Panama´s Opening Doors to Investment:Reverted Areas of the Panama Canal Zone

Dulcidio De La GuardiaVice Minister of Finance

Ministry of Economics and Finance

London, September 2010

Why are Multinational Companies driven to Panama?

Major drivers for shifting operations to Panama include political stability, strategic location, sustained economic growth, investment grade rating, and great logistical connectivity

• Central location with modern infrastructure

• Investment grade with dollarized economy

• Great connectivity with region

• Efficient telecommunications infrastructure

• Modern multimodal logistics platform that facilitates global commerce

• Tax and importation incentives of law 41

• Immigration flexibility

• Special economic and free trade zones

• International financial center

• No capital flow restrictions

• Lower cost of living and security

• Eco-tourism and biodiversity

Additional Benefits of Investing in PanamaAdditional Benefits of Investing in Panama World Economic ForumWorld Economic Forum

“Panama ranked 53rd and had the largest improvement in the region based on infrastructure quality and economic stability”

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Panama leads the region with stable macroeconomic indicators

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Despite the global crisis, Panama outperformed expectations with the highest growth rates in the region averaging 8.2% between 2005 and 2009

• Real GDP growth rate 4.9% in the first quarter of 2010.

• FDI inflows averaged over 7.0% of GDP since 2003 and reached US$1.7B in 2009.

• Resilient public finances as the deficit was only 1.0% of GDP in 2009.

• Inflation averaged less than 2.0% in the past 40 years.

2.2

4.2

7.5

5.6

10.110.7

2.4

4.9

12.2

2.93.6

4.9 4.5

5.1 5.2

3.0

-1.1

4.2

2002 2003 2004 2005 2006 2007 2008 2009P 2010 -Q1

GDP Grow th (% change)

Global GDP Grow th (%change)

Source: National Institute of Statistics and Census, Central Bank Peru, Central Bank Brazil

* Fitch estimations for Nominal GDP 2009 of Brazil and Mexico

FDI as % of GDP

Panama´s economic performance is the strongest in Latin America

Panama´s economic performance is the strongest in Latin America

Construction, 4.4

Manufacturing, 7.6

Banking, 6.6

Commerce, 7.2

Free Zones, 7.1

Telecomm, 5.6

Transportation, 5.3

Agriculture, 4.5

Marine Ports, 1.7

Utilities, 3.0

Hotels, 2.6

ACP, 4.7

2002-09 Share of GDP (% total)

Source: INDESA

Different sectors contribute to Panama´s growthDifferent sectors contribute to Panama´s growth

Source: National Institute of Statistics and Census

Value-added sectors continue to grow despite global crisis

Canal revenues grew 4.9% from 2008-2009 while the Suez Canal decreased by 20.3%

Canal revenues grew 4.9% from 2008-2009 while the Suez Canal decreased by 20.3%

Tourist expenses doubled in 5 years and is driving growth

Tourist expenses doubled in 5 years and is driving growth

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Reexportation of goods and services in the Colon Free Zone grew 11.4% in 2009

Reexportation of goods and services in the Colon Free Zone grew 11.4% in 2009

High value-added sectors continued to grow in 2009 despite global crisis• Logistics center with Panama Canal serving 144 maritime

routes in 80 countries with 14,000 transits in 2009.

• The Canal´s US$5.3B expansion will enable it to capture 50% market share by 2020 and reach 3.5B people

• Great connectivity as Copa Air offers direct flights to 45 destinations in 22 countries.

• The Tocumen International airport will add 12 new gates to increase capacity to 9 million passengers by 2020.

• Hotel capacity will expand to 7000 new hotel rooms from 20 projects coming online in the next 2 years

• The UN awarded Panama with the best connectivity regionally supported by a modern telecom structure that is globally connected via 5 fiber optic submarine cables

Entry of passengers residing abroad (‘000)

Panama Canal total traffic: Number of transits

Source: ACP

Expenditures by tourists (US$ billion)

Toll Revenues (US$ billion)

Exports of goods, services and income by sector (US$)

14,721 14,702 14,342

7,330

1183.91317.5

1438.2

360.0

Source: National Institute of Statistics and Census

Panama is recognized as a financially prudent choice for investors

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The investment grade rating will create benefits in Panama such as lower borrowing costs, less investment risk, and a higher degree of confidence in the financial sector

Feb'10 Jun'10 Change

International Monetary Fund 1.8% 5.0% + 3.2%

World Bank 1.3% 2.8% + 1.5%

CEPAL 2.5% 4.5% + 2.0%

INDESA 4.0% 6.9% + 2.9%

Panama Economy Insight 1.6% 4.5% + 2.9%

BBVA 3.5% 4.5% + 1.0%

Standard & Poor's 2.5% 5.0% + 2.5%

+ 2.3%Average

The economic outlook is promising for investors. Real GDP growth rate to surpass 6% in 2010

