Panama As A Strategic First Step In America

Chinese companies should take advantage of this invitation, or at least assess the benefits deriving from establishing themselves in the Republic of Panama as a strategic point for the growth of their business in this corner of the world.

Among the many benefits that Panama is offering I will refer only to four important ones that I think may be of interest to Chinese companies. These are: The Panama-Pacific Special Economic Area, The City of Knowledge, the Regime for Headquarters in the Multimodal Operations Center (SEM) and the Colon Free Zone.

The Panama-Pacific Special Economic Area.

This former US Naval Air Station, known as Howard, is currently under development by the London & Regional Corporation who hold the area as a concession by the Panamanian Government. It is located at the entrance of the Panama Canal by the Pacific Ocean, near the Panama Railroad, the Port of Balboa and Panama City, and just one hour away from the major container ports located on the Caribbean Sea. Additionally, the area has an airport; hangars; communication infrastructure and logistics, and it is important to underscore that most major fiber optic cables in the world reach Panama, providing the country with the best connectivity in Latin America.

It offers a business environment and special regulations particularly attractive for investment, especially for services businesses, as the area offers by law special treatment in the fiscal, labor, immigration and customs areas. It also offers a single government procedure achieving greater efficiency, productivity and ensuring business success. The activities enjoying tax advantages in this area are:

1. Off-shore services
2. The sale and transfer of shares between companies in the area
3. The transfer of assets and services between businesses in the area or businesses located in free zones for oil or port areas.
4. Sale of goods or services to visitors, passengers or crew in transit to foreign countries or ships crossing the Panama Canal or aircraft using ports in Panama offering flights abroad, unless the sale is performed by the manufacturer or a company of the same economic group.
5. Services or activities related to aviation and airports: transportation, cargo and storage handling, maintenance, repair, conversion and reconversion of aircrafts, parts and / or aircraft parts, distribution, manufacturing of parts and / or aircraft parts.
6. Manufacturing of high technology products
7. Multimodal and logistic services
8. Call center services: capture, processing, storage, switching, transmission and broadcasting of data and digital information, links of radio, television, audio, video signals and / or office management data to users within the area or outside the territory of Panama, research and development of resources and digital applications for the use on Intranet and Internet networks. It is important to note that industries that just cater to product import and export without having them in some way processed in the area are not allowed for the time being. Corporations such as Caterpillar and Dell are already there.

City of Knowledge.

Located opposite the first lock of the Canal on the Pacific side, the City of Knowledge is an area created to develop fields related to education, research and innovation.

Like the area described in the first point, the Panama City of Knowledge offers tax and immigration benefits (but not labor benefits), with the difference that this area is aimed at industries different from those on the Panama-Pacific Special Economic Area. Thus companies engaged in :

• Information technology and communication (eg. software development, telecommunications, electronics, multimedia, applications for the logistics sector, developments for e-government, computer security, outsourcing, corporate solutions, among others);
• Bioscience (e.g. biotechnology, medicine, bio-sciences applied to the environment, pharmaceutical, biochemical andindustries involved in other related disciplines);
• Environmental Management (e.g. environmental education, research on climate change centers, environmental monitoring (such as the one developed by NASA), companies involved in reforestation, in various ranges of the energy sector or in the management of clean development mechanisms);
• Human Development (e.g. Universities, schools, sustainable economic development, access to the best academic programs, artistic creation and open and democratic cultural offers) and
• Business Management and Entrepreneurial Culture (Accelerator and business incubator programs).

Colon Free Zone Created in 1948 by the Panamanian Government, the Colon Free Zone is the oldest free zone in Panama. It is located on the Atlantic entrance of the Panama Canal. This area includes a collection and redistribution center, where established companies enjoy tax exemption to develop businesses related to the collection and redistribution of cargo, import, re-export, storage, re-packing, assembly and processing of products. The area features ports, railway terminals, roads and an area near the Colon Free Zone, which allows for better cargo handling. Multinational Company Headquarters on Panamanian Territory

On August 24, 2007, the Panamanian Government enacted Law N° 41, which aims to create a special regime for the establishment and operation of the Multinational Company Headquarters, with the objective of attracting investment, creating jobs and promoting the transfer of technology.

Unlike other places we have presented, this law is for companies that establish their headquarters anywhere inside the Panamanian territory, provided that they carry out any of the following activities:

1. The Direction and / or Managing of business operations in a specific or global geographic area or a company business group. Examples of these services: strategic planning, business development, management and / or training of personnel, control of operations and / or logistics.
2. Logistics and warehousing of components or parts, required for the manufacture or assembly of the products it makes.
3. Technical assistance to group companies or business customers who have purchased products or services on behalf of other companies in the same economic group.
4. Financial management including treasury services.
5. Company accounts.
6. The development of design drawings and / or construction which constitute part of typical business activity of the business group.
7. The electronic processing of any activity including consolidations of business group operations, including network operations.
8. Counseling, coordination and monitoring of guidelines for marketing and advertising of goods or services produced by economic group.
9. Support of operations and research and development of products and services of the group.
10. Any other similar service previously approved by the Cabinet Council through reasoned decision. Companies registered under this Law shall also be entitled to tax benefits (exemption from income tax and tax on the Transfer of Movable Property and Services (ITBMS), labor and migratoryl.

The regimes mentioned above, are complemented with the financial environment and the legal security that Panama has developed over recent years, in addition to the enviable geographical position of the country. We are confident that Panama is the ideal country for starting the commercial operations of Chinese companies interested in entering the market in the Americas.

By David Sucre Levy|david@sucre.net| Sucre, Arias & Reyes Lawyers