Panama Hopes To Become Latin American Financial Services Hub

by Mike Godfrey, Tax-News.com, Washington

01 October 2003

According to participants at the Council of the Americas conference recently, financial and trading services already contribute 80% of Panama's Gross Domestic Product, and a further initiative is afoot which backers hope will help transform the country into Latin America's regional financial services hub.

In partnership with the World Bank's International Finance Corporation, the Panamanian government is seeking to transform the American military's Howard airforce base into a special economic zone with tax incentives and high-tech logistical and telecommunications facilities. It is hoped that the project will attract some $600 million in investment and create 20,000 jobs over the next two decades.

Legislative approval for the initiative is expected to be forthcoming by the end of this year according to Alfredo Arias, general administrator of the Interoceanic Regional Authority, which administers private and public investment programs.

However, this is not to say that Panama is not attractive to foreign investors at present. Currently, no income tax is levied on foreign transactions booked through Panamanian offices, and there are no restrictions on foreign ownership of commercial undertakings. Additionally, there are no duties or tariffs imposed in the Colon Free Trade Area which also provides for exemptions on export income.

Unsurprisingly, the finance sector is the main pillar on which the country's economy rests, and while Panama's GDP is valued at a relatively small $12.6 billion, the total value of the financial sector's assets (as at the end of June 2003) was $32.5 billion, the Wall Street Journal reported.

Additionally, the country's stock exchange is currently seeking to extend Central American integration into South America and Panama, and the authorities have signed memorandums of understanding with financial regulators in nearby Costa Rica and El Salvador.

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