General Overview on Panama’s Economy and Investment …...General Information About Panama •...
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General Overview on Panama’s Economy and Investment Climate
Transcript of General Overview on Panama’s Economy and Investment …...General Information About Panama •...
General Overview on Panama’s Economy and
Investment Climate
General Information About Panama
• Capital: Panama City
• Total Area: 75k Sq km
• Population: 3.9MM (2014 estimate)
• Political Division: 10 Provinces
and 5 Indigenous Regions
• Government: Constitutional
Democracy
• Currency: US Dollar, since 1904
• Language: Spanish (Official),
English (Commercial)
•The standard of living in Panama has increased over the past 14 years GDP Per Cápita
•The development of the logistics sector and FDI growth over the past years has improved key economic sectors in Panamá. Total GDP
•A friendly legal framework for investors including attractive tax incentives have led Panama to became a center for MHQ in LAC MHQ
•Panama is undergoing robust construction initiatives and manufacture industries with an average growth between 4 to 10% over the last 10 years
Annual Industrial Prod. Growth
• Panama’s exports have grown 3 fold since 1999 demonstrating the growth of industry and service Exports
•A high demand of foreign proucts and consumer spending, luxury goods, construction materials, automobiles and more.
Imports
•Currently 90% of the world’s ships can pass through the Canal, providing high revenues from ship transit
Panama Canal Revenues
•Several social programs are running with a common purpose to reduce general poverty in Panama. Results are shown over the last decade. Poverty Rate
• In 2012 Panama was voted No1 tourist destination for 2012 in several global publications including New York Times
Tourism
Panama: The Path of Growth
1999 2013
Source: Index Mundial, World Bank, Panama Canal Authority, and CIA World Fact Book
ANNUAL TOURISTS
Macroeconomic Environment
9,615 10,404
11,602
13,022
14,441 14,721
17,112
40% 38% 37%
36% 34% 35% 36%
2009 2010 211 2012 2013 Oct-13 Oct-14
78.3%
18.8%
2.9%
Debt Composition
External Debt
(78.3%)
Local Financing
(18.8%)
Other Internal
Financing (2.9%)
Net Debt vs. Net Debt/GDP Ratio (In MM, USD)
Favorable Macroeconomic Environment
6.7
0 2 4 6 8
Costa Rica
Suriname
Guyana
Paraguay
Peru
Ecuador
Colombia
Nicaragua
R. Dominicana
Bolivia
Panama
% GDP Growth Estimate
Estimated growth 2014% of GDP in Latin America and the Caribbean ECLAC
11,037
0 2,000 4,000 6,000 8,000 10,000 12,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Figures in USD
Evolution of GDP per capita of Panama. 1999-2013
A Country Open for Business
-13
-7
1
3
6
9
10
15
20
26
Argentina
Venezuela
Ecuador
Mexico
Chile
Brazil
Colombia
Costa Rica
Peru
Panama
Ranking Doing Business*2009-2014 Variation in the number of positions
Country Global
Ranking
2013
Global
Ranking
2014
Chile 34 34
Peru 39 42
Colombia 42 43
Mexico 51 53
Panama 61 55
Guatemala 93 79
Uruguay 85 88
Costa Rica 109 102
Belice 104 106
Investment Grade
Rating
Agency
Term Rating Date Perspective
Long Term; Foreign
Currency
BBB July 2, 2012
Stable
Short-Term Foreign
Currency
A-2 July 2, 2012
Long-Term Local
Currency
BBB July 2, 2012
Short Term Local
Currency
A-2 July 2, 2012
Long Term; Foreign
Currency
BBB March 7, 2014
Stable
Long-Term Local
Currency
BBB March 7, 2014
Short Term Local
Currency
F3 March 7, 2014
Long Term; Foreign
Currency
Baa2 Oct 31, 2012
Stable Long-Term Local
Currency
Baa3 Jun 9, 2010
The stable outlook suggests that no changes are expected in the next 2 years.
Rating agencies expect average growth rates of 6% without significant changes in fiscal policy.
6.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014I Half
GDP % Growth per Year
A Growing Economy with Stable Perspectives
4.3%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
10.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Unemployment Rate
By mid 2014, FDI figures reached US$ 2,575.4
million, which means 26% more in comparison to
last year inflows over the same period.
