Barbados

Executive Summary

Barbados is the largest economy in the Eastern Caribbean.  Barbados’ Gross Domestic Product (GDP) was USD 5.03 billion in 2018.  The government of Barbados entered into a standby arrangement with the International Monetary Fund (IMF) in late 2018.  The USD 290 million Barbados Economic Recovery and Transformation (BERT) program aims to decrease the debt to GDP ratio, strengthen the balance of payments, and stimulate growth in the economy.  While the government met its IMF targets, the program dampened income and spending power due to public sector layoffs, the introduction of new indirect taxes, and a decline in the construction sector.  The coronavirus pandemic has reduced the gains that were expected to strengthen Barbados’ economic position in the near term.  The impact of the pandemic on tourism, a mainstay of Barbados’ economy which generates almost 40 percent of GDP, has had ripple effects across the economy.  The IMF agreed to reduce Barbados’ primary surplus targets and to augment its Extended Fund Facility.

Barbados ranks 128th out of 190 countries rated in the 2020 World Bank Doing Business Report.  The report highlights some positive changes in getting electricity, trading across borders, and enforcing contracts but highlights that registering property has become more difficult.

The services sector continues to hold the largest potential for growth, especially in the areas of international financial services, information technology, global education services, health, and cultural services.  The gradual decline of the sugar industry has opened up land for other agricultural uses.  Investment opportunities exist in the areas of agroprocessing and alternative and renewable energy.  Uncertainty about the recovery prospects of the tourism, commercial aviation, and the cruise industry impacts the potential for projects in those sectors.

Barbados recently revised its tax regime to harmonize its domestic and international tax rates.  This was in response to an Organization for Economic Cooperation and Development (OECD) initiative that addressed harmful tax practices.  Some acts were repealed or amended, and some new measures were introduced.  For further details, see https://investbarbados.org/revisedtaxregime.php.

Barbados bases its legal system on the British common law system.  It does not have a bilateral investment agreement with the United States, but it does have a double taxation treaty and tax information exchange agreement.

In 2015, Barbados signed an intergovernmental agreement in observance of the United States’ Foreign Account Tax Compliance Act (FATCA), making it mandatory for banks in Barbados to report the banking information of U.S. citizens.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 30 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 128 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019  N/A https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country (M USD, historical stock positions) 2018 20,368 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita (M USD) 2018 15,410 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

2. Bilateral Investment Agreements and Taxation Treaties

Barbados does not have a bilateral investment treaty with the United States, but it does have a double taxation treaty and a tax information exchange agreement.  Barbados has bilateral investment treaties with Canada, China, Cuba, Germany, Italy, Mauritius, Switzerland, the United Kingdom, and Venezuela.  In addition to the United States, Barbados also has tax information exchange agreements with Denmark, the Faroe Islands, Greenland, and South Africa.  Bilateral investment treaties with Belgium-Luxembourg and Ghana are awaiting ratification.  Barbados has a vast double taxation agreement network of 40 countries including Spain, Italy, the United Kingdom, Bahrain, Qatar, the United Arab Emirates, Singapore, China, Austria, Iceland, San Marino, Mexico, Panama, and Canada, with others awaiting ratification or signature.  Additional information is available from Invest Barbados.  Barbados is also party to the following:

Caribbean Community (CARICOM)

The Treaty of Chaguaramas established the CARICOM in 1973.  Its purpose is to promote economic integration among its 15 member states.  Investors operating in Barbados have preferential access to the entire CARICOM market.  The Revised Treaty of Chaguaramas (RTC) establishes the CSME, which permits the free movement of goods, capital, and labor among CARICOM states.  CARICOM has bilateral agreements with Cuba, Colombia, Costa Rica, the Dominican Republic, and Venezuela.  In 2013, CARICOM entered into a Trade and Investment Framework Agreement with the United States.

CARIFORUM-EU Economic Partnership Agreement (EPA)

The Caribbean Forum of African, Caribbean and Pacific States (CARIFORUM) and the European Community signed an EPA in 2008.  The overarching objectives of the EPA are to alleviate poverty, promote regional integration and economic cooperation, and foster the gradual integration of the CARIFORUM states into the world economy by improving trade capacity and creating an investment-conducive environment.  The Agreement promotes trade-related developments in areas such as competition, intellectual property, public procurement, the environment, and the protection of personal data.

