Beatriz Cabal of Galindo Arias & López in Panama City looks at the business environment in the country
In today’s global economy, Panama is making important efforts to remain competitive so as to continue attracting investment from local and foreign sources. In order to do so, since 2010, Panama has been steadily making legislative changes to improve the way it is perceived in matters of international transparency as well as information sharing with different countries, being its most recent accomplishment the commitment to share information in accordance with the Common Reporting Standard developed by the OECD, which shall go into effect in September 2018.
Indeed, Panama enacted Law 23 of 2015, which adopts measures to prevent money laundering and the financing of terrorism and the proliferation of weapons of mass destruction, by tightening controls and overseeing certain financial transactions. This law is especially relevant for banks, insurance companies, casinos, law firms, real estate and construction companies, as well as a myriad of other entities, by requiring these entities to exercise enhanced due diligence with their existing and potential clients depending upon on the nature of the transaction.
Another material change arose on December 31 2015, where by mandate of law, all Panamanian corporations were barred from issuing bearer shares. In addition, those that wanted to maintain the privilege had to surrender the issued share certificates to an authorized depository.
Currently, Panama’s legislative branch is discussing the amendments to Law 22 of 2006, which regulates Public Procurement in the country. There is widespread support from the public to include regulations that guarantee the transparency of these processes, such as the elimination of norms that allow companies to bid, but keep the price of the offer hidden, as well as restricting the participation of companies and individuals that have been convicted locally or abroad in cases of corruption or money laundering.
From a commercial perspective, Panama has made important investments to maintain, expand, and build the necessary infrastructure to guarantee its position as a key logistic center. One of the most notable developments is the upcoming completion of the Panama Canal expansion. The new set of locks is expected to begin operations in June 2016, which in turn will result in the doubling of the Canal’s current capacity by allowing Post-Panamax vessels to pass thru the canal. This increase in maritime trade will also require the support of related services such as ports, railways, and free trade zones that will continue to fuel the Panamanian economy.
Since Panama is constantly looking to enhance the benefits of its key geographic locale, it is important to note that Panama has not only excelled in the maritime industry, but also in the airline industry by connecting Panama, as well as the rest of the American continent, thru its “Hub of the Americas”, located in Tocumen International Airport. Panama has negotiated deals to attract some of the largest airlines in the world, connecting Panama directly to Frankfurt with Lufthansa, Istanbul with Turkish Airlines, and Dubai by the end of the year with Emirates, just to name a few of the most recent destinations.
Nowadays, with the “Hub of the Americas”, it is common to hear that people from Europe, North or South America stop in Panama to connect to their next destination, which offers the unique opportunity for them to stay in the country, thus helping boost the tourism industry. Additionally, Panama’s newfound world connectivity has allowed its nationals to travel to foreign countries with relative ease and at reasonable prices.
In the local aspect, Panama began construction in October 2015 of the second line of the metropolitan metro and it’s expecting to complete the project in 2018. This second line will increase the current metro’s capacity with 16 new stations and will cover an additional 21 km that will run from East to West. Additionally, in April 2016, the Panamanian government signed an agreement with Japan to finance the third metro line for up to an amount of $2.6 billion. The Japanese monorail will be the first of its kind in the American continent and will connect the city’s center with most of the suburban areas, adding 14 new stations and covering 26.7 kilometers. These new lines will benefit the general population and increase their quality of life by reducing the time they spend commuting to and from work.
Recent events have placed Panama in an unflattering light, leading the world in general to perceive Panama as a tax haven and an unregulated country, without taking into consideration all the concerted efforts that the country has taken in order to comply with international transparency and anti-corruption standards. It is our firm belief that once the turmoil has cleared, Panama will have the opportunity to demonstrate its true colors and will regain its footing in the international spotlight as a competitive international player that offers all the legal safeties and guarantees for investors to continue participating in our economy.
Galindo Arias & López
About the author
Beatriz Cabal joined the firm in 2008, and since that time has acquired vast experience in the areas of telecommunications, media and technology (TMT), administrative law, corporate law, and mergers and acquisitions.
Beatriz has experience advising foreign and local companies in starting up their business in Panama; including counsel regarding all required local permits, negotiating contracts, as well as how best to structure their organisations using Panamanian corporations as holding entities. She has led and coordinated due diligence processes for potential sellers and buyers of companies established in the Republic of Panama, as well as negotiated and drafted the share purchase agreement and other related contracts, for either party.
Additionally, she advises key players in the telecommunication and media industry (TV/internet/cellphone).