Download General Overview on Panama’s Economy and Investment Climate

General Overview on Panama’s Economy and
Investment Climate
General Information About Panama
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•
•
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Capital: Panama City
Total Area: 75k Sq km
Population: 3.9MM (2014 estimate)
Political Division: 10 Provinces
and 5 Indigenous Regions
• Government: Constitutional
Democracy
• Currency: US Dollar, since 1904
• Language: Spanish (Official),
English (Commercial)
Panama: The Path of Growth
Source: Index Mundial, World Bank, Panama Canal Authority, and CIA World Fact Book
1999
2013
GDP Per Cápita
•The standard of living in Panama has increased over the past 14 years
Total GDP
•The development of the logistics sector and FDI growth over the past years has
improved key economic sectors in Panamá.
MHQ
•A friendly legal framework for investors including attractive tax incentives
have led Panama to became a center for MHQ in LAC
Annual Industrial
Prod. Growth
•Panama is undergoing robust construction initiatives and manufacture industries
with an average growth between 4 to 10% over the last 10 years
Exports
• Panama’s exports have grown 3 fold since 1999 demonstrating
the growth of industry and service
Imports
Panama Canal
Revenues
Poverty Rate
Tourism
•A high demand of foreign proucts and consumer spending, luxury goods,
construction materials, automobiles and more.
•Currently 90% of the world’s ships can pass through the Canal, providing high
revenues from ship transit
•Several social programs are running with a common purpose to reduce
general poverty in Panama. Results are shown over the last decade.
• In 2012 Panama was voted No1 tourist destination for 2012
in several global publications including New York Times
ANNUAL TOURISTS
Macroeconomic Environment
Net Debt vs. Net Debt/GDP Ratio
Debt Composition
(In MM, USD)
17,112
40%
38%
37%
14,441
14,721
2.9%
18.8%
13,022
11,602
36%
10,404
9,615
External Debt
(78.3%)
34%
35%
Local Financing
(18.8%)
36%
78.3%
2009
2010
211
2012
2013
Oct-13
Oct-14
Other Internal
Financing (2.9%)
Favorable Macroeconomic Environment
Evolution of GDP per capita of
Panama. 1999-2013
Estimated growth 2014% of GDP in Latin
America and the Caribbean ECLAC
6.7
Panama
11,037
2013
2012
Bolivia
2011
R. Dominicana
2010
Nicaragua
2009
Colombia
2008
2007
Ecuador
2006
Peru
2005
Paraguay
2004
2003
Guyana
2002
Suriname
2001
Costa Rica
2000
1999
0
2
4
% GDP Growth Estimate
6
8
0
2,000
4,000
6,000
8,000
Figures in USD
10,000 12,000
A Country Open for Business
Ranking Doing Business*2009-2014
Variation in the number of positions
Panama
26
Peru
20
Costa Rica
15
Colombia
10
Brazil
9
Chile
6
Mexico
3
Ecuador
Venezuela
Argentina -13
Country
1
-7
Global
Ranking
2013
Global
Ranking
2014
Chile
34
34
Peru
39
42
Colombia
42
43
Mexico
51
53
61
55
Guatemala
93
79
Uruguay
85
88
Costa Rica
109
102
Belice
104
106
Panama
Investment Grade
Rating
Agency
Term
Rating
Date
Long Term; Foreign
Currency
BBB
July 2, 2012
Short-Term Foreign
Currency
A-2
July 2, 2012
Long-Term Local
Currency
BBB
July 2, 2012
Short Term Local
Currency
A-2
July 2, 2012
Long Term; Foreign
Currency
BBB
March 7, 2014
Long-Term Local
Currency
BBB
March 7, 2014
Short Term Local
Currency
F3
March 7, 2014
Long Term; Foreign
Currency
Baa2
Oct 31, 2012
Long-Term Local
Currency
Baa3
Jun 9, 2010
Perspective
Stable
Stable
Stable
 The
stable
outlook
suggests that no changes
are expected in the next
2 years.
 Rating agencies expect
average growth rates of
6% without significant
changes in fiscal policy.
A Growing Economy with Stable Perspectives
Annual FDI Flows into Panama 2004-2013
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
6.2%
US$ Millones
GDP % Growth per Year
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
2006 2007 2008 2009 2010 2011 2012 2013 2014
I Half
4,653.5
+56.2%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unemployment Rate
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
By mid 2014, FDI figures reached US$ 2,575.4
million, which means 26% more in comparison to
last year inflows over the same period.
