Thetabiz Corporation

Attorneys are required, among other things, for establishing a corporation, registering products, registering a patent, obtaining a commercial license, and for handling immigration matters. Attorneys are frequently used to prepare major bids to make sure that paperwork and other requirements are properly completed. In many cases, local lawyer firms become part of consortia participating in major bids.

Panama does not have a Central Procurement Office such as the U.S. General Services Administration (GSA). All purchases of goods and services of any significant value are by law advertised for public bid. Government procurement regulations establish that each government organization is responsible for its own procurement but subject to the supervision of the Ministry of Economy and Finance and the Comptroller General’s Office. The later provides ultimate authorization for all purchasing contracts. Government regulations also establish a process of company pre-qualification for purchases above US$250,000 to ensure that potential suppliers have the proper qualifications. Another feature of the procurement system is that tender documents for major bids are discussed with interested companies in order to assure agreement about an understanding of terms and condition of participation. Lack of transparency, excessive delays, and bureaucracy in the bid selection process have caused problems for U.S. and other bidders in important government bids in the past.

Excessive bureaucracy is also responsible for the government’s poor payment record. Typical payment schedules range from three to six months, after good or services have been invoiced.

Success among distributors is often decided by quality of the training, counseling and support they receive from their principals. U.S. companies should focus on providing U.S.-level training and technical assistance to their distributors and making sure they have the resources to provide after-sales support, including spare parts, service equipment, and quality service to the customers.

The price structure for imported goods in Panama depends on the level of competition. The costs of transportation and import duties vary from item to item. Local prices can be higher or lower than world average depending on local competitive conditions. For the sake of illustration, the calculation below demonstrates average costs added to a product before it reaches the consumer. Import duties average 10% over CIF value and wholesale and retail markups are about 25% each.

Television and newspaper advertising are the promotion tools of choice for the majority of distributors of U.S. products. E-mail marketing is becoming increasingly popular, especially for services. Panama has a very competitive advertising market, with standard prices and very good production quality. Additionally, trade shows, specialized seminars and exhibitions are effective tools for trade promotion. Special sale prices during events such as mother’s and father’s day, back to school and Easter are usually advertised in newspapers during weekends. Most foreign manufacturers of consumer products maintain a high profile presence in the country through newspaper ads, large billboards, sponsored sports events, and TV advertising. Radio advertising is mainly utilized outside of Metropolitan Panama City.

Panama has the highest per capita income in Central America. The majority of income is skewed to a small, consumer goods oriented economic class. These upper-middle and upper class families have high levels of disposable income. They are interested in purchasing high quality, trend-setting goods. Price is less of a factor in purchasing decisions made by this class than for the middle and lower income classes. The majority of Panamanians are interested in quality but price plays a more important role in the purchase decision. The use of the U.S. dollar as legal currency and consumer preference for high quality products at competitive prices are two reasons for high acceptance of U.S. products in Panama. Overall, U.S. products are well accepted in the market and are considered of good quality. However, in many instances, U.S. products must compete against lower priced products especially from the Far East. For example, as in the U.S. itself, Japanese and Korean electronics dominate the market because of aggressive market entry techniques and good quality at competitive prices.

Panama has one of the most modern and flexible corporate laws in Latin America. In order to form a corporation in Panama, the client must furnish the following information:

• The name of the corporation. It may be in any language, but it must terminate in a word or abbreviation indicating that it is a corporation
• The objectives and purposes of the corporation
• The amount of the authorized capital. Usually the authorized capital will consist of US$10,000 divided into 100 shares of US$100 each. Shares may be nominative or bearer shares.
• Duration of the corporation, usually perpetual
• The full names and addresses of three or more directors and/or officers
• The domicile of the corporation

The time period usually involved in setting up a corporation is from 15 days to two months. Attorney fees usually range from US$600 to US$1,500 per corporation.

