Panama

Bureau of Economic and Business Affairs
Report
June 29, 2017

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Executive SummaryShare    

As the home of the Panama Canal, the world’s second largest free trade zone, and sophisticated logistics and finance operations, Panama attracts relatively high levels of foreign direct investment from the region and from around the world. Panama boasts one of the Western Hemisphere’s fastest growing economies, good credit, a strategic location, and a stable, democratically elected government.

Panama’s Ministry of Economy and Finance predicts the economy will grow by 5.8 percent in 2017, up from an estimated 4.9 percent in 2016, and in line with 5.8 percent growth in 2015. Panama’s sovereign debt rating is investment grade, with ratings of Baa2 (Moody’s), and BBB (Fitch; Standard & Poor’s). The Panama Canal Authority inaugurated a USD 5.4 billion expansion of the Panama Canal in June 2016. It will promote increased investment in port systems operations, storage facilities, and logistics. Panamanian President, Juan Carlos Varela has sought to improve Panama’s image and investment climate profile. Panama received a record USD 5.21 billion in Foreign Direct Investment (FDI) in 2016 – up 16 percent from 2015, and it retains one of the highest “FDI to GDP” ratios in Latin America.

Panama has challenges, including a poor educational system, high labor costs, a lack of skilled workers, and reports of corruption, fraud, and a perceived lack of judicial transparency. Foreign investors in Panama have also complained about a lack of transparency in government procurements. Some U.S. firms have reported inconsistent, unfair, and biased treatment from Panamanian courts.

Table 1

Measure

Year

Index or Rank

Website Address

TI Corruption Perceptions index

2016

87 of 176

transparency.org/news/feature/
corruption_perceptions_index_2016#table

World Bank’s Doing Business Report “Ease of Doing Business”

2017

70 of 190

doingbusiness.org/rankings

Global Innovation Index

2016

68 of 128

globalinnovationindex.org/
analysis-indicator

U.S. FDI in partner country ($M USD, stock positions)

2015

$4055

BEA data available 7/25/16 at
bea.gov/international/
factsheet/factsheet.cfm

World Bank GNI per capita

2015

$11,880

data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Towards Foreign Direct Investment

Panama depends heavily on foreign investment and it has worked to make the investment process attractive and simple. 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 runs a considerable trade surplus with Panama. Both countries signed a Trade Promotion Agreement (TPA) that entered into force in October 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 Latin America’s few predominantly services-based economies, with services representing roughly three-quarters of Panama’s GDP. 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. The TPA covers all services sectors, 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 previously 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, 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 government, they do monitor large foreign investments.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Panamanian government does impose 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. Medical practitioners, lawyers, accountants, and customs brokers must be Panamanian citizens. The Panamanian government 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.

Other Investment Policy Reviews

In 2014, the World Trade Organization (WTO) completed a Trade Policy Review of Panama. The results of the review can be found here: https://www.wto.org/english/tratop_e/tpr_e/tp401_e.htm

Business Facilitation

Procedures regarding how to register foreign and domestic businesses, as well as how to obtain a notice of operation, can be found at the Ministry of Trade and Industry’s website, where you may register a foreign company, create a branch of a registered business, or register as an individual trader. Applicants must submit notarized documents to the Mercantile Division of the Public Registry, the Ministry of Trade and Industry and the Social Security Institute. Panamanian government statistics state that applications for foreign businesses take between one to six days to process.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

The U.S.-Panama Bilateral Investment Treaty (BIT) entered into force in 1991 and was amended in 2001. The BIT ensures that, with some exceptions, U.S. investors receive fair, equitable, and nondiscriminatory treatment, and that both parties abide by international law standards, such as for expropriation and compensation and free transfers. Following the October 31, 2012, implementation of the TPA, the investor protection provisions in the TPA have supplanted those in the BIT. However, until October 30, 2022, investors may choose to invoke dispute settlement under the BIT for disputes that arose prior to entry into force of the TPA, or for disputes relating to investment agreements completed before the TPA entered into force. Panama has closely scrutinized, and in some cases disputed, which firms may qualify for preferred treatment under the BIT and TPA.

