Doing business in Panama: Panama trade and export guide
Updated 13 May 2015
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This publication is available at https://www.gov.uk/government/publications/exporting-to-panama/doing-business-in-panama-panama-trade-and-export-guide
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Find out how UK companies can control risks when doing business in Panama.
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1. Panama export overview
Unlike other Central American countries, Panama’s economy is based on a large service sector. The service sector accounts for 80% of Gross Domestic Product (GDP).
Panama is Latin America’s leading recipient of Foreign Direct Investment (FDI) as a percentage of GDP. In 2013, total FDI was USD 4.7 billion, which represented 9% of the economy.
Contact a Department for International Trade (DIT) Panama export adviser for a free consultation if you are interested in exporting to Panama.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Panama.
Many UK companies operate from Panama, including well-known companies such as Aggreko, Biwater, Cable and Wireless, Diageo, GlaxoSmithKline, SabMiller, Solar Century and Unilever.
Strengths of the market
- Panama uses the US dollar and there are no foreign exchange controls
- 100% foreign ownership is allowed
- no restrictions on the transfer and repatriation of capital and profits
- legislation guaranteeing juridical security, fiscal and tax incentives for investors
- Panama hasn’t experienced major difficulties as a result of the downturn and there have been no bailouts
- economic stability, with record low inflation and sustained economic growth
- strategically located on the major world shipping route provided by the Panama Canal
- a hub for air travel
- one of the best countries for telecommunications connectivity in the world
- low unemployment at only 4.1%
2. Challenges doing business in Panama
There are some challenges for doing business in Panama. These include:
- bureaucracy
- lack of clarity and transparency in public tender
- slow judicial system
- copyright issues
Read the overseas business risk for Panama for more information on the challenges for doing business in Panama.
3. Growth potential
Panama has experienced tremendous economic growth for the past decade. The economy grew by an average of 8.3% annually from 2004 to 2013. During 2009 and despite the global downturn, the economy continued to grow at 3.9%. GDP growth for 2014 was 7.5%.
Fitch Ratings status for Panama has recently improved to BBB. Moody’s Investors Service also increased its rating to investment grade status to Baa3. Experts predict that Panama’s economic growth will remain strong over the coming years. The Ministry of Finance and Economics forecasts a 6% annual economic growth from 2015 to 2019.
The Panamanian government offers several different tax incentive schemes depending on the sector and the commercial activity. For more information on these incentives, contact the Department for International Trade (DIT) team in Panama.
3.1 Trade agreements
Panama became a member of the World Trade Organization (WTO) in 1997 and is a beneficiary of the General System of Preference (GSP) programmes and the Caribbean Basin Initiative (CBI).
Panama is part of the European Union - Central America Association Agreement.
4. UK and Panama trade
The UK is the second largest investor in Panama with more than USD 3.3 billion holdings. Exports of UK goods to Panama in 2014 reached £149 million. These imports are much larger that of other Central American countries. During 2014 and on a per capita basis, Panama imported an average of £39 of British products.
This success is largely down to Panama’s Colon Free Zone (CFZ).
The UK’s main exports to Panama during 2011 included:
- beverages (notably Scotch Whisky)
- organic chemicals
- medical and pharmaceuticals products
- machinery
- transport equipment
5. Opportunities for UK businesses in Panama
Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.
Identify opportunities to supply products and services to the international aid agencies. Contact the Department for International Trade (DIT) Aid Funded Business Service for more information.
5.1 Infrastructure
Panama is half way through implementing a major infrastructure strategy. The government recently announced the plan for an estimated public investment of USD 20 billion from 2015 to 2019. 55% of the investment will be for social infrastructure.
There are significant rail infrastructure projects underway. The budget for the second and third lines of the metro system is USD 6.4 billion. There are other projects which offer opportunities for UK companies in:
- housing (a project for 5000 new houses)
- roads and urban planning
- technical and vocational schools
- hospitals
- Liquefied Natural Gas (LNG) terminal
- port expansion to support the Panama Canal expansion
Contact the Department for International Trade (DIT) team in Panama for more information on the infrastructure sector.
5.2 Power and renewable energy
Panama was recently ranked third in a study as one of the most attractive countries in to which invest in clean energy.
There are projects underway in:
- solar
- wind
- clean coal
- LNG
- hydro
Contact the Department for International Trade (DIT) team in Panama for more information on the power and renewable energy sector.
5.3 Electricity generation, transmission and distribution
Panama is looking to become an energy hub for the Central America region. Panama recently completed the Central American electricity connection, and is pursuing a distribution line from Colombia and Panama’s planned power plants.