The economic outlook is promising for investors. Real GDP growth rate to surpass 6% in 2010

Panama is the 5th country in Latin America to obtain investment grade

Panama is the 5th country in Latin America to obtain investment grade

Moody´s Investors Services

“Panama is a regional hub for trade, finance and transportation that will support its growing economic resilience and diversification”

INV

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TM

EN

TIN

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ST

ME

NT

SP

EC

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RIS

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Panama is promoting new business development in the Reverted Areas

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Discover the potential of developing and investing in commercial activities strategically located in the Reverted Areas of the Panama Canal and in terminal areas of the Atlantic and Pacific

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Maritime Services Cluster

Tourism & Events

FishingIndustry

Nautical Training

RetailSales

Insurance Services

SupplyChainMgt

Ship Yards

Telecom

LogisticsCluster

Air, Land, & SeaCargo

Railroad

StorageYards

CommercialBusinessServices

Airports

Port Development

Colon Free Zone

Telecom

The Reverted Areas offer an incredible range of incentives and opportunities for investmentThe Reverted Areas offer an incredible range of incentives and opportunities for investment

The reverted assets have a unique history and are strategically located

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The Reverted Areas will be developed to compliment the expansion of the canal and the modernization of ports

• The Canal Treaty of 1977 reverted the operation of the Canal along with 147,386 hectares of land in the former canal zone back to Panama.

• 5,000 hectares of reverted land is available for private sector development and concessions.

• The reverted assets along the Panama Canal and in the terminal areas of the Atlantic and Pacific will become a regional hub for commerce.

Reverted Areas accessible to 3.5B billion potential customers at the crossroads of the world

Reverted Areas accessible to 3.5B billion potential customers at the crossroads of the world

LAGO GATUNLAGO

GATUN

Canal

Railroad/Fiberoptics

Trans-isthmus highway

Pan-American highway

Ports

Airports

Canal

Railroad/Fiberoptics

Trans-isthmus highway

Pan-American highway

Ports

Airports

PanamaCity

Source: ACPTransit the Canal

Feeder Services

Atlantic coast opportunities for touristic and housing developments

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Sherman North266.5 Hectares

Sherman North266.5 Hectares

Residential José Dominador Bazán (old Fort Davis) 380 hectares

Residential José Dominador Bazán (old Fort Davis) 380 hectares

Valuable investment areas for hotels, university campuses, technology research centers, residential complexes, and commercial centers

Atlantic coast areas for potential logistical services investments

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Telfers 100 hectares

Telfers 100 hectares

Sherman South – Lemon Bay228 hectares

Sherman South – Lemon Bay228 hectares

Competitively situated for port development, industrial manufacturing, container storage, combustible bunkering, thermal electricity generation plants, shipyards, etc

Pacific coast areas for tourism and housing development opportunities

10

Altos de Batele160 hectares

Altos de Batele160 hectares

Veracruz380 hectares

Veracruz380 hectares

Altos de Batele

Ciudad de Panamá

Amador

Howard

Clayton

Veracruz

Ciudad de Panamá

Amador

Howard

Clayton

Prime investment areas for hotels, universities, technology research centers,

residential complexes, and commercial centers

Pacific coast areas for potential logistical services investments

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Corozal East 43 hectares

Corozal East 43 hectares

Pedro Miguel – Red Tank90 hectareas

Pedro Miguel – Red Tank90 hectareas

Ciudad de Panamá

Amador

Howard

Clayton

Ideal locations for port development, industrial manufacturing, container storage, combustible bunkering, thermal electricity generation plants, shipyards, etc

Conclusions: Bright outlook for investing in Panama

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• Strong economic growth and political stability.

• Investment grade based on sound fiscal disciplinary measures.

• Regional connectivity to open new long term business opportunities.

• Major fiscal and immigration incentives designed for Multinational Companies.

• Exciting new opportunites for private sector development of over 5,000 hectares of reverted assets for logistical, manufacturing, R&D, touristic and residential housing projects.

• The government is marketing reverted areas that would be ideal for the logistical development of ports, transport services and telecom, such as Telfers in the Atlantic and Corazal West in the Pacific

• In addition, the areas of Sherman and Altos de Batel could become luxury tourist destinations.

Panama is a destination for foreign investment with the strongest economic performance of emerging markets regionally

Panama offers a positive outlook for future investment with many competitive advantages:Panama offers a positive outlook for future investment with many competitive advantages:

Thank You

Reverted Assets Management UnitReverted Assets Management UnitMinistry of Economics and FinanceMinistry of Economics and Finance

www.mef.gob.pa/uabrwww.mef.gob.pa/uabr