4.3%
2006 2007 2008 2009 2010 2011 2012 2013 2014
Other social activities
Social service activities and private
health
Private Education
Real Estate activities, business and rent
Financial Intermediation
Transport, storage and comunications
Hotels and Restaurants
Wholsale and Retail
2012
Construction
Electricity, gas and water supply
2011
Manufacture Industry
Mining and quarries
Fishing
Agriculture, live stock and forestry
GDP figures in US$ Million
Panama’s GDP Structure per Sectors
2010-2013
6,000.0
5,000.0
2013
4,000.0
3,000.0
2,000.0
1,000.0
-
Logistics Sector in Panama
% increase of logistic sector in
Panama’s GDP
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
13.2%
12.3%
 The
transportation and communications sector
represents about 25% of GDP.
 Panama
maritime ports move more than 6 million
TEUs per year.
11.3%
9.0%
6.1%
2009
2010
2011
2012
2013
 In
2013 transit through Tocumen International
reached 7.7 million passengers. This figure is
expected to double once operations on the south
terminal begin.
 The Free Zone law, The Panama Pacifico Zone, The
Colon Free Zone and the Multinational
Headquarters laws are the axes of the framework
towards the promotion and attraction of FDI in this
sector.
Dimensions of Locks and Vessels
Existing Locks Max Vessel size: 4,400 TEU’s
33.5 m (110’)
32.3 m (106’)
12.4 m
(39.5’)
55 m (180’)
12.8 m (42’)
49 m (160’)
18.3 m (60’)
15.2 m
(50’)
New Locks Max Vessel size: 12,600 TEU’s
Main Sea Trade Routes
POPULATION 2014 (In MM)
Caribbean
36.8
43.1
Central America
407.1
South America
471.6
North America
958.6
Total
East-West Route
North-South Route
Both
This is a major advantage for developing relay traffic as it provides the possibility of linkages
between multiple services on both east-west, and north-south routes.
Global Maritime Trade Volume Through
Panama Canal in %
Merchandise Share
% of Global
Maritime
Trade
Containerized Cargo
4.7%
Grains
10.6%
Petroleum and Sub Products
1.3%
Coal
1.3%
Mineral and Metals
1.8%
Chemical
5.8%
Panama Canal Share on
Worldwide Trade
6%
Source: Panama Canal Authority based on IHC data, October 2013
The
Air Connectivity
TORONTO
BOSTON
NUEVA YORK CHICAGO
WASHINGTON D.C JFK
LAS
VEGAS
LOS
ANGELES
ORLANDO
MIAMI
MONTERREY
MEXICO
GUADALAJARA
HABANA
NASSAU
CANCUN
PUNTA
KINGSTO SANTIA CANA SAN
MONTEGON
GO
JUAN
ST
PORT AUSANTO
BAY
GUATEMALA SAN PEDRO
MAARTEN
ARU
PRINCE DOMINGO
SULA
CURAÇAO
BA
TEGUCIGALPA
MARACAIB
SAN
PORT OF
BARRANQUILLA
SAN
SALVADORMANAGUA
CARTAGENAO
CARACAS SPAIN
ANDRES
LIBERIA
VALENCIA
CUCUTA
SAN
BUCARAMA
JOSE
MEDELLIN
NGA
PEREIRA
BOGOTA
CALI
• 69 destinations in 30 countries
• Transit of over 7.7 MM passengers
in 2013
• Construction of 2 new international
airports plus improvements in 3
existing airports
• $779 MM expansion of Tocumen,
adding 20 new gates
QUITO
GUAYAQUIL
MANAUS
IQUITOS
RECI
FE
LIMA
BRASILIA
SANTA
CRUZ
BELO
HORIZONTE
ASUNCION
SANTIAGO
SAO
PAULO
CORDOBA
BUENOS
AIRES
MONTEVIDEO
PORTO
ALEGRE
RIO DE
JANEIRO
Telecommunications Connectivity
Network Readiness Index 2014
Panama is ranked 43rd worldwide and 2nd in Latin America by the "Network Readiness
Index" of the World Economic Forum 2014
Construction
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Construction on GDP and Credit
Loans by NBS. Data in US$ Million.
