacion Nacional de Ganaderos (ANAGAN)
(National Cattlemen's Association)
President - Boabdil Bernal
P.O. Box 6494
Panama 5, Republic of Panama
Tel: (507) 225-1236 or 225-1337
Fax: (507) 225-1337
Asociacion Panamena de Ejecutivos de Empresa (APEDE)
(Panamanian Association of Business Executives)
Executive Director - Domingo de Obaldia
P.O. Box 1331
Panama 1, Republic of Panama
Tel: (507) 227-3511 or 227-4085
Fax: (507) 227-1872
Asociacion Panamena de Exportadores (APEX)
(Exporters Association of Panama)
Executive Director - Daniel Vega
P.O. Box 6-6527
Panama 6, Republic of Panama
Tel: (507) 230-0284 or 230-0169
Fax: (507) 230-0805
Camara de Comercio, Industria y Agricultura de Panama
(Chamber of Commerce, Industry and Agriculture of Panama)
Executive Director - Jose Ramon Varela
P.O. Box 74
Panama 1, Republic of Panama
Tel: (507) 227-1285 or 227-1445
Fax: (507) 227-4186 or 225-3653
Camara Panamena de la Construccion (CAPAC)
(Construction Chamber of Panama)
Executive Director - Eduardo Rodriguez
Apartado 6793
Panama 5, Republic of Panama
Tel: (507) 264-2255
Fax: (507) 264-2384
Camara Minera de Panama
(Mining Chamber of Panama)
President, Julio C. Bennedetti
P.O. Box 55-2646 Paitilla
Panama, Rep. of Panama
Tel: (507) 226-1769
Fax: (507) 226-3967
Sindicato de Industriales de Panama (SIP)
(Industrialists Association of Panama)
Executive Director - Daniel Vega
P.O. Box 6-4798
Panama 6, Republic of Panama
Tel: (507) 230-0284 or 230-0169
Fax: (507) 230-0805
Union Nacional de Peque¤as y Medianas Empresas (UMPYME)
(National Association of Small and Medium Sized Businesses)
Executive Director - Xiomara de Hall
P.O. Box 6-10027, El Dorado
Panama, Republic of Panama
Tel: (507) 225-6040 or 225-6050
Fax: (507) 225-4325
World Trade Center of Panama
Executive Director - Guillermo Ronderos
P.O. Box 6-2432
Panama 6, Republic of Panama
Tel: (507) 269-6124
Fax: (507) 269-6126
COUNTRY COMMERCIAL BANKS
Asociacion Bancaria de Panama
(Banking Association of Panama)
Executive Director, Ricardo Alba
P.O. Box 4554
Panama 5, Republic of Panama
Tel: (507) 263-7044
Fax: (507) 263-7783
Banco del Istmo
General Manager, L.J. Montague Belanger
P.O. Box 6-3823, El Dorado
Panama 6A, Republic of Panama
Tel: (507) 269-5555
Fax: (507) 263-5869
Banco General
General Manager, Raul Aleman
P.O. Box 4592
Panama 5, Republic of Panama
Tel: (507) 227-0150
Fax: (507) 227-3427
Banco Comercial de Panama
General Manager, Emanuel Gonzalez Revilla
P.O. Box 7659
Panama 5, Republic of Panama
Tel: (507) 263-6800 or 263-4433
Fax: (507) 263-8033
Banco Nacional de Panama
General Manager, Lic. Jose Antonio de la Ossa
P.O. Box 5220
Panama 5, Republic of Panama
Tel: (507) 269-2966
Fax: (507) 264-7155
The Chase Manhattan Bank, N.A.
General Manager, Olegario Barrelier
P.O. Box 9A-76
Panama 9A, Republic of Panama
Tel: (507) 263-5855 or 263-5877
Fax: (507) 263-6009
Citibank, N.A.
General Manager, Dionisio Koo
P.O. Box 555
Panama 9A, Republic of Panama
Tel: (507) 236-4044
Fax: (507) 236-1025
PRIBANCO, Primer Banco de Ahorros
General Manager, Joaquin De La Guardia
P.O. Box 7322
Panama 5, Republic of Panama
Tel: (507) 227-2225
Fax: (507) 227-4037
The First National Bank of Boston
General Manager, Luis Navarro
P.O. Box 5368
Panama 5, Republic of Panama
Tel: (507) 264-2244 or 64-2146
Fax: (507) 223-4089
COUNTRY MARKET RESEARCH FIRMS
Ditcher & Neira - Marketing Consultant
Director General, Leopoldo Neira
P.O. Box 6-7373, El Dorado
Panama, Republic of Panama
Tel: (507) 264-3466
Fax: (507) 223-1174
Data Market - Marketing Consultant
President, Albino De Leon
P.O. Box 6-86, El Dorado
Panama, Republic of Panama
Tel: (507) 223-3974
Fax: (507) 223-3936
Jaime Porcell & Asociados
President, Jaime A. Porcell
P.O. Box 4760
Panama 5, Rep. of Panama
Tel: (507) 226-0438
Fax: (507) 226-7390
MAJOR ADVERTISING AGENCIES
APCU de Panama, associated to James Walter Thompson
Manager, Ricardo Mendez
P.O. Box 6-7291, El Dorado
Panama, Republic of Panama
Tel: (507) 263-9288
Fax: (507) 263-9698
Boyd, Barcenas, S.A., associated to LINTA
Manager, Rafael Barcenas
P.O. Box 11373
Panama 6, Republic of Panama
Tel: (507) 263-9300
Fax: (507) 263-9692
FERGO, associated to Saatchi & Saatchi Advertising
President, Tony Fergo
P.O. Box 6-6249, El Dorado
Panama, Republic of Panama
Tel: (507) 263-8811
Fax: (507) 263-8892
DDB Needham Worldwide
President, Maria del Carmen Campagnani de Navarro
P.O. Box 5187
Panama, Rep. of Panama
Tel: (507) 269-7622
Fax: (507) 264-9622
Conte/McCann-Erickson
Manager, Norberto Esposito
P.O. Box 7025
Panama 5, Rep. of Panama
Tel: (507) 263-5155
Fax: (507) 263-7578
Cerebro/Young & Rubican
General Manager, Stuart Svenson
P.O. Box 7188
Panama 5, Rep. de Panama
Tel: (507) 263-7355
Fax: (507) 264-1689
APPENDIX F
MARKET RESEARCH
Non-Agricultural Market Research
Industry Sector Analyses (ISA) - U.S. Department of Commerce
FY-1995
- Automotive: Engine Parts/Suspension Parts (December 1994)
- Building Products: Non-Lumber (January 1995)
- Medical Equipment: Disposables (April 1995)
- Food Processing Equipment: Beverages/Diary/Poultry/Meat
(June 1995)
- Security and Safety Equipment (July 1995)
- Refrigeration Equipment: Industrial (September 1995)
FY-1996
- Automotive Parts & Services Equipment (Nov. 1995)
- Medical Equipment (January 1996)
- Financial Services (April 1996)
- Telecommunications Equipment (May 1996)
- Computer and Peripherals (July 1996)
- Electrical Power Systems (September 1996)
Agricultural Market Research
U.S. Department of Agriculture
- 1995 Agricultural Situation, Panama (March 1995)
- 1996 Agricultural Situation, Panama (March 1996)
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