Thetabiz Corporation

* Traditionally, Panama has maintained a rather liberal regime for foreign investment and investment
in financial instruments. The government and the Panamanian business
community actively encourage foreign direct investment (FDI). Laws in
general make no distinction between domestic and foreign companies.
*Panama has no legal restrictions on the transfer abroad of funds associated
with or capital employed in an investment. There are no restrictions on
capital outflows or convertibility. Panama uses the U.S. dollar as legal
tender. Currency conversion therefore is not an issue.
* Embassy is unaware of any outright expropriation of property by the Panamanian government
in recent years.
* The business community generally lacks confidence in the Panamanian judicial system as an objective, independent arbiter in legal or commercial disputes, especially when the case involves powerful local
figures with political influence. When disputes with foreign investors arise, as they do from time to time, the investors often choose not to pursue remedies available to them via the court system. In a few cases
the appearance of corruption has been so widely accepted as to constitute
conventional wisdom. The decision by investors to avoid the court system is moreover understandable, given massive case backlogs and the specter of corruption.
* An increasingly popular and viable alternative for settling disputes is the Center for Reconciliation and
Arbitration established by the Panamanian Chamber of Commerce. Rulings by arbitrators are generally fair and reasonable.
* There are no legal performance requirements such as minimum export percentages or significant
local procurement rules.
* With the exception of retail trade, the media, and a few professions, foreign and domestic entities have the right to establish, own, and dispose of business interests in virtually all forms of remunerative enterprise.
* Some of Panama’s business, corporate, and banking codes have been modernized and are, in general, enforced so as to strengthen confidence in property rights.
* Protection of intellectual property rights (IPR) in Panama has improved significantly over the
past several years.
* Panama’s relatively recent accession to the WTO, wholesale privatization, and overhaul of various laws that regulate economic activity created a fluid regulatory climate. Panamanian
regulators have been exposed only recently to complex issues, many of
them technical. Regulators’ responsiveness to the concerns of those they
regulate have been mixed, depending on the sector. U.S. businesses
have complained of arbitrariness or a lack of responsiveness by
officials responsible for issuing sanitary/phytosanitary permits for
the importation of agricultural products and, more recently, that those
same officials have applied unannounced and costly sanitary controls
upon arrival of various shipments of agricultural products that had
previously been pre-cleared for importation.
* Political violence in Panama is relatively rare, however, in 2002, there were several public
demonstrations, including a major public protest against corruption in
Panama City.
* Panama suffers from an expansive, unproductive labor force,
due, in part to, inflexible labor laws
* By regional standards, Panama is a strong advocate of trade liberalization, in part because a relatively
large proportion of its economy is outwardly focused: A.T. Kearney
ranked Panama as the most globalized country in Latin America on its
Globalization Index for 2003. Panama’s strong international thrust
was also evidenced by the fact that it served as Secretariat for the
Free Trade of the Americas from 2001-2003, and continues to lobby to
become the permanent headquarters of FTAA offices.
* Panama has bilateral investment agreements with the United States, the United Kingdom, France,
Switzerland, Germany and Taiwan.

In 2003, Panama completed a
free trade agreement (FTA) with El Salvador. Negotiations are under way
for a FTA agreement with the rest of Central America. Another FTA is
being negotiated with Taiwan. Panama also has bilateral preferential
trade agreements with Costa Rica, Honduras, Guatemala, Nicaragua and
the Dominican Republic. These accords are limited in scope and for
some products are based on quotas. Panama also has limited preferential
agreements with Mexico and Colombia. Previous negotiations with Chile
and Mexico are now on hold. Panama has also agreed to negotiate a more
broad preferential agreement with the Andean Free Trade Agreement (Pacto
Andino). For the past three years Panama has shown a strong interest in a
FTA with the United States. Following a presidential visit to the U.S. in
June 2003, the U.S. expressed its willingness “to explore options for
free trade” with Panama.