Panama also has bilateral investment agreements with Argentina, Canada, Chile, Cuba, the Czech Republic, the Dominican Republic, Finland, France, Germany, Italy, Korea, Mexico, the Netherlands, Qatar, Spain, Sweden, Switzerland, Taiwan, Ukraine, the United Kingdom, and Uruguay. Commerce Ministry officials note that there have been some exploratory talks toward investment agreements with Belgium and Luxembourg, but they acknowledge that these discussions have a lower priority than ongoing free trade negotiations.

3. Legal RegimeShare    

Transparency of the Regulatory System

All three major financial regulators (banking, securities, and insurance) regularly publish detailed sector reports on their websites. Panama’s banking regulator began publishing fines and sanctions in late 2016. The securities and insurance regulators have published fines and sanctions since 2010 and 2014, respectively.

In 2012, Panama passed a securities law to regulate brokers, fund managers, and matters related to the securities industry. The Commission structure was modified to follow the successful Banking Law model and now consists of a superintendent and a board of directors. The Securities Commission is generally considered a competent and effective regulator. Panama has committed to seeking the legal authority necessary to allow them to become a full signatory to the International Organization of Securities Commissions Memorandum of Understanding.

Panama is a member of United Nations Conference on Trade and Development’s (UNCTAD) international network of transparent investment procedures (http://panama.eregulations.org). Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time and legal bases justifying the procedures.

International Regulatory Considerations

Panama is not a member of Merocur or the Pacific Alliance. It has been a member of the World Trade Organization since September 6, 1997.

Legal System and Judicial Independence

Panama’s criminal justice system has transitioned from the civil to the accusatory system with the goal of simplifying and expediting criminal cases. 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, nor are the processes always transparent.

Laws and Regulations on Foreign Direct Investment

Panama has different incentive laws, depending on the activity, including the Multinational Headquarters Law, Investment stability Law, Incentives for the Film Industry, Call Centers, Industrial Promotion (CFI) and Promotion of Agriculture exports. The Proinvex site provides more details on tax and other benefits.

Government policy and law treats Panamanian and foreign investors equally with respect to access to credit. Panamanian interest rates closely follow international rates (i.e., the London Interbank Offered Rate - LIBOR), plus a country-risk premium. See section 6 for more information on capital markets and portfolio investments.

While there is no formal investment screening by the government, the government does monitor large foreign investments.

Competition and Anti-Trust Laws

Panama’s Consumer Protection and Anti-Trust Agency, established by Law 45, October 31, 2007, and modified by Law 29 of June 2008, reviews transactions for competition related concerns and serves as a consumer protection agency.

Expropriation and Compensation

Panamanian law recognizes the concept of eminent domain but it is rarely exercised. In one recent case, a U.S. company voiced concern about being reimbursed at fair market value in a case where the government’s revocation of a concession adversely impacted access or use of the investors’ property.

Dispute Settlement

ICSID Convention and New York Convention

Panama is a Party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards).

Investor-State Dispute Settlement

Resolving commercial and investment disputes in Panama can be a lengthy and complex process. Despite protections built into the U.S.-Panamanian trade agreements, investors have repeatedly struggled to resolve investment issues in courts. There are frequent claims of bias and favoritism in the court system and complaints about the lack of adequate titling, inconsistent regulations, and a lack of trained officials outside of the capital. The World Economic Forum – Global Competitiveness Index 2016-2017 report ranks the independence of Panama’s judicial system 118 out of 138 countries. Politically connected businesses have benefited from court decisions, and there have been allegations that judges have “slow-rolled” dockets for years without taking action. Many Panamanian legal firms suggest writing binding arbitration clauses into all commercial contracts.