Exemptions for business license requirements are granted to persons or legal entities engaged exclusively in agriculture, cattle, bee, or poultry husbandry, or in the manufacturing and sale of handicrafts, provided that the work is not performed by hired workers.

Joint ventures, especially for large projects, are becoming common in Panama. Some joint ventures are formed for limited periods of time, such as for a specific construction contract or technology transfer contract. The profits from joint ventures can be distributed annually to each joint venture partner, and are taxed in the same manner as any other income. Panamanian law contemplates the registration of license agreements, although in practice few licensors and licensees do so. License agreements are frequently used to reinforce rights to registered trademarks. The agreements must be attached to the registered trademark and filed with the Industrial Property Department in the Ministry of Commerce and Industry. The agreement becomes part of the file on the trademark covered. Panama is an interesting and potentially profitable site for licensing agreements and joint ventures as well as routine buy/sell operations. The Colon Free Zone offers the U.S. exporter looking for regional marketing arrangements a convenient one-stop distribution center. There have been instances of money laundering, intellectual property piracy and drug trafficking reported in the CFZ. All U.S. firms should be aware of these factors before commencing operations in the Zone.

Panama is receptive to U.S. style franchising. The market for both specific and general franchising opportunities is attractive. Panama maintains no control on royalty payments or transfers. Recreation, entertainment services, fast food, automotive, and hotel and motel franchises are readily marketable as the local market demands better facilities and services. The U.S. Embassy recommends consulting a local attorney for details on how to set up a franchise in Panama. Key factors for market success in Panama are: high quality, customer service, brandname recognition and attractive packaging. U.S. products targeting the middle to uppermiddle income market are usually competitive. Panamanians have a penchant for high quality U.S. products. Consumers with high disposable income follow sophisticated U.S. and European consumption patterns. Most high-end U.S. and foreign brand names are represented in Panama. An aggressive marketing strategy is usually necessary to succeed in this trendconscious market.

According to Panama’s constitution, nationals and foreigners are treated equally under the law. Both Panamanian and foreign companies must fulfill the same basic requirements to organize and operate most types of business activities in Panama. There are restrictions on foreigners participating in retail trade and practicing certain professions. In practice, however, there are legal ways to overcome these restrictions. U.S. firms interested in retailing should consult a local attorney. There is no law regulating the relationship between international suppliers and local agents and distributors. This relationship is only governed by the private agreements made between the parties involved. In cases of contract termination or disputes, the private contract clauses prevail over any other document or practice. Individuals may engage in business activities in their own names or through legal entities. The most commonly adopted form of legal entity is the corporation (sociedad anonima). Other types of legal entities commonly used in Panama are: general partnerships, simple limited partnerships, joint stock partnerships and limited liability companies. The U.S. Commercial Service, offers U.S. companies assistance in identifying potential business opportunities in Panama. We offer the worldwide Gold Key Service (GKS) for those who wish to travel to Panama and the International Partner Search (IPS) for those companies who cannot immediately visit Panama. Both services assist U.S. companies in locating appropriate representatives in Panama.

Business practices in Panama are very similar to those in the United States. Business tends to be direct and straightforward. On average, Panama City accounts for 65% of total national sales of consumer goods, the remaining 35% is distributed among the principal cities of David, Colon, Santiago and Chitre. Generally, the marketing channel structure in Panama is simple. Direct importers act as wholesalers and in many cases also as retailers. This situation is common in the case of apparel, automotive parts and hardware products. In the case of consumer goods, food and medicines, the retail operation is separate from the wholesale operation. For industrial goods, sales are normally handled by local exclusive agents or distributors. In other cases, local firms order directly from U.S. brokers or the manufacturer. Some of Panama’s major importers are also regional distributors for Central and/or South America, with warehousing facilities located in the Colon Free Zone (CFZ). Generally, CFZ importers/distributors have affiliated stores in Panama City for retail sale to the local market.