Panama is a beneficiary of the Caribbean Basin
Economic Recovery Act, better known as the Caribbean Basin Initiative
(CBI), which provides for one-way free trade access for specific
Panamanian exports to the U.S. In 2000, the U.S. Government enacted
new legislation enhancing the CBI program. The new CBI Law permits more
liberal treatment of textile imports from CBI countries. Since Panama
is not an important textile exporter, the new legislation has limited
value for Panama.

EPZs are well-defined areas for the
establishment of industrial, commercial and service facilities, which
operate in a free trade system. All or most production is exported. A
range of incentives has been established to attract companies into the
EPZs.

The Colon Free Zone (CFZ), the largest in the Western
Hemisphere and second in the world to Hong Kong, is located in the
City of Colon, 90 kilometers from Panama City. The CFZ offers free
movement of goods and complete exemption from taxation on imports and
re-exports. There are no taxes on the export of capital or the payment of
dividends. In addition, there are reduced income tax rates on earnings
from re-export sales. Furthermore, firms located in the CFZ are exempt
from import duties as well as from guarantees, licensing, and other
requirements and limitations on imports. Due to its geographic location,
the CFZ is a major factor in channeling goods from large industrialized
countries to consumer markets in Latin America. Unfortunately, the CFZ
has also been used by the Colombian drug cartels for money laundering
and drug trafficking. Other problematic transactions include trade in
pirated intellectual property and stolen vehicles.

The Government of
Panama designated the Comision Panamena de Normas Tecnicas (COPANIT),
an agency of the Ministry of Commerce and Industry, as the domestic
registering authority for participation in the International Standards
Organization ISO9000 program. There is no legal limitation in Panama
on participation in ISO-9000 by firms doing business here. In fact,
an increasing number of Panamanian firms are seeking or have already
obtained ISO-9000 certification. Panama is a member of the Pan American
Standards Commission (COPAN), headquartered in Venezuela.

Plants, seeds, or animals may be prohibited for import into Panama if so
determined by the Ministry of Agriculture.

Panama has no
special regulations for labeling and marking. Labels are required
to have basic information regarding the name and address of the
manufacturer, expiration date, list of ingredients, lot number, and
the product form, e.g. powder, liquid, etc.

Labels in English are
accepted, except for medicines, household products and foods which
require special instructions. In these cases instructions regarding
dosage, usage, warnings, etc., must be in Spanish. All goods arriving
in Panama intended to be reexported immediately must be marked “PANAMA
IN TRANSIT” on each box or outside container. In general, products which
comply with U.S. labeling and marking requirements will also meet local
requirements and are suitable for sale in Panama.

The Panamanian Fiscal Code
establishes a temporary entry regime of up to one year for all types
of merchandise.

The Vice Ministry of
Foreign Trade was created in 1998 to promote exports and investment. It
facilitates the processing of export documentation through a “One Stop”
(ventanilla unica) office which can reduce the export process to a few
hours. Export documentation required by Panamanian Customs authorities
includes: Commercial Invoice; Export Declaration (usually prepared and
signed by a Customs Broker); Certificate of Origin (issued by the Chamber
of Commerce, Industry and Agriculture of Panama or the Panama Trade
Development Institute); Bill of Lading; Airway Bill; and Veterinary,
Sanitary or Phytosanitary Certificate (when applicable).

There is no requirement to utilize export brokers for export
documentation.

Processing of customs documents in
Panama for imports is fast, efficient and reliable. A customs broker
licensed by the Government of Panama must clear merchandise imported
into Panama through customs. The following goods are imported under duty
free status: consigned to national or municipal governments, imported
by foreign diplomats, consigned to the Panama Canal, sold to vessels
transiting the Canal, or intended for reexport.

Basic import documentation
required by the Panamanian Customs office includes: Import Declaration
(Prepared and signed by a Customs Broker); Commercial Invoice (To be
presented in English or Spanish in quadruplicate); Airway Bill; Bill
of Lading (To be presented in triplicate); Commercial License Number;
Phytosanitary Certificate (In case of animal and plants products, to be
obtained from the U.S. Department of Agriculture); and Certificate of
Free Sale (if required).