International Commercial Arbitration and Foreign Courts

The Panamanian government accepts binding international arbitration of disputes with foreign investors. Panama is a party to the 1958 New York Convention as well as to the 1975 Panama Convention. Panama became a member of the International Center for the Settlement of Investment Disputes (ICSID) in 1996. Panama adopted the UNCITRAL model arbitration law as amended in 2006. Law 131 regulates national and international commercial arbitrations in Panama.

Bankruptcy Regulations

Commercial law is comprehensive and well established. The World Bank 2017 Doing Business currently ranks Panama 133/190 for resolving insolvency because of the antiquated law, slow court systems, and complexity of the process. Panama adopted a new bankruptcy law in 2015, but Panama’s Doing Business ranking has not yet shown material improvement for this metric.

4. Industrial PoliciesShare    

Investment Incentives

Panama provides Industrial Promotion Certificates (IPCs) to incentivize industrial development in high value-added sectors. Targeted sectors include 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.

Law 1 (2017) modifies Law 28 (1995) by exempting exports from income tax and provides a zero percent import duty for machinery for those companies that export 100 percent of their products. Producers to sell a portion of their products into the domestic market will pay a 3 percent import tariff for machinery and supplies.

Foreign Trade Zones/Free Ports/Trade Facilitation

Panama has 19 “free zones” which have special tax and other incentives for manufacturers, back office operations and call centers. Companies in the Colon Free Zone pay basic user fees and a five percent dividend tax (or two percent of net profits if there are no dividends). Banks and individuals in Panama pay no tax on interest or other income earned outside Panama. No taxes are withheld on savings or fixed time deposits in Panama. Individual depositors do not pay taxes on time deposits. Free zones offer tax-free status, special immigration privileges, and license and customs exemptions to manufacturers who locate within them. Investment incentives offered by the Panamanian government apply equally to Panamanian and foreign investors.

Performance and Data Localization Requirements

There are no legal performance requirements such as minimum export percentages, significant local requirements of local equity interest, or mandatory technology transfers. There are no established general requirements that foreign investors invest in local companies, purchase goods or services from local vendors, or invest in R&D or other facilities. Companies are required to have 90 percent Panamanian employees. There are exceptions to this policy; but the government must approve these on a case-by-case basis. Fields dominated by strong unions, such as construction, have opposed issuing work permits to foreign laborers and some investors have struggled to staff large projects fully. Foreign workers are common in Panama. Visas are available and the procedures to obtain work permits are generally not considered onerous.

As part of its effort to become a hub for finance, logistics, and communications, Panama has endeavored to become a data storage center. According to the Panamanian Authority for Government Innovation (AIG), the majority of these firms offer services to banking and telephone companies in Central America and the Caribbean. Panama boasts exceptional international connectivity, with seven undersea fiber optic cables.

General laws addressing protection of personally identifiable information can be found in the Constitution, the Criminal Code and the Electronic Commerce legislation. The concept of the personal privacy of communications and documents is provided for in the Panamanian Constitution as a fundamental right (Political Constitution, article 29). The Constitution also provides for a right to keep personal data confidential (article 44). The Criminal Code imposes an obligation on businesses to maintain the confidentiality of information stored in databases or elsewhere, and establishes several crimes for the misuse of such information (Criminal Code, articles 164, 283, 284, 285, 286). Panama’s electronic commerce legislation also states that providers of electronic document storage must guarantee the protection, reliability, and proper use of information and data stored on behalf of their customers (Law 51, July 22, 2008, article 55).

5. Protection of Property RightsShare    

Real Property

The majority of land in Panama, and almost all land outside of Panama City, is not titled; a system of rights of possession exists, but there are multiple instances where such rights have been successfully challenged. The World Bank’s Doing Business 2017 report notes that Panama has risen to 84 out of 190 countries on the Registering Property indicator, though it still ranks 148th in Enforcing Contracts. Panama enacted Law 80 (2009) to address the lack of titled land in certain parts of the country; however, it does not cure deficiencies in government administration or the judicial system. In 2010, the National Assembly approved the creation of the National Authority of Land Management (ANATI) to administer land titling; however, some investors have complained about ANATI’s capabilities.

