1 – Doing Business in Panama – Quick Facts
- Capital City: Panama City
- Population: 3,657,024 (July 2015 estimate, The World Factbook)
- Language: Spanish, however the business community is predominantly bilingual in English and Spanish.
- GDP 2015: $47.47 billion (The World Factbook)
- Unemployment Rate: 4.5% (2015 estimate, The World Factbook)
- Inflation rate: 0.6% (April 2016, Trading Economics)
- Currency: Balboa (PAB) at part with the US dollar (USD). USD is the currency used.
Panama’s Economic Figures
- GDP: USD $47.47 billion
- GDP growth rate: 6%
- GDP per capita PPP: $20,900
- GDP Composition by sector: Agriculture (3%), Industry (20%), Services (77%)
Largest Export Partners (2014)
- US 19.8%
- Germany 10.7%
- China 8.5%
- Costa Rica 6.7%
- Netherlands 5.2%
- Vietnam 4.3%
Largest Import Partners (2014)
- US 25.1%
- China 8.1%
- Mexico 4.2%
Import Export Commodities (2014)
- Passenger and Cargo Ships (12%)
- Refined Petroleum (12%)
- Coal Tar Oil (7.8%)
- Petroleum Gas (6.7%)
- Packaged Medicaments (5.8%)
- Crude Petroleum (15%)
- Refined Petroleum (14%)
- Passenger and Cargo Ships (9.4%)
- Sulfonamides (4.1%)
- Special Purpose Ships (2.9%)
2 – Economic Outlook of Panama
Panama’s future is looking bright, for the time being. The current and projected Free Trade Agreements (FTAs) will continue to provide the country with more business opportunities. This will increase the quality of products and services alongside improved competitive pricing. These aspects will continue to affect all growing industries and attract further investment.
Trade and Economic Challenges
The economy and trade in Panama are leaning in a positive direction, but the country is not without challenges. As the middle class and economy grow stronger, certain aspects of doing business in the country will become less appealing. This include that the minimum wage is higher than most Central American countries. Labor laws make it quite difficult to fire underperforming employees. Technical workers who are well-qualified and who speak English are in short supply. Also, overhead expenses like electricity are more expensive than other countries in the region.
There are other problems such as corruption, lack of transparency, a need for social reforms, and a need for better public education. These concerns need to be addressed for the economy to continue to grow and to remain appealing to the international community.
The three major global credit ratings agencies upgraded Panama to investment grade status in 2010. It remains in good standing making the market ideal and attractive to foreign investors. The government wants to ensure that logistics remains at a superior level for all those who use the ports of the Panama Canal. The agro-industry is also gaining momentum with foreign investors thanks to the quality of fresh water and rich soil. The well-established trading network also encourages foreign countries to import Panamanian foods.
Financial services and tourism continue to thrive and remain solid investment opportunities. The international banking industry in Panama experiences significant growth each year. Tourism is a priority for the Panamanian government. As security continues to improve, tourism will become one of the strongest industries in Panama. The government is putting in place regulations in the tourism industry to ensure that each visitor has a positive experience. This will foster growth for decades rather than a few years. You will find investment opportunities in the healthcare, mining, real estate and construction industries.
Panama continues to remain a business leader in the region thanks to their growing financial, international trade, tourism, and expatriate sectors. And, the continued addition of new Free Trade Agreements continues to make Panama a compelling country in which to do and to start a business.
Panama’s Technology and Connectivity
Panama is the technology hub of Central America and one of the most progressive technology countries in the whole of Latin America. The Global Information and Technology Report 2015 by the World Economic Forum has listed Panama as having the third best ICT industry in all Latin America. As of the fourth fiscal quarter of 2013, according to Internetworldstats.com, the Internet penetration rate is at 43% per ITU or rather 1.6 million people use the Internet and this figure continues to grow regardless of their geographical challenges. And, 90% of the population uses a mobile phone.As of the second fiscal quarter of 2016, according to Internet Live Stats, the Internet penetration rate is at 45.2% per ITU or rather 1.8 million people use the Internet and this figure continues to grow regardless of their geographical challenges. And, 90% of the population uses a mobile phone.
As in line with much of Latin America, you will find free wifi at many cafes and restaurants. Fiber optics is available in addition to broadband and 4G wireless broadband technologies providing some of the fastest connectivity. Almost all hotels will have Internet for guests to use. You may have difficulty connecting in remote areas of the country.
E-Commerce and Startups
Thanks to the technology infrastructure in Panama and free trade zones, e-commerce is a growing industry. The transportation and logistics industry is also one of the best in Latin America.
Panama has a developed startup community including accelerator and incubator programs. Dozens of startups have launched and at least as many others are in development. Venture capitalists and angel investors have established clubs. Panama hosts many startup events throughout the year.
3 – Panama’s Key Industries
Call centers continue to be one of the largest employers with 14,000 persons employed in the industry. The technology infrastructure, the large bilingual population and tax breaks are a few of the reasons the industry is continuing to grow. Many US Fortune 500 companies such as Dell, Hewlett Packard, and Caterpillar have their call centers in Panama.
Construction is also a large employment industry. Employers vary from large investment groups to public projects as the country continues to dedicate millions of dollars each year to the development of the country’s infrastructure.
Another large and growing sector is that of the banking and finance industry. Each year the number of people employed in the industry grows. The investment opportunities, existing projects, retirement population, startup community, businesses relocating to the free trade zones, and growing number of international financial businesses in the country all contribute to this booming industry.
The logistics industry is expected to create 10,000 or more jobs per year for the next 10 years due to the various expansion projects. That is over 100,000 new jobs in the already growing industry. One of the concerns is the lack of skilled labor available in the country.
Copa Airlines is one of the largest company employers. Copa is a Panamanian Airline that continues to grow each year in conjunction with the economy. The Tocumen Airport expansion project provides Copa with even more opportunities to create new jobs and to expand their service offerings to even more cities worldwide.
4 – Time and Cost to Import into Panama
The time and cost to import into Panama will vary greatly. If the exporting country is part of a free trade agreement with Panama and the imported good is subject to the benefits of the agreement, it is likely minimal to no import tariffs or customs fees will apply. If the exporting country is not a member of any bilateral agreement or trade bloc with Panama, goods will be subject to import duties, sales tax, and a consumption tax. If the goods are shipped into a free trade zone, they are able to be accepted, repackaged, and exported without having to pay import fees. Do not forget to consider Incoterms before you sign any sales contracts. The transit time to Panama will vary from a few days for ocean vessels departing from Miami to roughly a month for shipments originating in Asia
5– Panama General Business Taxes
Taxes are complicated in all countries. Generally speaking, corporations are taxed 25%; yet, businesses receive many tax deductions and tax breaks depending upon the industry, the size of the business, and many other factors. Any income earned outside of Panama is not taxed.