Caribbean Basin Initiative

The Caribbean Basin Initiative facilitates the economic development and export diversification of the Caribbean Basin economies.  It promotes economic development through private sector initiatives in Central America and the Caribbean by expanding foreign and domestic investment in non-traditional sectors, diversifying country economies, and expanding their exports.  The Caribbean Basin Initiative provides beneficiary countries with duty-free access to the U.S. market for most goods.  It permits duty-free entry of products manufactured or assembled in Barbados into the United States.

Caribbean/Canada Trade Agreement (CARIBCAN)

CARIBCAN is an economic and trade development assistance program for Commonwealth Caribbean countries in which Canada provides duty-free access to its national market for the majority of products originating in Commonwealth Caribbean countries.

3. Legal Regime

Transparency of the Regulatory System

Barbados’ legal framework fosters competition and establishes clear rules for foreign and domestic investors regarding tax, labor, environmental, health, and safety concerns.  These regulations are in keeping with international standards.  The Ministry of Finance and Economic Affairs and Invest Barbados provide oversight aimed at ensuring the transparency of investment.

Rulemaking and regulatory authority rest with the bicameral parliament of the government of Barbados.  The House of Assembly consists of 30 members who are elected in single seat constituencies.  The Senate consists of 21 members who are appointed by the Governor General.

Foreign investment into Barbados is governed by a series of laws and their implementing regulations.  These laws and regulations are developed with the participation of relevant ministries, drafted by the Office of the Attorney General, and enforced by the relevant ministry or ministries.  Additional compliance supervision is delegated to specific agencies, by sector, as follows:

  • Banking and financial services – The Central Bank of Barbados (CBB)
  • Insurance and non-banking financial services – Financial Services Commission (FSC)
  • International business – International Business Unit, Ministry of International Business
  • Business incorporation and intellectual property – CAIPO

The Ministry of Finance and Economic Affairs monitors investments to collect information for national statistics and reporting purposes.

All foreign businesses must be registered or incorporated through CAIPO and will be regulated by one of the other aforementioned agencies depending on the nature of the business.

Although Barbados does not have legislation that guarantees access to information or freedom of expression, access to information is generally available in practice.  The government maintains a website and an information service to facilitate the dissemination of information such as government office directories and press releases.  The Government Information Service (BGIS) website is available at: http://gisbarbados.gov.bb/ .  The government also maintains a parliamentary website where it posts legislation prior to parliamentary debate and live streams House sittings.  The government budget is also available on this website, http://www.barbadosparliament.com/ .

Although some bills are not subject to public consultation, input from various stakeholder groups and agencies is enlisted during the initial drafting of legislation.  Public awareness campaigns, through print and electronic media, are used to inform the general public.  Copies of regulations are circulated to stakeholders, and government ministries and departments, and are published in the Official Gazette after passage in parliament.  The Official Gazette is also available on the BGIS website.

Accounting, legal, and regulatory procedures are transparent.  Publicly listed companies publish annual financial statements and changes in portfolio shareholdings, including share values.  Service providers are required to adhere to international best practice standards including International Financial Reporting Standards, International Standards on Auditing, and International Public Sector Accounting Standards for government and public sector bodies.  They must also comply with the provisions of the Money Laundering and Financing of Terrorism Prevention and Control Act.  Accounting professionals must engage in continuous professional development.  The Corporate and Trust Service Providers Act regulates Barbadian financial service providers.  Failure to adhere to these laws and regulations may result in revocation of the business license and/or cancellation of work permit(s).  The most recent Caribbean Financial Action Task Force (CFATF) Mutual Evaluation assessment found Barbados to be largely compliant.

The Office of the Ombudsman is established by the constitution to guard against abuses of power by government officers in the performance of their duties.  The Office of the Ombudsman aims to provide quality service in an impartial and expeditious manner when investigating complaints by Barbadian nationals or residents who consider the conduct of a government body or official unreasonable, improper, inadequate, or unjust.