Any food product or other item used for human
consumption (including for use on human skin or clothes) may be subject
to the Certificate of Free Sale (CFS) documentation requirement. The
main purpose of the CFS is to prevent the dumping of inferior goods,
especially for human consumption, on the Panamanian market. The CFS
must verify that a product is sold freely and used widely in the
U.S. Potential exporters of items subject to the CFS documentation
requirement may wish to either contact: (1) their trade association which
may provide the service of issuing the documentation, or (2) the Food
and Drug Administration, Division of Programs and Enforcement Policy,
200 C Street, SW, Washington, D.C. 20204.

If for any reason the bill
of lading or any other required document cannot be presented within 24
hours after the shipment has arrived, clearance of the goods will be
permitted by posting a bond equal to the amount of import duties. The
bond is cancelled if the prescribed documents are presented in due
form within a period of 90 days. The bond may be extended in justified
cases, an additional 90 days.

The Fiscal Code regulates all matters concerning the country’s exports. The
Code establishes that all national products may be exported, except:
drugs (with the exception of those having pharmaceutical or scientific
purposes); staple products determined by the Government to be temporarily
scarce in the country; and those products the Panamanian Government
decides not to export for reasons of international agreements or for
economic interest of the country.

Exports subject to the payment of taxes require an Export Authorization,
which is issued by the National Customs Office, Ministry of Economy
and Finance. Exports subject to taxes are: metals and natural
resources.

No import licenses are required in Panama. Any company holding a commercial
license can freely import goods into Panama. Individuals or companies
wishing to engage in commercial or industrial activities require a
commercial or industrial license. Phytosanitary permits are required
to import some agricultural products. These were routinely issued
in the past but as previously stated, are now frequently refused or
delayed as a means of limiting agricultural imports.

Panama assesses import duties on an ad valorem basis. The ad valorem system uses the declared C.I.F. value as the basis for import duty calculations and in some cases utilizes historical price information as a reference. In addition to the duty, all imports into Panama are subject to a five percent transfer or value added tax (ITBM) levied on the C.I.F. value, plus import duty and other handling charges. Pharmaceuticals, foods and school supplies are exempt from the ITBM tax.

Beginning in 1995, Panama adopted the Harmonized System (HS) or Tariff Nomenclature as its customs classification system. In general, the Panamanian customs system tends to be efficient and straightforward and does not represent a significant obstacle for U.S. exporters. For more information contact the Panamanian Customs’ office.

The current Panamanian Government took office in September 1999. The previous Government joined the WTO and lowered tariffs to a maximum of 15%, except for a few agricultural products, and to an overall average of 12%, the lowest in the region. The revised import duty structure was significantly lower than the one negotiated for WTO accession and represented a substantial commitment to trade liberalization. The current Government has maintained this policy with regard to manufactured products but has largely reversed it for agricultural products. Duties for most agricultural products have been increased to the maximum limits permitted by the WTO. Additionally, the Government has erected substantial non-tariff barriers for certain agricultural products including pork, produce (permanent barriers), beef, poultry and rice (seasonal barriers). The mechanism utilized has been alleged phytosanitary concerns over non quarantine diseases. The Government has declared it will abide by WTO commitments.

The High Value Products (HVP) sector continues the most important category of imported products in Panama. HVP imports from the US were $83 million during CY02, representing a 4% decrease as compared to the previous year. HVP was composed of Snacks ($15 m, all time high), Processed fruit and vegetables ($10 m), Fruit and Vegetable Juices ($9m), Pet Foods ($6m, all time high), Dairy Products ($6 m), Wine and beer ($6 m), Fresh fruit ($4 m), Poultry meat ($4 m), Red meats ($3 m), Breakfast cereals ($3 m), and other ($17 m).

Best prospects are: Snacks, Processed Fruits and Vegetables, and Fruit and Vegetable Juices.