The Republic of Panama is an isthmus of 75,517 square kilometers, uniting South America on one side and Central and North America on the other. It has an estimated population of 3.5 million inhabitants and a gross domestic product of approximately US$20.86 billion (according to 2010 statistics).
Since colonial times, Panama has played a pivotal role on the continent´s trade and commerce. Due to its unmatched location in the region, it was the preferred path of crossing between the Atlantic and the Pacific Ocean, and an obligatory stop for all businessmen looking to do business in the American continent. During the nineteenth (19th) century, the first inter-oceanic railroad was built crossing the Isthmus of Panama; and during the early twentieth (20th) century, the Panama Canal was finished, starting its operations in 1914.
From then on, and quite early after its voluntary separation from Colombia in 1903, Panama started its path to become one of the world’s most important financial centers and have since serviced the international community through its services infrastructure.
Besides adopting the US dollar as the currency of circulation in the country right after separation from Colombia (1903), in 1927 Panama enacted its corporation’s law. In 1948, the Colon Free Zone was established and in 1970 the Banking law was passed, which gave way to the growing Panamanian International Banking Center.
Furthermore, Panama has also established the largest registry of ships in the world, has effectively developed the Trust Business, adopted International Private Foundations, and enacted key benefits programs that have resulted in growing foreign direct investment into the country.
Today, we can conclude that Panama has progressively adopted a set of rules, made several key decisions, and transformed its international services approach, to allow the country to become the second most rapidly growing economy in the region, and one of the most important hubs for international financial and commercial services in the continent.
Due to the above mentioned characteristics, an always growing international services infrastructure, a territorial tax approach and a political and juridical stability in place for more than 20 years; the international community have historically looked at Panama as a very reliable option to make, or channel their investments at any given time.
The Panamanian Mercantile Registry is among the largest company registries in the world. Although, the country allows for the formation of several types of companies, it is the Panamanian corporations, which are most widely used across the globe. These companies are commonly used for such small things as owning a bank account or shares of a small corporation in an emerging economy, to a lot bigger things, like owning an oil well or developing multimillion dollar projects in major economies. Although share ownership of corporations is a private matter of the company, foreign owned and control Panamanian registered companies are estimated to be a large percentage of the total registered companies in the Panamanian Public Registry.
Very similar to the use of corporations, the international community has also made extensive use of the Panamanian International Banking Center. With very clear advantages such as the free use of the US dollar, the free movement of funds in every currency, banking confidentiality and the physical presence of several banks representing more than 20 countries; approximately 75% of the funds deposited in Panama are foreign owned deposits, originated out of the country. This statistics have been sustained for the last 20 years at least, which supports the fact that the Panamanian banking center is well perceived by the world as a reliable place for their deposits and as a safe pass thru financial center for all credit operations. The banking Center is constantly growing both in number of financial institutions and in users or account holders. Therefore, the country regulator (Superintendency of Banks) is constantly updating its methods and adopting the necessary rules to avoid any pollution of the system and maintain a healthy banking sector.
Trust businesses and its uses among the international community have also grown in quantity, quality and size in Panama. Based on the Corporations Law, the Trust Law and the Private Foundations law, a large number of companies, trusts and foundations are administered from Panama to the world. Being a civil law based country, but largely influenced by common law principles, Panamanian trust services sit among the top of the trust practice in Latin America and is commonly seek by foreigners to find international qualified administration of its funds and assets.
Securities related services are another area where Panama has developed an international services oriented infrastructure. With the creation of the Superintendency of Securities, and the enacting of the related regulations, administration of securities from Panama has expanded geometrically. Panamanian mutual funds, fund administrators, investment advisory companies and Securities brokerage houses have progressively incremented in numbers, and have clearly evidenced the fact that it is the foreign investors that have decided to offer their financial services from Panama, and make the country a harbor for their financial services provision.
Considering the above, it is not uncommon to find a citizen of any country establishing Panamanian corporations for a specific project in any other country and opening bank accounts in Panama for channeling the investments and distributing the returns. As a consequence, Panamanian professionals have gained a strong proficiency in advising clients in the use of these international services and infrastructure.
Nevertheless, the above are not the only “internationalized” services in Panama. The Panamanian maritime industry is also a big player in international circles and so it is the Free Zone Regime. Not to mention, Foreign Investment in Panama has also taken a big step.
Besides the immense role of the Canal in maritime transportation and the logistic advantages related to it in sea travel; the maritime industry has also recognized Panama as its preferred port for registration. Created in 1925, ship registration in Panama is considered an open type registry, making no distinction between local or foreign owned vessels and making its emphasis in the management, control and security of each registered vessel. Similarly to the previous mentioned international services, the ship registry in Panama, is substantially used by the international community, outweighing its use by locals, by far in all aspects.
The Colon Free Zone, located in the Atlantic coast of Panama, is the second largest free zone in the world. Created in 1948, functioning today as a commercial hub for international trade in the region, it has outgrown its physical capacity, requiring several additional investments to accommodate the commercial activity and trade going on in the area.
Having covered the basics of Panamanian international services and its historic and ongoing importance for the international community, we also need to highlight the current facts that are making Panama one of the focal points for the development of the region.
Regarding the country as an International Financial Center, Panama has signed several Double Taxation Avoidance Agreements (DTAs), hence complying with the international tax standards, including among those, countries such as Mexico, Spain, France, Italy, Luxembourg, Portugal, Singapore, Barbados, Holland, South Korea, Qatar and a Tax Information Exchange Agreement (TIEA) with the United States of America. This fact, together with all other previously mentioned advantages have made Panama one of the single most convenient countries to invest in the region.
Besides the economic well being of the country, Panama has adopted several special regimes for attracting foreign investments into the country. Special programs such as the City of Knowledge, the Panama-Pacifico development, the Multinational Headquarters Initiative and a few others; foreign investors are blanketed with possible benefits when establishing their businesses in or from Panama.
The country has also been recognized as one of the best places to retire by various international researches and niche magazines. At the same time, and with the help of its most important airline, Panama has become one of the most popular touristic destinations in the Continent. Capitalizing on this growth, and the opportunities foreign investment brings, the country have undergone an amazing transformation in its infrastructure, among several other considerably important investments such as hotels, cruise line ports, enlargement of the international airport and the establishing of an international airline hub reaching all major cities in the continent.
In conclusion, we can say that Panama is not only a geographical isthmus uniting the American continent, but also an isthmus uniting the world through its International Services Infrastructure.