Nearshore Americas

Special Report: Making the Most of Panama’s Reemergence

A set of tax reforms and enhancements to logistics infrastructure have put Panama in an ascending path to nearshore investment success.

Nearshore Americas’ latest white paper highlights Panama’s credentials as a destination for investment, detailing recent public policy changes and infrastructure projects which promise to turn the country into a FDI hotspot.

Click here to download the white paper

Panama is already regarded as a crucial node in global logistics. Its world-renowned canal handles approximately 3% of worldwide maritime trade and connects over 1,920 ports across 170 countries.

In recent years, Panama has tried to improve its standing in international trade and business even further by making adjustments to its economic regulations.

The country has implemented numerous changes to its economic policy, particularly in its regulatory framework. It also plans to implement a “Dry Canal” that will open transportation routes between the Pacific and the Atlantic, serving as an alternative to the Panama Canal.

To the aforementioned one can add the implementation of free trade zones and the EMMA (Multinational Company Headquarters) regime, which provides various tax benefits, labor flexibility and migration incentives tailored to diverse business activities.

These measures, combined with Panama’s strategic location and robust infrastructure, make the country a compelling choice for foreign investors.

Ongoing expansion projects, including the Panama Canal Container Port, which has an initial capacity of 2.5 million TEUs, are set to enhance the nation’s capacity to handle cargo volumes.

Infrastructure developments outlined in the working plan of President-elect José Raúl Mulino are expected to further increase Panama’s appeal.

Panama, with a population of 4.4 million, experienced 6.1% economic growth in 2023, the highest in Central America. According to the World Bank, the country has successfully reduced poverty from 48% in 1991 to 13% last year.

This economic boom, coupled with political stability, has led to higher employment and real wages for Panamanians, who now enjoy one of the highest GDP per capita rates in the region.

Panama is already the most connected nation in Central America with six submarine cables, but it is set to enhance its connectivity further with two additional systems under construction. The Carnival Submarine Network (CSN-1) and Caribbean Express are scheduled to be operational by 2025 and 2026, respectively. The CSN-1 will extend 4,500 km from Ecuador to Florida’s west coast, with landing points in Panama and Colombia.

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Panama boasts 15 active free trade zones, with seven more under development. These zones, along with other special economic zones, benefit from special tax and labor regimes for various business activities. Panama also holds the region’s broadest network of commercial trade agreements, providing access to over 1.6 billion potential consumers in 59 countries.

The Colón Free Zone, located in the province of Colón, stands as the largest in the Americas and the second largest in the world after Hong Kong.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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