4,653.5 +56.2%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US$ M
illo
nes
Annual FDI Flows into Panama 2004-2013
Panama’s GDP Structure per Sectors
2010-2013
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0A
gri
cultu
re, live s
tock
an
d f
ore
stry
Fis
hin
g
Min
ing a
nd
quarr
ies
Manu
fact
ure
Ind
ust
ry
Ele
ctri
city
, gas
and w
ate
r su
pply
Const
ruct
ion
Who
lsale
and R
eta
il
Hote
ls a
nd
Rest
aura
nts
Tra
nsp
ort
, st
ora
ge a
nd c
om
unic
atio
ns
Fin
anci
al In
term
edia
tion
Real Est
ate
act
ivitie
s, b
usi
ness
and
rent
Pri
vate
Educa
tio
n
Soci
al se
rvic
e a
ctiv
itie
s an
d p
rivate
health
Oth
er
soci
al act
ivitie
s
GD
P f
igure
s in
US$
Millio
n
2011 2012 2013
The transportation and communications sector
represents about 25% of GDP.
Panama maritime ports move more than 6 million
TEUs per year.
In 2013 transit through Tocumen International
reached 7.7 million passengers. This figure is
expected to double once operations on the south
terminal begin.
The Free Zone law, The Panama Pacifico Zone, The
Colon Free Zone and the Multinational
Headquarters laws are the axes of the framework
towards the promotion and attraction of FDI in this
sector.
9.0%
13.2% 12.3%
11.3%
6.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2009 2010 2011 2012 2013
% increase of logistic sector in Panama’s GDP
Logistics Sector in Panama
Dimensions of Locks and Vessels
33.5 m (110’)
32.3 m (106’)
12.8 m (42’)
55 m (180’)
49 m (160’)
18.3 m (60’)
12.4 m (39.5’)
15.2 m (50’)
Existing Locks Max Vessel size: 4,400 TEU’s
New Locks Max Vessel size: 12,600 TEU’s
Main Sea Trade Routes
East-West Route
North-South Route
Both
This is a major advantage for developing relay traffic as it provides the possibility of linkages
between multiple services on both east-west, and north-south routes.
Caribbean 36.8
Central America 43.1
South America 407.1
North America 471.6
Total 958.6
POPULATION 2014 (In MM)
Global Maritime Trade Volume Through The
Panama Canal in %
Merchandise Share % of Global
Maritime
Trade
Containerized Cargo 4.7%
Grains 10.6%
Petroleum and Sub Products 1.3%
Coal 1.3%
Mineral and Metals 1.8%
Chemical 5.8%
Panama Canal Share on
Worldwide Trade
6%
Source: Panama Canal Authority based on IHC data, October 2013
Air Connectivity
QUITO
HABANA
PORT AU PRINCE
VALENCIA
CARTAGENA
LOS ANGELES
GUADALAJARA
MEXICO
WASHINGTON D.C
ORLANDO
MIAMI
CANCUN
GUATEMALA
SAN SALVADOR
PUNTA CANA SANTIA
GO SAN JUAN
PORT OF SPAIN
ARUBA MARACAIB
O BARRANQUILLA
GUAYAQUIL
LIMA
BELO HORIZONTE
RIO DE JANEIRO
MONTEVIDEO BUENOS AIRES
CORDOBA SANTIAGO
CALI
MANAUS
TEGUCIGALPA
SANTO DOMINGO
BOGOTA
SAN PEDRO SULA
SAO PAULO
SAN ANDRES
MEDELLIN
SANTA CRUZ
KINGSTON
MANAGUA
SAN JOSE
CARACAS
NUEVA YORK - JFK
CUCUTA BUCARAMANGA
ST MAARTEN
PORTO ALEGRE
NASSAU
BRASILIA
ASUNCION
PEREIRA
CHICAGO
MONTERREY
MONTEGO BAY
LAS VEGAS
LIBERIA
CURAÇAO
RECIFE
TORONTO
IQUITOS
BOSTON
• 69 destinations in 30 countries
• Transit of over 7.7 MM passengers
in 2013
• Construction of 2 new international
airports plus improvements in 3
existing airports
• $779 MM expansion of Tocumen,
adding 20 new gates
Telecommunications Connectivity
Network Readiness Index 2014
Panama is ranked 43rd worldwide and 2nd in Latin America by the "Network Readiness
Index" of the World Economic Forum 2014
Construction
In 2013 construction generated more than $4.1 billion, accumulating 12% of GDP. This figure was 30% higher than 2012.