The judicial system’s capacity to resolve contractual and property disputes is weak and open to corruption, as illustrated by the most recent World Economic Forum’s Global Competitiveness Report 2016-2017, which rates Panama’s judicial independence as 118 out of 138 countries. U.S. citizens should exercise greater due diligence in purchasing Panamanian real estate. Engaging a reputable attorney and licensed real estate broker is strongly recommended.

Intellectual Property Rights

Panama has an adequate and effective domestic legal framework to protect and enforce intellectual property rights (IPR). The U.S.-Panama TPA improved standards for the protection and enforcement of a broad range of IPR, including for patents; trademarks; undisclosed tests and data required to obtain marketing approval for pharmaceutical and agricultural chemical products; and digital copyright products such as software, music, books, and videos. In order to implement the requirements of the TPA, Panama passed Law 62 of 2012 (industrial property) and Law 64 of 2012 (copyrights). Law 64 also extended copyright protection to the life of the author plus 70 years, mandates the use of legal software in government agencies, and protects against the theft of encrypted satellite signals and the manufacturing or sale of tools to steal signals.

Panama is a member of the Paris Convention for the Protection of Industrial Property. Panama’s Industrial Property Law (Law 35 of 1996) provides a term of 20 years of patent protection from the date of filing, or 15 years for pharmaceutical patents. Panama has expressed interest in participating in the Patent Protection Highway with the U.S. Patent and Trademark Office (USPTO). Law 35, amended by Law 61 of 2012, also provides trademark protection, simplifies the registration of trademarks, and allows for renewals for 10-year periods. The law grants ex-officio authority to government agencies to conduct investigations and seize suspected counterfeited materials. Decree 123 of 1996 and Decree 79 of 1997 specify the procedures that National Customs Authority (ANA) and Colón Free Zone officials must follow to investigate and confiscate merchandise. In 1997, ANA created a special office for IPR enforcement; in 1998, the Colón Free Zone followed suit.

The Government of Panama is making efforts to strengthen the enforcement of IPR. A Committee for Intellectual Property (CIPI), comprising representatives from five government agencies (the Colón Free Zone, the Offices of Industrial Property and Copyright under the Ministry of Commerce and Industry (MICI), ANA, and the Attorney General), under the leadership of the MICI, is responsible for the development of intellectual property policy. Since 1997, two district courts and one superior tribunal have exclusively adjudicated antitrust, patent, trademark, and copyright cases. Since January 2003, a specific prosecutor with national authority over IPR cases has consolidated and simplified the prosecution of such cases. Law 1 of 2004 added crimes against IP as a predicate offense for money laundering, and Law 14 establishes a 5 to 12-year prison term, plus possible fines.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders

Embassy point of contact:

Colombia Primola
Economic Specialist
PrimolaCE@state.gov

Local lawyers list: http://panama.usembassy.gov/emergencycontact/list-of-attorneys.html

6. Financial SectorShare    

Capital Markets and Portfolio Investment

Government policy and law with respect to access to credit treat Panamanian and foreign investors equally. Panamanian interest rates closely follow international rates (i.e., the London Interbank Offered Rate - LIBOR), plus a country-risk premium.

Some private companies, including multinational corporations, have issued bonds in the local securities market. Companies rarely issue stock on the local market and, when they do, often issue shares without voting rights. Investor demand is generally limited because of the small pool of qualified investors. While wealthy Panamanians may hold overlapping interests in various businesses, there is not an established practice of having cross-shareholding or stable shareholder arrangements, designed to restrict foreign investment through mergers and acquisitions.

Money and Banking System

Panama's 1998 Banking Law (as amended in 2008) regulates the country's financial sector. The law concentrates regulatory authority in the hands of a well-financed Banking Superintendent.