The Office of the Auditor General is also established by the constitution and is regulated by the Financial Administration and Audit Act.  The Auditor General is responsible for the audit and inspection of all public accounts of the Supreme Court, the Senate, the House of Assembly, all government ministries, government departments, government-controlled entities, and statutory bodies.  The Office of the Auditor General’s annual reports can be found on the parliament of Barbados website.

International Regulatory Considerations

The OECD recognized Barbados as largely compliant with international regulatory standards.   Barbados is a signatory to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the Multilateral Competent Authority Agreement, and the Multilateral Convention to Implement Tax Treaty Related Matters to Prevent Base Erosion and Profit Shifting.

The Barbados National Standards Institution (BNSI) oversees a laboratory complex housing metrology, textile, engineering, and chemistry/microbiology laboratories.  The primary functions of the BNSI include the preparation, promotion, and implementation of standards in all sectors of the economy, including the promotion of quality systems, quality control, and certification.  The Standards Act (2006) and the Weights and Measures Act (1977) and Regulations (1985) govern the work of the BNSI.  In November 2019, the government revealed plans to upgrade its governance structure and laboratory systems to bring it in line with international testing and certification standards.  As a signatory to the World Trade Organization (WTO) Agreement on the Technical Barriers to Trade, Barbados, through the BNSI, is obligated to harmonize all national standards to international norms to avoid creating technical barriers to trade.

Barbados ratified the WTO Trade Facilitation Agreement in 2018.  With full implementation, the Agreement improves the speed and efficiency of border procedures, facilitates trade costs reduction, and enhances participation in the global value chain.  In 2019, Barbados implemented the Automated System for Customs Data which streamlined document compliance and inspections by port authorities.  However, the government increased the issuance fees for certificates of origin which has made trade more expensive.  In the 2020 World Bank Doing Business report, Barbados is ranked 132nd out of 190 countries for trading across borders.

Legal System and Judicial Independence

Barbados’ legal system is based on the British common law.  Modern corporate law is modeled on the Canada Business Corporations Act.  The Attorney General, the Chief Justice, junior judges, and magistrates administer justice in Barbados.  The Supreme Court consists of the Court of Appeal and the High Court.  Parties may appeal to the Court of Appeal.  The High Court hears criminal and civil (commercial) matters and makes determinations on the interpretation of the constitution.

The Caribbean Court of Justice (CCJ) is the regional judicial tribunal.  The CCJ has original jurisdiction to interpret and apply the Revised Treaty of Chaguaramus (RTC).  In 2005, Barbados became a full member of the CCJ, making the body its final court of appeal and original jurisdiction of the RTC.

The United States and Barbados are both parties to the WTO.  The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes.

Laws and Regulations on Foreign Direct Investment

Invest Barbados’ foreign direct investment policy is to promote Barbados as a desirable investment location, to provide advice, and to assist prospective investors.  The main laws concerning investment in Barbados are the Barbados International Business Promotion Act (2005), the Tourism Development Act (2005), and the Companies Act.  There is also a framework of legislation that supports the jurisdiction as a global hub for business including insurance, ships’ registration, and wealth management.

All proposals for investment concessions are reviewed by Invest Barbados to ensure proposed projects are consistent with the national interest and provide economic benefits to the country.

Invest Barbados provides complimentary “one-stop shop” facilitation services to investors to guide them through the investment process.  It offers a website useful for navigating the laws, rules, procedures, and registration requirements for foreign investors: http://www.investbarbados.org .

Competition and Anti-Trust Laws

Chapter 8 of the RTC outlines the competition policy applicable to CARICOM states.  Member states are required to establish and maintain a national competition authority for facilitating the implementation of the rules of competition.  At the CARICOM level, a regional Caribbean Competition Commission (CCC) applies the rules of competition.  The CARICOM competition policy addresses anticompetitive business conduct such as agreements between enterprises, decisions by associations of enterprises, and concerted practices by enterprises that have as their object or effect the prevention, restriction, or distortion of competition within the Community and actions by which an enterprise abuses its dominant position within the Community.  The Fair Competition Act codified the establishment of the Barbados Fair Trading Commission (FTC) in 2001.  The FTC is responsible for the promotion and maintenance of fair competition and participates in the CCC.  The FTC regulates the principles, rates, and standards of service for public utilities and other regulated service providers.  The Telecommunications Act regulates competition in the telecommunications field.