A joint venture business model is very common in the construction sector.
There is no restriction on the entry of foreign companies on this sector.
Construction of lines 2 and 3 of the Panama Metro raises new opportunities for urban development in eastern and western areas of Panama City.
The arrival of expats represents good option for real estate companies to rent or sell apartments and houses at high income areas such as Costa del Este, Panama Pacifico, among others.
0
500
1000
1500
2000
2500
3000
3500
4000
4500
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2007 2008 2009 2010 2011 2012 2013
Construction on GDP and Credit Loans by NBS. Data in US$ Million.
Years 2007-2013
Construction Loans Construction GDP
76% of the Banking Center is comprised by foreign
banks.
Under the National Banking System, 52% of total
assets belong to international private banks, 35%
to Panamanian private banks and 13% to Official
Banks.
The average lending rates (on loans), have
remained, on average, at about 10% in the period
1990-2012, falling below that level in recent years
as a result of a global trend of lower rates.
Deposits and loans keep showing a growing trend.
-0.9%
2.1%
7.6% 8.2%
9.6%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2009 2010 2011 2012 2013
Growth rate of Financial Intermediation. Years 2009-2013
Financial Sector in Panama
• No Central Bank
• Dollarized economy since 1904
• 90 banks (national and international)
• US$ 101.5 billion in total assets in 2014
• By 2013, total premiums reached US$ 1,315.9
million (13.5% more than 2012). Car and Health insurance are the major premiums in local market, gathering 1/3 of total premiums by 2013. There
are 31 companies in this sector.
Financial Sector in Panama
IBC, Internal vs. External Assets
0
20,000
40,000
60,000
80,000
100,000
120,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Total Assets Domestic Foreign
A
sian
Cri
sis
D
ot
Com
Crisis
C
risis
in A
rgent
ina
S
uprim
e C
risis
Euro
pean
Crisis
IBC, Internal Vs. External Deposits
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Total Deposits Foreign Domestic
A
sian
Cri
sis
D
ot C
om
Cri
sis
C
risi
s in
Arg
entin
a
S
upri
me C
risi
s
Euro
pean
Cri
sis
TPA Benefits
Immediate and Progressive Tariff Rate Elimination
Telecommunications Market opening
Investor Protection
Greater Protection of Copyright and IP
Labor and Environmental Rights
Equal conditions for Foreign Investors
18.1%
7.8%
6.1%
5.9%
5.8%
4.7% 4.7% 3.4%
3.4%
2.7%
37.4%
Major Trade Export Partners by 2013
United States
Canada
China
Costa Rica
Germany
Netherlands
Taiwan
Italy
India
United Kindom
Rest of the World
843.9
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
Evolution of Panama’s FOB Values for Exports in US$ millions. Years 2003- 2013
Panama Export Figures and Trade Partners
United States has been historically Panama’s main trading partner.
Major national exports come from agricultural and agro industrial sector, which accounts for 45% of total
exports in 2013
Panama has signed FTA’s with the following countries: United States of America, Canada, México,
Colombia, Chile, Peru, Singapore, Taiwan, and the Central American countries.
Special agreements are included with the EU and EFTA.
The Colon Free Zone and Petroleum Free Zone represented 26% of total imports from the rest of the
world in 2013.
Imports have shown a growing trend over the past 3 years, mainly due to capital goods impact,
public projects by the government and higher demand from logistics and communication companies.