Traditional bank lending from the well-developed banking sector is relatively efficient and is the most common source of financing for both domestic and foreign investors, offering the private sector a variety of credit instruments. The free flow of capital is actively supported by the government and is viewed as essential to Panama’s 92 banks (48 domestic, 28 international plus 16 representational offices).

There are no restrictions on, nor practical 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. There are no government or private sector rules to prevent foreign participation in industry standards setting consortia.

Financing for consumers is relatively open for mortgages, credit cards, and personal loans, even to those earning modest incomes.

Panama’s strategic geographic location, dollarized economy, status as a regional financial, trade, and logistics center, and favorable corporate and tax laws make it an attractive target for money launderers. Money laundered in Panama is believed to come in large part from the proceeds of drug trafficking. Tax evasion, bank fraud, and corruption are also believed to be major sources of illicit funds. Money is often laundered via bulk cash and trade due to weak customs controls, particularly in Panama’s free trade zones.

In 2015, Panama strengthened its legal framework, amended its criminal code, harmonized legislation with international standards, and passed an anti-money laundering/counter terrorist financing (AML/CTF) reform law. Panama passed Law 18 (2015) that severely restricts the use of bearer shares; companies still using these types of shares must appoint a custodian and maintain strict controls over their use.

Panama’s history of client secrecy was exposed in April 2016 when one of its top law firms was the target of a massive hack and data dump. In early 2017, Panama released its first National Risk Assessment on money laundering and terrorist financing ahead of its Financial Action Task Force (FATF) Mutual Evaluation.

The judicial system lacks sufficient resources to effectively prosecute and convict money launderers and remains at risk for corruption. The transition to a U.S.-style accusatory criminal justice system, which began in September 2010, was implemented in all of Panama’s provinces in September 2016. Prosecutors still have minimal experience under the new system.

Foreign Exchange and Remittances

Foreign Exchange

Panama’s official currency is the U.S. Dollar.

Remittance Policies

Panama has customer due diligence, bulk cash, and suspicious transaction reporting requirements. As part of the law, Panama also created a new regulator, the Intendencia, to oversee AML/CTF compliance by over 12,000 designated non-financial businesses and professionals across 16 sectors, including remittance businesses. In early 2017, Panama released its first National Risk Assessment on money laundering and terrorist financing ahead of its FATF Mutual Evaluation. According to the report, remittance businesses reported assets of USD 1.5 billion in 2015, or only .01 percent of the total assets in the financial system.

Sovereign Wealth Funds

Panama started a sovereign wealth fund in 2012 with an initial capitalization of USD 300million. From 2015 onwards, the law mandates contributions to the National Treasury from the Panama Canal Authority in excess of 3.5 percent of GDP must be deposited into the Fund.

7. State-Owned EnterprisesShare    

The following is a list of state-owned enterprises in Panama,followed by their Spanish acornyms: the Panama Pacific Special Economic Area Agency (AAEEPP); Tocumen International Airport, S.A. (AITSA); the Panama Maritime Authority (AMP); National Bingos; the Civil Aviation Authority (AAC); the Household Garbage Collection Authority (AAUD); Power Generation Co. S.A. (EGSA); Power Transmission Co. S.A. (ETESA); National Highway Co., S.A. (ENA); National Water Supply and Sewage Co. (IDAN); Agricultural Marketing Institute (IMA); the National Welfare Lottery; the Colon Free Zone (ZLC); the National Bank of Panama; the Savings Bank of Panama.

Privatization Program

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.

8. Responsible Business ConductShare    

In February 2017, the Ministry of Foreign Affairs formed an interagency committee to create and execute the National Corporate Social Responsibility Plan (CSR) in accordance with the International Organization for Standardization standard 2600. The private sector also has a number of CSR initiatives, including annual CSR awards given out by the American Chamber of Commerce. SumarRSE, a Panamanian NGO, is devoted exclusively to promoting CSR.

