Panama: A beautiful country, alive with growth and opportunity

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View of the Coastal Strip in Panama City

Panama is easy to find on a map of the world. It's that tiny, narrow isthmus which joins the two great land masses of North and South America. Zoom in to a verdant land of mountains, rainforest, arable coastal plains and islands. Zoom in closer to the Panama Canal and look at the new, wide locks which will double its capacity. Notice that ground has just been broken for a port extension on the west bank; on the opposite bank a new port is scheduled to begin construction.

The iconic Bridge of the Americas defines the Pacific entrance to the Canal – soon to have a sister bridge with six lanes and Line 2 of the Metro system crossing to the special economic area of Panama Pacifico and the western satellite towns. Scroll over to the Caribbean side and you see another new bridge over the canal nearing completion, and building activity on the streets of Panama’s second city, Colon, which is undergoing a major urban renewal.

You  are  looking  at  a  beautiful  country,  alive  with growth and opportunity.

The  geographical  position  of  Panama  is  what  gives this country its unique character, its history and a clout which is quite disproportionate to its diminutive size.

The Panama Canal is the principal factor. Before that it was the Camino Real and Las Cruces trails across the isthmus – the route of the Spanish conquerors for moving the wealth of the new continent to Europe. Then the railroad,  which  carried  thousands  of  adventurers  to  the  Californian gold mines.

Much  has  changed,  but  the  principle  remains  the same.

The  Isthmus  is  an  important  gateway  of  North  and South America  and  a  hub  of  business  and  commerce, thanks  to  its  comprehensive  multimodal  logistics  platform with ports, railway, modern roads and of course the expanded Panama Canal.

Many  multinational  companies  have  moved  their headquarters  here,  attracted  not  only  by  the  privileged geographical position, but also by the tax incentives, the dollarized  economy,  the  political  stability,  the  banking center and the favorable investment conditions that exist in the country.

The Investment Stability Law No. 54 of July 22, 1998, guarantees equal rights to foreign and national investors with regards to investments and business practices, with no restrictions on the outflow of capital or outward direct investment.

Panama City at night

History: Panama  was  inhabited by  several  indigenous  tribes  prior to its discovery by the Spanish conqueror, Rodrigo de Bastidas in 1501.

The territory broke away from Spain in 1821 and joined a union of Nueva Granada,  Ecuador,  and  Venezuela and  Colombia  named  the  Republic of  Gran  Colombia. When  Gran  Colombia  dissolved  in  1831,  Panama and Nueva Granada remained joined, eventually  becoming  the  Republic of  Colombia.  With  the  backing  of the  United  States,  Panama  seceded from Colombia in 1903, allowing the Panama Canal to be built by the U.S. Army  Corps  of  Engineers  between 1904  and  1914.  In  1977,  an  agreement was signed for the total transfer of the Canal from the United States to Panama by the end of the 20th century, which culminated on December 31, 1999.

Cathedral Church in Casco Antiguo

Geography: The  Republic  of Panama  is  bordered  by  Costa  Rica to  the  west,  Colombia  to  the  southeast, the Caribbean to the north and the  Pacific  Ocean  to  the  south.  It mostly lies between latitudes 7° and 10°N, and longitudes 77° and 83°W (a small area lies west of 83°).

The highest point in the country is Volcán Barú , which rises to 3,475 meters  (11,401  ft.).  A  jungle  forms the Darien Gap between Panama and Colombia and creates a break in the Pan-American Highway.

The country has nearly five hundred rivers, the most important being the Río Chagres. The central part of the  river  is  dammed  to  form  Gatun Lake, the main element of the Panama Canal. When it was created, Gatun  Lake  was  the  largest  man-made lake in the world, and the dam was the largest earth dam. It drains northwest into the Caribbean. The Kampia and Madden Lakes (also filled from the Río Chagres) provide hydroelectricity for the area of the former Canal Zone.

Climate: Panama  has  a  tropical climate. Temperatures are uniformly high—as  is  the  relative  humidity — and there is little seasonal variation.
Diurnal ranges are low; on a typical dry-season day in the capital city, the early morning minimum may be 24 °C (75.2 °F) and the afternoon maximum 30 °C (86.0 °F). The temperature seldom exceeds 32 °C (89.6 °F) and then only for short periods. Almost  all  of  the  rain  falls  during  the rainy  season,  which  is  usually  from April  to  December,  but  varies  in length  from  seven  to  nine  months.
In  general,  rainfall  is  much  heavier on the Caribbean than on the Pacific side of the continental divide.