Expropriation and Compensation

The Barbados constitution and the Companies Act (Chap. 308) contain provisions permitting the government to acquire property for public use upon prompt payment of compensation at fair market value.  U.S. Embassy Bridgetown is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.

Dispute Settlement

ICSID Convention and New York Convention

The government of Barbados wrote the New York Convention’s provisions into domestic law but did not ratify the convention.  The Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980), which recognizes the 1958 New York Convention on the Negotiation and Enforcement of Foreign Arbitral Awards, are the main laws governing dispute settlement in Barbados.

Barbados is also a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention.  Individual agreements between Barbados and multilateral lending agencies also have provisions calling on Barbados officials to accept recourse to binding international arbitration to resolve investment disputes between foreign investors and the state.

Investor-State Dispute Settlement

The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980) provide for arbitration of investment disputes.  Barbados does not have a bilateral trade treaty or a free trade agreement with an investment chapter with the United States.  U.S. Embassy Bridgetown is not aware of any current investment disputes in Barbados.

Barbados ranks 170th out of 190 countries in enforcing contracts according to the 2020 World Bank Doing Business Report.  Dispute resolution in Barbados generally takes an average of 1,340 days.  The slow court system and bureaucracy are widely seen as the main hindrances to timely resolution of commercial disputes.  Through the Arbitration Act of 1976, local courts recognize and enforce foreign arbitral awards issued against the government.  In 2019, the Supreme Court of Judicature Act was amended to include the establishment of a commercial division in the High Court which will oversee proceedings regarding arbitration.  Barbados does not have recent cases of investment disputes involving either U.S. or foreign investors.

International Commercial Arbitration and Foreign Courts

The Supreme Court of Barbados is the domestic arbitration body.  Local courts enforce foreign arbitral awards.  In 2019, two new court protocols in the Supreme and Magistrate courts were introduced for alternative dispute mechanisms in mediation and arbitration to be available to judges and attorneys to remedy civil matters.  The law courts also increased the number of mediators and mandatory training.

Bankruptcy Regulations

Under the Bankruptcy and Insolvency Act (2002), Barbados has a bankruptcy framework that recognizes certain debtor and creditor rights.  The Act gives a potentially bankrupt company three options: bankruptcy (voluntary or involuntary), receivership, or reorganization of the company.  The Companies Act provides for the insolvency and/or liquidation of a company incorporated under this Act.  In 2019, the Supreme Court of Judicature Act was amended to include the establishment of a commercial division in the High Court which will oversee proceedings connected to bankruptcy and insolvency.  Barbados ranked 35th out of 190 countries in resolving insolvency in the 2019 World Bank Doing Business Report.  The bankruptcy resolution process takes about 15 percent of the estate costs within 1.8 years.

5. Protection of Property Rights

Real Property

There are no restrictions on foreign ownership of property in Barbados.  Foreign investors and locals are treated equally regarding property taxes.  Civil law protects physical property and mortgage claims.  The CBB must verify real property purchases for non-residents.  If a non-resident uses foreign funds and pays for the property in Barbados, the CBB will normally endorse the transaction.  The sale of property is subject to a 2.5 percent property transfer tax in addition to a 1 percent stamp duty.  Brokerage and legal fees are not included in those levies.  Buyers should seek the advice of a local attorney when purchasing property.

With respect to commercial, industrial, hotel and villa properties, the applicable rate of land tax is 0.65 percent on the improved value of the property.  Holders of a certificate from the Barbados Tourism Authority enjoy rebate of 50 percent for hotels and 25 percent for villas.  The Commissioner of Land Tax charges an annual fee based on the assessed property value on residential property as follows:

  • 0% on the first USD 75,000
  • 10% on amounts between USD 75,001 and USD 225,000
  • 70% on amounts between USD 225,000 and USD 425,000
  • 1% on excess of USD 425,000
  • 8% on vacant land under 4,000 sq. ft.
  • 0% on vacant land over 4,000 sq. ft.