9. CorruptionShare    

Panama ranked 87th out of 176 countries in the 2016 Transparency International Corruption Perceptions Index. Complaints by U.S. investors about allegedly corrupt judicial and governmental decisions prejudicial to their interests remain common. The Panamanian judicial system continues to pose a problem for investors due to poorly trained personnel, case backlogs, and a lack of independence from political influence. Supreme Court judges are typically nominated to 10-year terms, often based on political considerations.

Panama’s government lacks strong systemic checks and balances that would serve to incentivize accountability. Under Panamanian law, only the National Assembly may initiate corruption investigations against Supreme Court judges, and only the Supreme Court may initiate investigations against members of the National Assembly, which in turn has led to charges of a de facto “non-aggression pact” between the branches.

While Panama’s current President campaigned on a pledge to eliminate corruption in the government, increase transparency, and prosecute corrupt officials, several high-profile corruption scandals have created considerable pressure on the government to do more. In late 2016, Odebrecht, a Brazilian firm, admitted to paying USD 59 million in bribes to win Panamanian contracts of at least USD 175 million between 2010 and 2014. Odebrecht’s admission was confined to bribes paid during the previous administration. The scandal’s reach has yet to be fully determined.

Anti-corruption mechanisms exist, such as asset forfeiture, whistleblower and witness protection, and conflict-of-interest rules. However, the general perception is that anti-corruption laws are not applied rigorously, that government enforcement bodies and the courts are not effective in pursuing and prosecuting those accused of corruption, and the lack of a strong professionalized career civil service in Panama's public sector has hindered systemic change. The fight against corruption is also hampered by the government’s refusal to dismantle Panama's dictatorship-era libel and contempt laws, which can be used to punish whistleblowers, while those accused of acts of corruption are seldom prosecuted and almost never jailed.

Panama ratified the United Nations’ Anti-Corruption Convention in 2005 and the Organization of American States’ Inter-American Convention Against Corruption in 1998. However, there is a perception that Panama should more effectively implement the conventions.

Resources to Report Corruption

Angelica Maytin
Directora Nacional de Transparencia y Acceso a la Informacion (ANTAI)
Autoridad Nacional de Transparencia y Acceso a la Información
Ave. del Prado, Edificio 713, Balboa, Ancón, Panama, Republica de Panama
(507) 527-9270 / 71/72/73/74
www.antai.gob.pa

10. Political and Security EnvironmentShare    

Panama is a peaceful and stable democracy. On rare occasions, large-scale protests can turn violent and disrupt commercial activity in affected areas. Mining and energy projects have been sensitive, especially those that involve development in the designated indigenous areas (comarcas).

In May 2014, Panama held national elections that international observers agreed were free and fair. The transition to the new government was smooth and uneventful. Panama's Constitution provides for the right of peaceful assembly, and the government respects this right. No authorization is needed for outdoor assembly, although prior notification for administrative purposes is required. Unions, student groups, employee associations, elected officials, and unaffiliated groups frequently attempt to impede traffic and commerce in order to force the government or business to agree to demands.

11. Labor Policies and PracticesShare    

Panama’s official unemployment rate is 5.5 percent, close to what most economists consider full employment. Economists in Panama estimate that the unemployment rate for skilled workers is negative, indicating a shortage of workers for skilled jobs including accounting, IT, customer service, and specialized construction skills. Employers frequently cite the lack of skilled labor and English language speakers as a limiting factor on growth.

Panama's non-agriculture labor force is approximately 1.5 million persons. Forty-one percent of workers are employed in the informal sector, with a lower rate of informal employment in Panama’s capital region (37 percent) compared to the indigenous areas (80 percent).

While the government has periodically revised its labor code, including a modest revision in 1995, it remains highly restrictive. Several sectors, including the Panama Canal Authority, the Colón Free Zone, and export processing zones/call centers are covered by their own labor regimes. Employers outside of these areas, such as the tourism sector, have called for greater flexibility, easier termination of workers, and the elimination of many constraints on productivity-based pay. The Panamanian government has issued waivers to the regulations on an ad hoc basis in order to address employers’ needs, but there is no consistent standard for obtaining such a waiver.