In August 2012, a new law was established to promote the construction and operation of power plants based on natural gas for the provision of electricity. There are opportunities for UK companies in technologies to diversify energy sources for future electricity generation, transmission and distribution
Contact the Department for International Trade (DIT) team in Panama for more information on the electric sector.
5.4 Agriculture
The government is looking for increasing support to the agricultural sector. It needs to increase productivity to meet the demands of the market. There are opportunities for UK companies with technologies and ideas to help increase productivity.
Contact the Department for International Trade (DIT) team in Panama for more information on the agriculture sector.
5.5 Education
The government has incentivised learning English through training programmes abroad in English speaking countries.
The ‘Panama Bilingue’ project started in 2015, where teachers and pupils will be trained to learn English. This has created opportunities for British learning and higher education institutions in language training, curricula and testing.
Technical training schools are also being developed to increase the skills of Panama’s workforce.
Contact the Department for International Trade (DIT) team in Panama for more information on the education sector.
5.6 Ports and maritime
The logistics sector accounts for 35% of GDP. This includes maritime services around extensive port infrastructure and related logistics and distribution services.
The Panama Canal and its ports infrastructure is collectively the largest in Latin America. Further expansion of the Canal will be needed to meet the future demand. This will bring with it many opportunities for UK companies.
Contact the Department for International Trade (DIT) team in Panama for more information on the ports sector.
6. Start-up considerations
Panama has modern and flexible corporate laws. Registering a corporate structure in Panama takes about one week.
The most common forms of setting up a business entity in Panama are:
- incorporation of a company
- joint ventures
- agent or distributor
It is recommended to use a representative, distributor or commission agent with a commercial license. Securing exclusivity for a buying agent can be hard due to the competitive condition of the market.
In order to participate in Panamanian Government procurement bidding processes, it is a prerequisite to have a local counterpart or direct presence.
7. Legal considerations
Contact the Department for International Trade (DIT) team in Panama to help find tax and legal advisers before entering into agreements.
There are no legal requirements for export percentages, significant local requirements of local equity interest, or mandatory technology transfer.
Panama offers all available incentives equally to Panamanian and foreign investors.
7.1 Standards and technical regulations
Labels on imported goods should contain:
- the name and address of the manufacturer
- expiration date
- list of ingredients
- lot number
- product form (powder, liquid etc)
Labels should be in Spanish for medicines, household products and food requiring special instructions. For all other goods, English labels are accepted. Intellectual Property (IP)
Trademarks, designs, patents and copyright are the principal forms of IP protection available to companies and individuals.
The UK and Panama are parties to the Berne Convention for the Protection of Literary and Artistic Works.
Panama’s Copyright and Neighbouring Rights Law 1994 protects original literary works. However, there are serious flaws in protection for copyright works. Piracy, particularly of sound recording and movies, remains a problem.
8. Tax and customs considerations
Panama and the UK signed an Investment Protection Treaty in 1983 and Double Taxation Agreement in 2013.
Duties are assessed on the cost, insurance and freight (CIF) value on an ad ‘valorem’ basis. The Government has reduced tariffs in order to meet the requirements of the WTO membership. Panama Uses the Harmonised System (HS) for custom codes.
In addition to the duty, all imports into Panama are subject to a 7% value added tax (ITBMS) levied on the CIF value. Certain items are exempted from the tax, including pharmaceuticals, food and school supplies. The tax is also applied to certain services.
The average of import tariffs is under 9%. However, some notable exceptions exist, mainly for agricultural products considered crucial to rural economies and automobiles.
8.1 Documentation
Most goods imported into Panama must be cleared by a customs broker, licensed by the Panamanian Government.
Documents required by the Panamanian Customs can vary depending to the way the products are imported. The most common forms of documentation required are::
- Airway Bill or Bill of Lading
- packing list
- commercial invoice
You can find more about import tariffs in the Market Access Database (MADB).
8.2 Regulations
There is no independent monetary policy in Panama. There are no legal restrictions on capital outflows or transfer of funds abroad.
9. Business behaviour
The national language in Panama is Spanish. English is spoken by some people in government and business elites, but is not universally spoken.
Most business documentation must be completed in Spanish.
10. Entry requirements
You don’t need a visa to enter Panama for up to 30 days. Your passport must be valid for at least three months at the time of travelling.
10.1 Travel advice
If you’re travelling to Panama for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.
11. Contacts
Contact the Department for International Trade (DIT) team in Panama for more information and advice on opportunities for doing business in Panama.