Barbados ranks 118th of 190 countries in ease of registering property in the 2020 World Bank Doing Business Report.  It takes approximately 50 days to complete seven procedures and the cost is about 4.5 percent of the property value.  The government has included an additional procedure that has increased the time to record the conveyance at the Land Registry and to pay transfer fees and stamp duties.  This has made transferring property more onerous.

Intellectual Property Rights

Barbados has a good legislative framework governing intellectual property rights (IPR), but enforcement need improvement.  Barbados is a member of the World Intellectual Property Organization (WIPO) and  is party to the Berne Convention,  the Paris Convention,   the Nice Agreementand others.a The government of Barbados adopted a new Copyright Act in 1998 and amended it in 2004 to provide tougher penalties.  In the early 2000s, Barbados also approved legislation covering integrated circuits topography, geographical indications, and protection against unfair competition.  In addition, Barbados revised its Trademark and Industrial Designs Acts to meet international standards.

Article 66 of the Revised Treaty of Chaguaramas (2001) establishing the CSME commits all 15 members to implement stronger intellectual property rights protection and enforcement.  The CARIFORUM-EU EPA contains the most detailed obligations regarding intellectual property in any trade agreement to which Barbados is a party. The EPA provides for the protection and enforcement of IPR.  Article 139 of the EPA requires parties to “ensure an adequate and effective implementation of the international treaties dealing with intellectual property to which they are parties and of the Agreement on Trade Related Aspects of Intellectual Property (TRIPS).”

Barbados remains on the Office of the United States Trade Representative (USTR) Special 301 Report Watch List in 2020.  Barbados acceded to the WIPO Internet Treaties in December 2019 but has not proposed IPR legislation to implement its treaty obligations.  It is also not clear that there is a strong commitment to enforce existing legislation.  In the realm of copyright and related rights, continuing concerns include the unauthorized retransmission of U.S. broadcasts and cable programming by local cable operators in Barbados, including state-owned broadcasters, without adequate compensation to U.S. right holders, and  the refusal of Barbadian TV and radio broadcasters and cable and satellite operators to pay for public performances of music.   The longstanding failure to enforce judgments and other successful outcomes for right holders and the resulting lack of deterrence are additional sources of concern.

It is the responsibility of the importer to pay for and destroy counterfeit goods.  Failure to observe certain standards regarding the importation of goods may result in a recommendation to the Comptroller of Barbados’ Customs and Excise Department to have the goods destroyed.  If the goods fall under Ministry of Health’s jurisdiction, they are destroyed under that ministry’s guidance.  If the goods are prohibited and do not pertain to the Ministry of Health, the Customs and Excise Department will destroy them as appropriate.  Information on the prevalence of counterfeit goods in the local market is not readily available, as there is no tracking method in place to collect data.  Barbados is not on the Notorious Markets List.

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/ .

10. Political and Security Environment

Barbados does not have a recent history of politically motivated violence or civil unrest.

Panama

Executive Summary

As the home of the Panama Canal, the world’s second largest free trade zone, and sophisticated logistics and finance operations, Panama attracts high levels of foreign direct investment from around the world and has great potential as a foreign direct investment (FDI) magnet and regional hub for a number of sectors.  Panama remains in the first position in attracting FDI in Central America, closing 2019 with $4.835 billion, according to Panama’s National Institute of Statistics and Census (INEC).  Panama, over the last decade, has been one of the Western Hemisphere’s fastest growing economies, benefiting from investment-grade credit, a strategic location, and a stable, democratically elected government.

Prior to the outbreak of the COVID-19 crisis, Panama’s Ministry of Economy and Finance predicted the economy would grow by four percent in 2020, up from three percent in 2019.  However, the crisis will clearly have a significant negative impact on GDP with estimates including negative growth.  The global crisis has hit some of Panama’s key industries, including maritime and the national airline Copa, and the services ancillary to trade.  Panama’s macroeconomic health has been stable, with the inflation rate less than one percent as of the end of 2019.  As of May 2020, six weeks into the COVID-19 crisis, the sovereign debt rating remains investment grade, with ratings of Baa1 (Moody’s), BBB (Fitch), and BBB+ (Standard & Poor’s).  Decreases in government revenue, unexpected expenditures, and additional borrowing resulting from the COVID-19 crisis changed Moody’s outlook from stable to negative.