Due to its strategic location at the mouth of two oceans, Panama, from the time of the conquistadors, has served as the crossroad of trade for the Americas. Today the country is an international trading, banking, and services center. Trade liberalization and privatization over the last several years, while flawed, have added some substance to these assertions. Panama’s dollar-based economy offers low inflation and zero foreign exchange risk. Panama’s Government actively seeks foreign investment. The downturn of Panama’s economy, which started in 1999, modestly reversed itself at the start of 2003. Panama still struggles to overcome the departure of the US military, low prices for its primary exports, higher prices for petroleum imports, reduced trade and investment due to the regional and worldwide economic slowdown, and contraction of domestic demand, however, growth in tourism, telecommunications, and maritime sectors along with recent growth in construction portends that first quarter 2003 gains in the Panamanian economy might continue. The sectors of Panama’s economy that have suffered in 2002 were manufacturing and construction, traditional agriculture, retail sales, fishing, and the exports sector (the Colon Free Zone in particular). According to the Government of Panama (GOP), the economy grew 0.8% in real terms in 2002, compared to 0.3% real growth in 2001. Although Panama’s 2002 per capita GDP is among the highest in the region at US$3,699, this figure is unreliable as an indicator of prosperity overall, because of Panama’s highly skewed income distribution. Panama’s income distribution is second only to Brazil in the hemisphere in terms of inequality. The Survey of Living Standards, produced by the World Bank and the Government of Panama in 2000, estimated that 37% of all Panamanians live in poverty, including over 50% of children under age 10, and 95% of the indigenous population. GDP grew 2.0% during the first quarter of 2003. The GOP predicts GDP growth of 2-2.5% for 2003. Due to the evolution and composition of Panama’s largely services based economy, the extent and nature of local competition is limited in most non-service sectors. Although the United States is Panama’s most important trading partner, with about 40% of the import market, and U.S. products enjoy a high degree of acceptance in Panama, competition is strong in several sectors including: telecommunications equipment, automobiles, heavy construction equipment, consumer electronics, computers, apparel, gifts, and novelty products. Panama’s merchandise imports increased in 2002 by 3.5 percent over 2001 to a total of US$3.1 billion. The value of Panama’s total merchandise exports in 2002 reached US$756 million, a decrease of 6.5 percent over the previous year. The Colon Free Zone alone represents a larger market than Panama’s entire internal market. Free Zone imports totaled US$4.45 billion in 2002, with exports of US$ 4.8 billion. These figures mark a decrease of 6.5% and 10% respectively in comparison to 2001, when imports decreased 0.6% and exports increased 0.4%. The total net contribution of the CFZ to the Panamanian trade balance (Exports-Imports) was US$369.3 million, down slightly from 2001. In 1999, the CFZ experienced one of its worse years ever, a disastrous 23% decline. Zone imports are mostly luxury goods, electronic products, clothing, and other consumer products. Because of this product mix, U.S. market share is somewhat lower in the Zone than in Panama. Hong Kong is the Free Zone’s biggest supplier, while Colombia and Ecuador are the two largest destinations for Zone re exports. As a direct effect of economic slow down of the economy, Panama’s agriculture sector continued to reduce its contribution to the GDP in 2002, which stands now at 6.9%. Falling prices for export commodities such as coffee and sugar continued affecting those sectors, reducing their exports on an average of 2%. Banana exports decreased 13% due to access problems to EU markets and to local labor unrest. Traditional commodities such as rice, corn and beans suffered setbacks due to bad weather conditions (drought caused by El Nińo), forcing an increase in imports. The sectors that experienced the highest growth rates were fruits (mainly melons, watermelons and pineapples) with 7% average increase, and beef with 3% increase. Some agricultural imports are still subject to high duties while non-tariff barriers have proven to be a persistent obstacle to agricultural market opening. The Fisheries sector suffered a setback with exports decreasing 12% due to recurring problems with shrimp virus (the White Spot Virus). Panama paved the way for tuna exports by signing the International Dolphin Conservation Program Agreement in 1998. 2002 witnessed advanced growth in the sector with tuna exports increasing to USD 14 million (a 49% increase), mainly to U.S. markets.

