Attitude toward Foreign Direct Investment
Panama is heavily dependent on foreign investment and has worked to make the investment process attractive and simple for investors. With few exceptions, the Government of Panama makes no distinction between domestic and foreign companies for investment purposes. Panama benefits from stable and consistent economic policies, a dollarized economy and a government that consistently supports trade and open markets.
The United States and Panama have signed a Trade Promotion Agreement that entered into force in October of 2012. The U.S.-Panama TPA has significantly liberalized trade in goods and services, including financial services. The TPA also includes sections on customs administration and trade facilitation, sanitary and phyto-sanitary measures, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protection.
Panama has one of the few Latin American economies that is predominantly services-based. Services represent nearly 90 percent of Panama’s Gross Domestic Product. The TPA has improved U.S. firms’ access to Panama’s services sector and gives U.S. investors better access than other WTO Members under the General Agreement on Trade in Services. All services sectors are covered under the TPA, except where Panama has made specific exceptions. Under the agreement, Panama has provided improved access in sectors like express delivery, and granted new access in certain areas that had previously been reserved for Panamanian nationals. In addition, Panama agreed to become a full participant in the WTO Information Technology Agreement.
The office of Panama’s Vice Minister of International Trade within the Ministry of Commerce and Industry is the principal entity responsible for promoting and facilitating foreign investment and exports. Through its Proinvex service (http://proinvex.mici.gob.pa) the government provides investors with information, expedites specific projects, leads investment-seeking missions abroad, and supports foreign investment missions to Panama. In some cases, other government offices may work with investors to ensure that regulations and requirements for land use, employment, special investment incentives, business licensing, and other requirements are met. While there is no formal investment screening by the GOP, the government does monitor large foreign investments.
Other Investment Policy Reviews
In 2014 the World Trade Organization completed a Trade Policy Review of Panama. The results of the review can be found here:
Laws/Regulations on Foreign Direct Investment
There are different incentive laws, depending on the activity. Multinational Headquarters, Investment stability Law, Incentives for the Film Industry, Call Centers, Industrial Promotion (CFI) and Promotion of Agriculture exports. You may access www.proinvex.mici.gob.pa for more details on tax and other benefits.
Procedures regarding how to register a business for domestic and foreign businesses can be found here: http://panama.eregulations.org/menu/116?l=es. Applicants must submit notarized documents to the Mercantile Division of the Public Registry, the Ministry of Trade and Industry and the Social Security Institute. According to the government of Panama, applications for foreign businesses take between one and six days.
Panama provides Industrial Promotion Certificates (IPCs) to incentivize industrial development in high value-added sectors, and specifically targets R&D, management and quality assurance systems, environmental management, utilities and human resources. Approved IPC’s provide up to 35 percent in tax reimbursements, and preferential import tariffs of 3 percent.
Limits on Foreign Control and Right to Private Ownership and Establishment
The GOP imposes some limitations on foreign ownership in the retail and media sectors where, in most cases, ownership must be Panamanian. However, foreign investors can continue to use franchise arrangements to own retail within the confines of Panamanian law (under the TPA, direct U.S. ownership of consumer retail is allowed in limited circumstances).
In addition to limitations on ownership, the exercise of approximately 55 professions is reserved for Panamanian nationals. Specifically, medical practitioners, lawyers, accountants, and customs brokers must be Panamanian citizens. The GOP also requires foreigners in some sectors to obtain explicit permission to work. However, there are no reports of such restrictions hindering U.S. firms operating in Panama.
With the exceptions of retail trade, the media and several professions, foreign and domestic entities have the right to establish, own, and dispose of business interests in virtually all forms of remunerative activity. 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 citizenship) are readily obtainable for significant investors.
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. The Government of Panama undertook a series of privatizations the mid-1990s including most of the electricity generation, distribution, ports and telecommunications sectors.
Screening of FDI
While there is no formal investment screening by the GOP, the government does monitor large foreign investments.
Panama’s Consumer Protection and Anti-Trust Agency, established by Law 45, October 31, 2007, reviews transactions for competition related concerns and serves as a consumer protection agency.