Apart from those brought by the COVID-19 crisis Panama has other challenges, including corruption, judicial capacity, a poorly educated workforce, and labor issues, which often precludes further investment from foreign companies or complicates existing investments.  With a population of just over four million, Panama’s small market size for many companies is not worth the risk of investment.  The World Bank classified Panama in July 2018 for the first time as a “high-income” jurisdiction in its annual country classifications after its Gross National Income per capita squeaked past the threshold for that classification.

Panama is one of the most unequal countries in the world, with the 14th highest Gini Coefficient and a national poverty rate of 14 percent.  Those numbers will increase due to the COVID-19 crisis.  The Cortizo administration has shown its willingness to address investment challenges by prioritizing key economic reforms required to improve the investment climate and has addressed the precarious situation of the country’s most vulnerable through payment deferral legislation and a robust food aid program.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 101 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 86 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 75of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 N/A http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 14,370 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

2. Bilateral Investment Agreements and Taxation Treaties

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 that were 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 has a bilateral taxation treaty with the United States.

Panama also has 21 bilateral investment protection agreements with:  Argentina, Canada, Chile, Cuba, the Czech Republic, the Dominican Republic, Finland, France, Germany, Italy, Korea, the Netherlands, Qatar, Spain, Sweden, Switzerland, Ukraine, the United Kingdom, Israel and Uruguay.  Panama signed four BITs that are pending entry into force: Belgium, Luxembourg, Haiti, and United Arab Emirates.

Panama established diplomatic relations with the People’s Republic of China in June 2017.  Under the then-Varela administration, parties were negotiating a free trade agreement, however, there have been no further negotiations since July 2019 when the Cortizo administration took office.

3. Legal Regime

Transparency of the Regulatory System

Panama has five regulators, four that supervise the activities of financial entities (banking, securities,  insurance, and “designated non-financial businesses and professions (DNFBPs)” and a fifth supervisor that oversees credit unions. Each of the regulators regularly publish detailed sector reports, as well as information regarding fines and sanctions 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.  Law 23 of 2015 created the regulator for DNFBPs, which began publishing fines and sanctions in 2018.  In January 2020, the regulator for DNFBPs was granted independence and Superintendent status similar to that of the banking regulator.

In 2012, Panama modified the securities law to regulate brokers, fund managers, and matters related to the securities industry.  The Securities Superintendent is generally considered a competent and effective regulator.  Panama is a full signatory to the International Organization of Securities Commissions (IOSCO).

Panama is a member of UNCTAD’s 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

In 2006, at the time of the negotiations of the TPA, the parties also signed an agreement regarding “Sanitary and Phytosanitary Measures and Technical Standards Affecting Trade in Agricultural Products.”  That agreement entered into force on December 20, 2006.

The Panamanian Food Safety Authority (AUPSA) was established by Decree Law 11 in 2006 to issue science-based sanitary and phytosanitary (SPS) import policies for agricultural and food products entering Panama.  AUPSA does not have regulatory authority for domestic products.  In the last four years, AUPSA, as well as other parts of the government, have implemented or proposed measures that restrict market access.  These measures have also increased AUPSA’s ability to limit the import of certain agricultural goods, for example as fresh or chilled onions.  In that particular case, AUPSA modified its import requirement adding that imported onions can only be commercialized before 120 days have elapsed since harvest of the onion bulb, and each shipment must be accompanied by a laboratory analysis certifying the shipment to be free of Ditylenchus dipsaci.  In another case, AUPSA certified that a bio-tech agricultural product met international standards and did not pose a threat to human consumption, but the Ministry of Health (MINSA) refused to recognize U.S. and international standards, which resulted in a loss of investment of more than $100 million.

On October 28, 2019, the Government of Panama introduced draft bill 164 which would eliminate AUPSA and create the National Service for Food Import and Export Procedures (SENTA in Spanish).  As of the writing of this report, that draft bill 164 still in the National Assembly.

Legal System and Judicial Independence

In 2016, Panama transitioned from the civil to accusatory justice 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 United States.  Judicial pleadings are not always a matter of public record, nor are the processes always transparent.

