Over the last two decades, Panama has positioned itself as Central America’s leading country for international investment. The Panama Canal is a leading factor driving Panama’s economy, making it a strategic location for shipping and commerce. Free trade zones also play a significant role in making Panama a key player.
Colón, Panama, has been the home of the largest Panama free trade zone for nearly eighty years. The city’s port is near the Caribbean entrance to the Panama Canal. This strategic location makes it ideal for importing and re-exporting goods and materials throughout Central and South America. It has abundant investment opportunities as a commercial hub for the Western Hemisphere.
What is a Free Trade Zone?
A free trade zone is a designated area within a country. It provides a place where goods can be traded or manufactured without being subject to certain tariffs. Businesses can avoid paying some taxes and customs in these zones. Since these areas simplify the import/export process, they encourage international trade and attract investment.
History of the Panama Free Trade Zone
Shortly after the Canal’s completion, Colón Chamber of Commerce officials began discussing the merits of creating a free trade zone. It made sense, as their port was so close to the opening of the Panama Canal. The zone officially began operating in 1948. Today, it is the largest free trade zone in the Western Hemisphere and the second largest in the world.
There is another free trade zone in Panama Pacifico near Panama City at the Pacific entrance to the Panama Canal. This zone is known for its attractive tax exemptions and specializes in serving high-tech manufacturing and logistics companies. Other Panama free trade zones in Marpesca and Panapark have specific trade focuses and benefits.
What Makes a Panama Free Trade Zone Beneficial for Investors?
Free trade zones can offer attractive benefits to investors. The following are some advantages investors may experience in free trade zones:
- Tax and Duty Benefits: Low tax duties and limited tariffs are the rule in free trade zones. This makes utilizing them to re-export products to other international markets more lucrative.
- Adaptable Business Models: Free trade zones allow many commercial activities. In addition to importing and re-exporting, entrepreneurs and investors can set up sales and distribution of their products. The zones also offer warehousing and other storage options, adding to their versatility.
- Trade Agreements: Panama’s positioning as a hub for international trade included signing trade agreements with several countries. These agreements enhance the free trade zones’ ability to lower shipping costs.
- Investment Opportunities: Manufacturing, logistics, and high-tech services are among the most lucrative investment opportunities in Panama’s free trade zones. Importing and re-exporting work very well in these sectors. Investors looking for excellent deals and impressive ROI should consider doing business in an FTZ.
Other benefits of free trade zones include relaxed labor laws and easier hiring of foreign workers. Tax exemptions on duties and import fees make doing business less expensive. Excellent infrastructure, like ports, well-built roads, and other transportation networks, makes them accessible. Free trade zones also have excellent security, ensuring your business investments are well-protected and taken care of.
Free Trade Zones Offer Unique Investment Opportunities
There are requirements to set up a business in a free trade zone. You must make a formal request to the National Commission of Free Zones. Bank references are also required. Investors must also conduct a study and provide results covering a variety of criteria. That said, there are many benefits to investing in FTZs. Expanding your portfolio with FTZs could be a valuable way to diversify.
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