Panama spends approximately 14 percent of the central government’s budget, or four percent of GDP, on education. The 2015-2016 World Economic Forum Global Competitiveness Report ranked Panama 97th out of 140 countries for its quality of higher education and 87th for its quality of higher education. The report points to an inadequately educated workforce as the most problematic factor for doing business. This poor showing underscored the 2010 Organization for Economic Co-operation and Development (OECD) Program for International Student Achievement (PISA) analysis, which ranked Panama second worst among participating Latin American countries.

The law provides for the right of private sector workers to form and join unions of their choice, subject to the union’s registration with the government.

The law provides for the right of private sector workers to strike except in areas deemed vital to public welfare and security, including police and health workers. All private sector and public sector workers have the right to bargain collectively, and the law prohibits employer anti-union discrimination, and protects workers engaged in union activities from loss of employment or discriminatory transfers. Strikes must be supported by a majority of employees and related to improvement of working conditions, a collective bargaining agreement, or in support of another strike of workers on the same project (solidarity strike).

The law prohibits all forms of forced labor of adults or children. The law establishes penalties of 15 to 20 years’ imprisonment for forced labor involving movement (either cross-border or within the country) and six to 10 years’ imprisonment for forced labor not involving movement.

The law prohibits the employment of children under age 14, although children who have not completed primary school may not begin work until age 15. Exceptions to the minimum age requirements can be made for children 12 and older to perform light farm work if it does not interfere with school hours. The law does not set a limit on the total number of hours that these children may work in agriculture or define what kinds of light work children may perform. The law prohibits 14 to 18-year-old children from engaging in potentially hazardous work and identifies such hazardous work to include work with electrical energy; explosives or flammables, toxic and radioactive substances; work underground and on railroads, airplanes, and boats; and work in nightclubs, bars, and casinos.

12. OPIC and Other Investment Insurance ProgramsShare    

The United States and Panama signed a comprehensive Overseas Private Investment Corporation (OPIC) agreement in April 2000. OPIC offers both financing and insurance coverage against expropriation, war, revolution, insurrection, and inconvertibility for eligible U.S. investors in Panama. OPIC can insure up to $200 million per project for U.S. investors, contractors, exporters, and financial institutions. Financing is available for overseas investments that are wholly owned by U.S. companies or that are joint ventures in which the U.S. firm is a participant. Panama has been a member of the Multilateral Investment Guarantee Agency (MIGA) since 1996.

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($B USD)

2014

$49.166

2015

$52.132

http://data.worldbank.org/indicator/
NY.GDP.MKTP.CD?locations=PA

Foreign Direct Investment

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2014

$4616

2015

$4055

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

2014

$2350

2015

$2653

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

2013

N/A

2014

$2.6

N/A


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (U.S. Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

$39659

100%

Total Outward

N/A

100%

United States

$7029

18%

N/A

N/A

N/A

Colombia

$6870

17%

N/A

N/A

N/A

United Kingdom

$2564

6%

N/A

N/A

N/A

South Africa

$2251

6%

N/A

N/A

N/A

Switzerland

$3063

8%

N/A

N/A

N/A

"0" reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, U.S. Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

$11715

100%

All Countries

$728

100%

All Countries

$10988

100%

United States

$6944

59%

United States

$360

49%

United States

$6584

60%

Colombia

$992

8%

Luxembourg

$59

8%

Colombia

$987

9%

Peru

$326

3%

Ireland

$54

7%

Brazil

$468

4%

Costa Rica

$318

3%

United Kingdom

$43

6%

Peru

$324

3%

Cayman Islands

$253

2%

Canada

$38

5%

Costa Rica

$317

3%

14. Contact for More InformationShare    

Commercial Section
panamaweb@state.gov
Building 783, Basilio Lakas Street, Clayton
http://www.export.gov/panama