Well you have some assets well over 25.000 or better 50.000 USD? In that case, you should be able to open bank account over Internet, mail or fax. You could send your certified copy of passport by fax and bank account opening application by fax to the Bank of Copenhagen and you would get premier bank account.

How to make payments to your account

You can make payments to your account(s) either by sending a cheque or by having the amount transferred electronically by SWIFT (international transfer og funds between countries) directly from your local bank. The bank’s SWIFT-address is BCPH DK KK. Should you have any doubts concerning the correct procedure, just give the bank a call. On their list of correspondent banks you will find more information on how to transfer funds by SWIFT.

How to withdraw money

Withdrawing money is simple and fast. You only need mail, e-mail, fax or pass on the relevant instructions to us by telephone. The bank will then either send you a bank draft or transfer the funds electronically via SWIFT to your local bank. All requests for third-party payments should be made in writing and/or with a prior given password. Drafts and wire transfers made payable to a party other than the account holder will be assessed a per draft/wire charge in accordance with the Schedule of Fees. Should you decide to come to the Bank personally to withdraw cash, you are most welcome. However, kindly make arrangements for this in advance.

Fitch Ratings, the widely known international rating agency, announced today the rating for the Republic of Panama. Following is the text of the press release:

Fitch Ratings-New York-April 8, 2005: Fitch Ratings, the international rating agency, today affirmed the Republic of Panama’s long-term foreign currency rating of ‘BB+’. Fitch also affirmed the sovereign’s long-term local currency rating of ‘BB+’, the short-term foreign currency rating of ‘B’ and the country ceiling of ‘BBB’. The outlook on these ratings is stable.

“Fiscal slippage beyond what had been anticipated occurred in 2004 in Panama; however, against this, we have seen a strong economic recovery and the new administration’s efforts to strengthen public finances, as demonstrated by the prompt passage of a fiscal reform in January and improvements in fiscal transparency,” said Theresa Paiz Fredel, Director of Latin American Sovereign Ratings at Fitch.

The non-financial public sector (NFPS) registered an estimated deficit of about 5.0% of GDP last year, under new accounting methodology. However, if liabilities not recorded in public finances as a result of arbitration rulings against the state are included, the deficit rises to 6.2% of GDP. In addition, outstanding accounts payable (which were reduced from 3.6% of GDP) add another 0.8% of GDP, the 2004 deficit would approach 7% of GDP. As a result, Panama’s debt/GDP ratio is estimated to have increased to 68%, among the highest in its peer group. The authorities expect to reduce the NFPS deficit to 3.6% of GDP in 2005 with improved tax administration and the rationalization of expenses. As the 2005 budget does not take into account the recently approved fiscal reform, the deficit could be even lower. Nevertheless, Fitch will closely monitor fiscal outturns this year to see if implementation of the new fiscal package delivers the expected consolidation. If the deficit is not reduced substantially in 2005, renewed pressure on sovereign creditworthiness could arise.

With a legislative majority and strong popular support, the Torrijos government, which took office on September 1, 2004, is expected to tackle an ambitious reform agenda early in its term. In addition to the recently approved fiscal reform, the government is committed to obtaining passage of a social security reform and to the expansion of the Panama Canal.

“If meaningful fiscal consolidation is not achieved,” said Paiz-Fredel, “Fitch will be concerned that stronger GDP growth rates may not be sufficient to stabilize debt dynamics, let alone offset any future increase in public debt related to the Canal project.”

Dollarization, a stable financial system, moderate debt service needs, and the Government’s considerable financial and land assets support the sovereign’s ratings. Dollarization has resulted in a long history of monetary and price stability unseen in other emerging markets. In addition, it limits the probability of a devaluation-induced increase in public debt ratios or a balance of payment crisis.

We have launched the new website which promotes business through Panamanian Corporation business vehicles world wide. So you are welcome to join us!