Economy: Panama  is  projected to  be  the  fastest  growing  economy in Central America. The IMF is predicting  GDP  growth  of  6.4%  while the  World  Bank  is  predicting  GDP growth  of  7%.  The  current  unemployment rate is 4.1%. According to Forbes  Magazine,  economic  growth will be bolstered by the Panama Canal  expansion  project. This  features the  construction  of  a  third  set  of locks, which will allow the canal to handle  post-Panamax  ships  with  a capacity of up to 15,000 containers, instead  of  the  current  maximum  of 5,000.

GDP Growth Predictions for Latin America 2015

The  transportation  and  logistics services  sectors,  along  with  infrastructure development projects, have boosted economic growth.

Panama’s  economic  freedom score  is  64.1  and  the  country  is ranked 14th out of 29 countries in the South  and  Central  America/Caribbean region, and its overall score is above the world average.

The country’s top individual and corporate  income  tax  rates  are  25 percent. Other taxes include a valueadded tax of 7% and a capital gains tax.

Panama’s  average  tariff  rate  is 7.6 percent, and the country is relatively  open  to  international  trade.
The  government  welcomes  foreign investment.  The  financial  sector, vibrant  and  well-regulated  as  a  regional financial hub, provides a wide range  of  financing  options.  Capital markets  are  relatively  sophisticated and continue to expand.

Free trade agreements: Panama has  free  trade  agreements  with  the United  States,  Canada,  Chile,  Mexico,  Peru,  El  Salvador,  Singapore, and  a  partial  one  with  Colombia.
There is a Central American Association Agreement  with  the  European Union.

Competitiveness rate: Panama‘s competitiveness  rate  was  4.44%  in 2014 and the country ranks number 48  in  the  Global  Competitiveness Index  list.  Standard  &  Poors  credit rating  for  Panama  stands  at  BBB.
Moodys rating for Panama sovereign debt is Baa2. Fitchs credit rating for Panama is BBB. In general, a credit rating  is  used  by  sovereign  wealth funds,  pension  funds  and  other  investors to gauge credit, thus having a big impact on the country’s borrowing costs.

Population: Panama  had  a population  of  3,984,995  in  March 2015.  The  capital  and  largest  city is  Panama  City,  whose  metro  area is home to nearly half of its people.
The  CIA  World  Factbook  gives  the following  statistics  for  the  population: “70% mestizo (mixed Amerindian and white), 14% Black/mulatto, 10%  white,  and  6%  Amerindian”.
The Amerindian population includes seven  indigenous  peoples:  Ngäbe, Kuna (Guna), Emberá, Buglé, Wounaan,  Naso  Tjerdi  (Teribe),  and  Bri Bri. Around 94.5% of the population is literate.

Language: The culture, customs, and language of the Panamanians are predominantly  Spanish  and  Caribbean. The official and dominant language is Spanish. About 93% of the population  speaks  Spanish  as  their first  language.  However  English  is the language of commerce.

Government: Panama  is  a democratic  republic.  The  Constitution  treats  foreigners  and  nationals equally. The President is the head of state and government and is elected by direct votes. The Executive, Legislative and Judicial powers operate independently.
The  country  has  ten  provinces and  five  comarcas  (reservations), populated by a variety of indigenous groups.

Currency: The Panamanian currency  is  officially  the  balboa,  fixed at  par  with  the  United  States  dollar since independence in 1903. In practice Panama is dollarized: US dollars are legal tender and used for all paper currency, while Panama has its own coinage. Because of its ties to the US dollars, Panama has traditionally had low inflation and in 2014 registered only 2.6%.

Legal Framework: Panama has laws  and  tax  incentives  alongside strict  investment  protection  legislation in order to promote investment and  fair  trade.  The  International Headquarters  Law,  The  Tourism Law,  The  Special  Economic  Areas Law are just some to be mentioned.
The  Public  Registry  gives  transparency  to  company  registration,  recording  of  mortgages  and  liens  and transfer of title to properties.