Some U.S. firms have reported inconsistent, unfair, and/or biased treatment from Panamanian courts.  The judicial system’s capacity to resolve contractual and property disputes is often weak, hampered by a lack of technological tools, and susceptible to corruption.  The World Economic Forum’s 2019 Global Competitiveness Report rated Panama’s judicial independence at 129 of 137 countries.

The Panamanian judicial system suffers from significant budget shortfalls that continue to affect all areas of the system.  The transition to the accusatory justice system, with no increased funding, resulted in an insufficient budget (which was insufficient even before the transition) for the personnel, infrastructure, and operating requirements of both a backlogged inquisitorial system and the new accusatory justice system.  The budget shortfall’s continued impact is evident in poorly trained accusatory justice system personnel and often inadequate technological tools, especially in investigations and forensics.. The judiciary’s lack of independence continues as a legacy of a highly politicized system of appointments for judges, prosecutors, and other officials from the most senior positions on down.  Furthermore, 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.

Laws and Regulations on Foreign Direct Investment

Panama has different laws governing incentives depending on the activity, including the Multinational Headquarters Law, the Tourism Law, the Investment stability Law, miscellaneous laws associated with certain sectors, including the film industry, call centers, certain industrial activities, and agriculture exports.  In addition, laws may differ depending on the economic zone, including the Colon Free Zone, the Panama Pacifico Special Economic Area, and the City of Knowledge.  Proinvex (http://proinvex.mici.gob.pa/ ), within the Ministry of Commerce and Industry, provides more details on tax and other benefits.

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

The Ministries of Tourism, Public Works, and Commerce and Industry, as well as the Minister Counselor for Investment court foreign investment.  However, once a company invests in Panama, some have reported more difficulty in navigating their new environment, especially in tourism, branding, imports, and infrastructure development.  Although individual ministers have been responsive to U.S. companies, the root issues are more difficult to address.  U.S. companies have complained about non-payment issues from several ministries, which have stalled payments without any official statement as to the merits of the contract terms.

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 some 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.

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.  In at least one circumstance, a U.S. company has expressed concern about not being reimbursed at fair market value following the government’s revocation of a concession.

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  struggled to resolve investment issues in courts and often revert to arbitration.  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 2019 report ranks the independence of Panama’s judicial system 129 out of 137  countries (http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf ).  There have been allegations that politically connected businesses have benefited from court decisions, and that judges have “slow-rolled” dockets for years without taking action.  Panamanian legal firms often 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 of 2013 regulates national and international commercial arbitrations in Panama.

Bankruptcy Regulations

Commercial law is comprehensive and well established.  The World Bank 2020 Doing Business Indicator currently ranks Panama 113 of 190 jurisdictions for resolving insolvency because of slow court systems and complexity of the process.  Panama adopted a new Insolvency law in 2016, but the Doing Business ranking has not yet shown material improvement for this metric.

5. Protection of Property Rights

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 2020 report (http://www.doingbusiness.org/data/exploreeconomies/panama  ) notes that Panama has risen to 87 out of 190 countries on the Registering Property indicator, though it still ranks 141st 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 address 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, investors complain about ANATI’s capabilities and lengthy adjudication timelines.

The judicial system’s capacity to resolve contractual and property disputes is generally considered weak and susceptible to corruption, as illustrated by the most recent World Economic Forum’s Global Competitiveness Report 2017-2018 (https://www.weforum.org/reports/the-global-competitiveness-report-2017-2018 ), which rates Panama’s judicial independence as 120 out of 137 countries.  Americans should exercise greater due diligence in purchasing Panamanian real estate than they would in purchasing real estate in the United States.  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 Colon Free Zone officials must follow to investigate and confiscate merchandise.  In 1997, ANA created a special office for IPR enforcement; in 1998, the Colon 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 Colon Free Zone, the Offices of Industrial Property and Copyright under the

Ministry of Commerce and Industry (MICI), the Customs Administration (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 IPR as a predicate offense for money laundering, and Law 14 establishes a 5 to 12-year prison term, plus possible fines.

Panama is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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:  https://pa.usembassy.gov/u-s-citizen-services/attorneys/

10. Political and Security Environment

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 called Comarcas.

In May 2019, Panama held national elections that international observers agreed were free and fair.  The transition to the new government was smooth.  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.

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