Years 2007-2013
2007 2008 2009 2010 2011 2012 2013
Construction Loans

4500
4000
3500
3000
2500
2000
1500
1000
500
0



Construction GDP

In 2013 construction generated more than $4.1
billion, accumulating 12% of GDP. This figure was
30% higher than 2012.
A joint venture business model is very common in
the construction sector.
There is no restriction on the entry of foreign
companies on this sector.
Construction of lines 2 and 3 of the Panama Metro
raises new opportunities for urban development in
eastern and western areas of Panama City.
The arrival of expats represents good option for
real estate companies to rent or sell apartments
and houses at high income areas such as Costa del
Este, Panama Pacifico, among others.
Financial Sector in Panama
Growth rate of Financial Intermediation. Years
2009-2013
12.0%
9.6%
10.0%
8.0%
7.6%
2.1%
2.0%
0.0%
-2.0%
-0.9%
2009
2010
2011
2012
banks.
 Under
the National Banking System, 52% of total
assets belong to international private banks, 35%
to Panamanian private banks and 13% to Official
Banks.
8.2%
6.0%
4.0%
 76% of the Banking Center is comprised by foreign
2013
 The
average lending rates (on loans), have
remained, on average, at about 10% in the period
1990-2012, falling below that level in recent years
as a result of a global trend of lower rates.
 Deposits and loans keep showing a growing trend.
Financial Sector in Panama
•
•
•
•
No Central Bank
Dollarized economy since 1904
90 banks (national and international)
US$ 101.5 billion in total assets in 2014
• By 2013, total premiums reached US$ 1,315.9
million (13.5% more than 2012). Car and Health
insurance are the major premiums in local market,
gathering 1/3 of total premiums by 2013. There
are 31 companies in this sector.
Total Assets
Domestic
Foreign
2014
2013
2012
2011
2010
European Crisis
Suprime Crisis
Crisis in Argentina
Dot Com Crisis
100,000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Asian Crisis
80,000
1998
1997
1996
1995
1994
1993
1992
1991
1990
IBC, Internal vs. External Assets
120,000
60,000
40,000
20,000
0
Total Deposits
Foreign
Domestic
2014
2013
2012
European Crisis
Suprime Crisis
70,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
Crisis in Argentina
Dot Com Crisis
60,000
2002
2001
2000
1999
1998
40,000
Asian Crisis
50,000
1997
1996
1995
1994
1993
1992
1991
1990
IBC, Internal Vs. External Deposits
80,000
30,000
20,000
10,000
0
TPA Benefits
Immediate and Progressive Tariff Rate Elimination
Telecommunications Market opening
Investor Protection
Greater Protection of Copyright and IP
Labor and Environmental Rights
Equal conditions for Foreign Investors
Panama Export Figures and Trade Partners
Evolution of Panama’s FOB Values for
Exports in US$ millions. Years 2003- 2013
Major Trade Export Partners by 2013
United States
1,400.0
1,000.0
Canada
18.1%
37.4%
1,200.0
China
7.8%
843.9
Costa Rica
800.0
Germany
600.0
Netherlands
400.0
Taiwan
6.1% Italy
200.0
0.0
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2.7%
3.4%
3.4%
5.9%
India
United Kindom
5.8%
4.7%
Rest of the World
4.7%
 United States has been historically Panama’s main trading partner.
 Major national exports come from agricultural and agro industrial sector, which accounts for 45% of total
exports in 2013
 Panama has signed FTA’s with the following countries: United States of America, Canada, México,
Colombia, Chile, Peru, Singapore, Taiwan, and the Central American countries.
 Special agreements are included with the EU and EFTA.
Panama Import Figures and Trade Partners
Panama’s major trade partners on
Imports 2013
CIF Value on Imports by Panama.
Years 2003-2013
14,000.0
48.9%
12,000.0
24.3%
United States
China
10,000.0
México
8,000.0
Costa Rica
6,000.0
Colombia
4,000.0
Spain
2,000.0
South Korea
0.0
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2.1%
2.8% 2.9% 3.0%
Japan
7.9%
4.1%
4.0%
Rest of the World
 The Colon Free Zone and Petroleum Free Zone represented 26% of total imports from the rest of the
world in 2013.
 Imports have shown a growing trend over the past 3 years, mainly due to capital goods impact,
public projects by the government and higher demand from logistics and communication companies.