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
CIF Value on Imports by Panama. Years 2003-2013
24.3%
7.9%
4.1% 4.0% 3.0% 2.9% 2.8%
2.1%
48.9%
Panama’s major trade partners on Imports 2013
United States
China
México
Costa Rica
Colombia
Spain
South Korea
Japan
Rest of the World
Panama Import Figures and Trade Partners
0
2000
4000
6000
8000
10000
12000
2006 2007 2008 2009 2010 2011 2012 2013
Service Trade Trend 2006-2013 (In MM USD)
Exports Imports
Service
Exports
US$ Million % Share % Growth
vs 2012
Transport 4,802.4 49.1% 1.7%
Travels 3,316.2 33.9% 8.1%
Financial
Serv.
566.7 5.8% -16.2%
Comm. Serv. 327.1 3.3% 0.4%
Insurance
Serv
275.5 2.8% 103.0%
Others (6) 478.9 4.9% 13.8%
Total 9,766.8 100% 4.5%
80% of the Panamanian economy is related to services
Service exports represent 92% of total exports, excluding The Colon Free Zone
Panama’s Services Figures
Energy demand in Panama is estimated to have an
annual growth rate of 7.5% per year until 2016
and 5.6% in the next 10 years
New concessions are aimed at addressing future
energy needs as well as the diversification of the
energy matrix
The current goal is to diversify the energy matrix,
where 80% will be produced from renewables
while the remaining 20% would be generated from
fossil fuels.
17% of the energy produced is lost through the
gaps in transmission lines and network absorption
capacity. This puts a limit on the system’s efficiency
and productivity.
0
500
1000
1500
2000
2500
3000
2009 2010 2011 2012 2013
Installed Capacity vs Energy top demand in MW. Years 2009-2013
Installed Capacity Top Demand
Energy Sector
Electricity Demand in Panama
0
500
1000
1500
2000
2500
MW
Years
Pronostico
Demanda Máxima
2012-2013
Growth 4.16%
GROWTH RATE 2012-2016: 6%
(2012)
Forecast
Max. Demand
Multinational Headquarters Law
Currently there are 106 companies
established under the MHQ law in different
sectors of the economy
MHQ Companies must have at least 200
million in assets worldwide to apply as MHQ
Company and get all the benefits.
28 MHQ companies come from the US.
MHQ office at Ministry of Commerce and
Industries is certified with ISO 9001.
The MHQ office has its own one-stop-shop
that offers migration services where
companies can obtain their MHQ visa’s.
Fiscal Incentives
• Total Exemption on Income Taxes based in offshore operations.
• Tax scheme negotiation is possible between company and Panamanian State.
• Exemptions from sales tax for services rendered to related corporations abroad.
Labor Incentives
• Panamanian labor code restrictions to hire expats does not apply under this law.
• MHQ labor force are not compeled to pay social security or income tax.
• MHQ permanent workers are exempt from import tax on household when they are moving for the first time.
Migration Incentives
• Permanent and temporary visa availability, with several benefits.
• Family members are also included with visa Benefits (couple, sons, fathers, and child under legal custody)
MHQ Main Benefits
Allowded Activities Under MHQ Law
• Financial Management and Treasury Services
• Operations Management
• Logistics and/or Storage Components
• Technical Assistance
• Operations Support and R&D
• Business Group Accounting
• Planning, Design and Support of Products
• Consulting, Marketing and Advertising Activities
• E-Processes and Operation Consolidation
Panama’s Free Zone Regime Law 32 April 5th, 2011
Incentives • Exemption from export taxes and duties on
all goods or services required for its operations.
• Exemption from income tax on lease and subleases for Free Trade Zones promoters.
• Tax Exemption for capital goods and properties.
• Exemption from income tax to storage services whose impact is measurable abroad.
Categories •Manufacturing •Assembly •Processing enterprises of finished or semi elaborated goods •Service Export enterprise •Environmental Services •High Education Centers •Scientific research centers •Logistic Services •Health Services •Companies related to Aviation Services and Airports
Conclusions
Beyond market size, Panama’s geostrategic location has historically
provided an influence on a regional and global level.
Over the last 10 years growth has been remarkable compared to
other countries in Latin America. Currently, policies must be geared
towards improvement on productivity and on the labor force on key
growing sectors. This must be accompanied by a responsible fiscal
policy.
Along the way, there are key issues that need to be addressed, such
as developing Value Added Logistic Services towards the logistic
cluster and improvements on infrastructure.
