Panama is a country that has shown remarkable stability and economic progress in recent years mainly due to the emergence of a highly competitive service sector related to the Panama Canal such as the logitstics, transport, financial, communications and commerce sectors. Likewise, a series of laws have been generated to encourage local and foreign investment in the country, highlighting the creation of different Special Economic Zones.
The Special Economic Zones (SEZ) are segregated areas located in different strategic locations of the country where companies that establish within them can benefit from a series of tax, migratory and labor incentives for their operations. The main goals that arise from the creation of the SEZ are to increase foreign investment, provide better job opportunities for local workers as well as to encourage innovation.
Each Special Economic Zone can be differentiated based on the activities that are allowed, the type of Law that governs them and by the benefits that a company can obtain while they are operating in them. Next, we will talk about 3 Special Economic Zones in Panama.
Special economic zones in panama
1. COLÓN free zone:
It´s a Free Trade Zone established by Decree Law 18 of June 17, 1948. As an autonomous entity of the central government, its purpose is to encourage international trade by providing a series of tax incentives to entrepreneurs. It´s considered the first Free Trade Zone in the Western Hemisphere and the second largest in the world. Although it is far away from Panama City, it has a direct connection to the railway system. This area has been affected lately by the high level of indebtedness on the part of foreign clients and by the proliferation of other more modern free zones that possess better benefits for the companies.
2. PANAMÁ PACÍFICO:
Regulated under Law 41 of July, 2004, this area is established as one of the most important State projects in Panama and consists of several sections:
- High technology manufacturing
- Distribution and storage center
- Commercial offices
- Residential section
It has a Single Point of Contact which is connected to several government entities such as: Ministry of Housing, Ministry of Labor, National Migration Service, National Customs Authority, among others.
Unlike Colón Free Zone, whose main connections are with the Asian Continent, Panamá Pacífico has closer ties with Central America and the Caribbean, its facilities are more modern and focuses mainly on transport services, logistics, manufacturing and technology. Its regimen only allows the rental of facilities, making it unatractive for those companies who are looking to aquire a land lot for construction. Another factor that plays against this SEZ is that it is located on the opposite bank of the canal with respect to the main seaports of the country, with only one access road.
3. Free zones:
Law 32 of April 5, 2011 of Free Trade Zones allows for the development of special areas that benefit from tax, labor and migration incentives, encouraging the production mainly for export and the creation of new jobs.
They are divided into Privately owned, State owned and Mixed. The Law that protects them, allows the greatest amount of operations and commercial activities in comparison with the other Special Economic Zones in Panama. There is high flexibility since the developer, operator or company is not restricted to establish in one specific area, Free Zones can be established, if they meet the criteria, anywhere in the territory. A challenge that is present in Free Trade Zones is finding qualified labor, however, among its regulations there are migratory facilities and favorable labor regime for the employer. These areas are mainly attractive for logistics, research, higher education, environmental and health services sectors.
The decision as to which Special Economic Zone to establish your company´s operations will depend on a series of factors ranging from the type of industry and activity, what incentives you are hoping to benefit from and the preferred location. If you wish to receive personal consultation on what suits your company, don´t hesitate to schedule an appointment with a representative.