Panama’s Services Figures
Service Trade Trend 2006-2013
Service
Exports
US$ Million
% Share
% Growth
vs 2012
Transport
4,802.4
49.1%
1.7%
Travels
3,316.2
33.9%
8.1%
6000
Financial
Serv.
566.7
5.8%
-16.2%
4000
Comm. Serv.
327.1
3.3%
0.4%
2000
Insurance
Serv
275.5
2.8%
103.0%
Others (6)
478.9
4.9%
13.8%
Total
9,766.8
100%
4.5%
12000
(In MM USD)
10000
8000
0
2006 2007 2008 2009 2010 2011 2012 2013
Exports
Imports
80% of the Panamanian economy is related to services
Service exports represent 92% of total exports, excluding The Colon Free Zone
Energy Sector
Installed Capacity vs Energy top demand in
MW. Years 2009-2013
3000
 Energy demand in Panama is estimated to have an
annual growth rate of 7.5% per year until 2016
and 5.6% in the next 10 years
2500
2000
 New
concessions are aimed at addressing future
energy needs as well as the diversification of the
energy matrix
1500
1000
500
0
2009
2010
2011
Installed Capacity
2012
2013
Top Demand
 The
current goal is to diversify the energy matrix,
where 80% will be produced from renewables
while the remaining 20% would be generated from
fossil fuels.
 17%
of the energy produced is lost through the
gaps in transmission lines and network absorption
capacity. This puts a limit on the system’s efficiency
and productivity.
Electricity Demand in Panama
2500
2000
1500
GROWTH RATE 2012-2016: 6%
(2012)
2012-2013
Growth 4.16%
Forecast
Pronostico
MW
Demanda
Máxima
Max.
Demand
1000
500
0
Years
Multinational Headquarters Law
 Currently there are 106 companies
established under the MHQ law in different
sectors of the economy
 MHQ Companies must have at least 200
million in assets worldwide to apply as MHQ
Company and get all the benefits.
 28 MHQ companies come from the US.
 MHQ office at Ministry of Commerce and
Industries is certified with ISO 9001.
 The MHQ office has its own one-stop-shop
that offers migration services where
companies can obtain their MHQ visa’s.
MHQ Main Benefits
Fiscal
Incentives
Labor
Incentives
Migration
Incentives
• Total Exemption on Income Taxes based in offshore
operations.
• Tax scheme negotiation is possible between company and
Panamanian State.
• Exemptions from sales tax for services rendered to related
corporations abroad.
• Panamanian labor code restrictions to hire expats does not
apply under this law.
• MHQ labor force are not compeled to pay social security or
income tax.
• MHQ permanent workers are exempt from import tax on
household when they are moving for the first time.
• Permanent and temporary visa availability, with several
benefits.
• Family members are also included with visa Benefits
(couple, sons, fathers, and child under legal custody)
Allowded Activities Under MHQ Law
•
•
•
•
•
•
•
•
•
Financial Management and Treasury Services
Operations Management
Logistics and/or Storage Components
Technical Assistance
Operations Support and R&D
Business Group Accounting
Planning, Design and Support of Products
Consulting, Marketing and Advertising Activities
E-Processes and Operation Consolidation
Panama’s Free Zone Regime
Law 32 April 5th, 2011
Categories
•Manufacturing
•Assembly
•Processing enterprises of finished or semi elaborated goods
•Service Export enterprise
•Environmental Services
•High Education Centers
•Scientific research centers
•Logistic Services
•Health Services
•Companies related to Aviation Services and Airports
Incentives
•
Exemption from export taxes and duties on
all goods or services required for its
operations.
•
Exemption from income tax on lease and
subleases for Free Trade Zones promoters.
•
Tax Exemption for capital goods and
properties.
•
Exemption from income tax to storage
services whose impact is measurable abroad.
Conclusions



Beyond market size, Panama’s geostrategic location has historically
provided an influence on a regional and global level.
Over the last 10 years growth has been remarkable compared to
other countries in Latin America. Currently, policies must be geared
towards improvement on productivity and on the labor force on key
growing sectors. This must be accompanied by a responsible fiscal
policy.
Along the way, there are key issues that need to be addressed, such
as developing Value Added Logistic Services towards the logistic
cluster and improvements on infrastructure.
Thank You!
Commercial Inquiries: [email protected]