Panama’s presidential elections are due to take place on May 5 2019. Three major parties are fighting neck and neck in a very close race. As consecutive presidential reelection is prohibited in Panama, current president Juan Carlos Varela must sit out for at least two terms before running again. Therefore, there could be a shakeup in the government as businessmen Laurentino “Nito” Cortizo from the Democratic Revolutionary Party (PRD), and Rómulo Roux from the Democratic Change (CD), are ahead of the current ruling party’s candidate, José Isabel Blandón. Ricardo Lombana, an independent candidate, is gaining traction and largely accepted by the population, something that is not all that common for candidates running independently from the main parties.
Panama Election and Effect on Business
Corruption, crime and unemployment are the top voter concerns and have dictated much of the political debate so far. Therefore, it will continue to be a key issue for the new government in as the three leading parties have pledged to implement transparency measures. Regarding the business world, the new administration will look to boost economic growth, as a drop in GDP in 2018, and attract more foreign investment. For example, boosted production in the agriculture industry aims to be increased to reduce imports.
Cortizo wants boots the tourism and logistics sectors to increase investment. Roux’s plan to revitalise the economy includes job creation and income tax reductions. One thing both men agree on is an urgent review of Varela’s controversial price control policy which regulates 22 basic basket products. Furthermore, both leading candidate’s plans look promising to continue Panama’s pro-business environment and may produce opportunities for foreign company formations and investment. Calls for a new Constitution Act of Panama is also at the heart of the political debate. In this case, it is the desire for greater governmental transparency and a modernised economy means new laws may be created which improve business in Panama.
Business in Panama
Currently, it is very easy for foreigners to do business in Panama and this may only improve with a new President as all three leading candidates have a pro-business stance. Planned works include the addition of a fourth bridge to the Panama Canal, expand the city’s metro and continue negotiations for a free trade agreement with China. Subsequently, these projects are expected to continue being supported by these candidates. The problem of corruption is currently not a major issue for foreign investors. Panama is expected to remain politically stable throughout the next presidential term and its economy is on track for 5.0% growth in 2019.
Why Do Business in Panama?
Panama is well known as an international tax haven. Offshore jurisdictions mean firms incorporated in Panama are not liable to tax on business done outside the country. As a result of such favourable taxation laws, many firms set up business in Panama and continue to operate in their home countries with minimal tax obligations. Opening a corporate bank account means firms can also receive payments directly into a Panamanian bank account can increase revenue and reduce tax payments. Strict financial privacy protects offshoring banking clients and there are no exchange controls, leaving money controls in and out of the control unrestricted. Panama’s dominant financial service sector provides firms with extensive accounting and taxation services.
When examining business opportunities, it is impossible to miss the Panama Canal. A major source of economic activity for the country, the canals are essential to global trade. Consequently, Panama has transformed into an international trade hub that connects the Atlantic and Pacific oceans. Strong logistics, storage service and investment sectors have grown to facilitate trade. Last year a record-breaking 442.1 million Panama Canal tons passed through the canals.
Special economic trade zones, located in strategic areas throughout Panama, are designed to encourage companies to set up a business where they are able to access tax, labour and migration incentives. The largest is the Colon Free Zone which re-exports a large variety of merchandise. The free zone passed through 19,713 million dollars of imports in 2017 alone. Furthermore, Panama uses the US dollar as its currency, creating a favourable investment location. Panama has great infrastructure and communication systems which facilitate the ease of doing business.
Get Started in Panama with Biz Latin Hub
The opportunities mentioned are just some of the reasons why investors and entrepreneurs are choosing Panama for their next overseas expansion. As highlighted, many of these opportunities are available for a limited time, whilst prices remain low and both local and international competition takes its time to ‘cotton on’ and expand into the country.
Latin America provides an attractive commercial environment for businesses looking to expand their operations. Before pulling the trigger and investing in Latin America, it is essential to have an understanding of corporate compliance…