Q: How is the Panamanian economy performing? What is your expectation for this year, and do you expect any impact from uncertainty in the US right now?
A: I think it is very important to note the level of growth that Panama has had in comparison with the region in recent years. Last year, growth in the Panamanian economy was slightly more than 5% – number one in the Latin America region. This year, according to indicators such as the World Bank, the IMF, as well as the World Economic Forum, the Panamanian economy is again expected to grow at around 5%.
Part of the government’s objective this year, and which we have been pushing since 2014, is how we can improve and increase our logistics capabilities in Panama, and mainly regarding our main asset, which is the Panama Canal.
We are currently putting great investment into the infrastructure and extension of the Aeropuerto Internacional de Tocumen. At the moment, Panama is promoting not only its logistical advantage in relation to its marine platform but also the aerial platform. And not only in terms of the connectivity it offers to other countries but also because part of Tocumen airport is being developed as a free zone – 300 hectares, to be exact, mainly to use the opportunities offered by Tocumen in terms of cargo transportation connectivity.
In this sense, the airport wants to take advantage not only of the passage of people through Tocumen, which is currently about 14 million people a year, but also opportunities in terms of freight transshipment.
Another very important aspect is that, with the placement of the canal, not only is the number of vessels increasing, but also the number of containers that are currently going through Panama. We have increased from ships with a capacity of between 1000 to 4000 containers to ships with a capacity of 13,000 to 14,000 containers.
This increases Panama’s opportunities to improve its logistics in terms of cargo transshipment. And this is not only reflected in Panama, but in all countries in the area. For example, Colombia has made efforts to modernise its ports on the Atlantic and the Pacific [coasts]. Jamaica, Mexico and the Port of Miami have made efforts to modernise and make important deliveries in their ports to take advantage of the opportunities offered by the Panama Canal at the regional level.
On the other hand, today, Panama is a signatory to 19 trade agreements, including trade treaties and partial agreements with other countries. Within this, we have a commercial agreement with the US, the Trade Promotion Agreement, with which we have not only the opportunity of mainly US producers introducing their products to Panama, but also the opportunities offered by the US market to us, and an ability to export products, at preferential tariffs, to the US.
That is to say, the commercial interchange between Panama and the US has been very good. The US has been one of Panama’s main commercial partners and, of course, we must remember that the Panama Canal was administered by the US until 2000.
Q: Do you feel that the Panama Papers scandal damaged the country in term of perception, or in any real terms?
A: The issue of the Panama Papers was born from the sale of offshore companies, which are bought by individuals around the world… and the same methods are used in some [other] countries. The issue of the Panama Papers, I think, has been very poorly [understood].
First, of all of the companies that were involved in the issue of the Panama Papers, only 10% were found to be Panamanian companies. The rest, the great majority, of offshore companies that were used in this are companies from other jurisdictions. In this sense, the business of selling companies is a lawful business, that is, it is not an illegal business on a global level.
One thing is the sale of partnerships, and another is the person who buys the partnerships, and, in the end, whoever ‘uses’ them. If we are talking about whether or not the worldwide issue of the Panama Papers is impacting the attraction of FDI in Panama, I would say no.
Last year, Panama had attracted FDI above the $5bn [mark]. We had the establishment of about 25 new multinationals in Panama. Of course, it is a matter of perception that affects the image of the country a little, but there is a commitment on the part of the current government to transparency, and in this sense, Panama has made important changes to its internal laws, and we left the FATF list [the Financial Action Task Force list of high-risk and non-co-operative jurisdictions].
[New rules] have been created that are focused on the subject of controlling financial companies, controlling their formation and the controls that are currently in place, in addition to continue reforming our law of corporations. They must be in the hands of a trust that knows who the shareholders are or the final beneficiary of the partnership. That is, Panama is committed to transparency and has made important legal adjustments to comply.
Of course, at the global level, the central issue is sometimes the subject of tax evasion and there is that type of situation, but Panama has said and demonstrated that it has a commitment to transparency at the international level.
Q: What is your outlook for this year for FDI?
A: Last year, exports in services of Panama were above $15bn, bringing us to the conclusion that our economy in Panama, per year, has been based on services. In this sense, what we are promoting in Panama is the establishment of multinational companies that use Panama as a back office, with support and marketing, logistics, administrative or marketing support for all their offices and branches on a global level.
And outside of that, once these multinationals are in Panama, what we try to do is to encourage them to do something more. For example, there are multinationals who use Panama as a distribution centre for their products. What we want is not only for these companies to use Panama as a point in their platform in communication, but go a little further and try to create some added value [here].
What we have determined is that part of the growth in FDI we have had over the past years comes from foreign capital of multinationals that are coming to Panama and are reinvesting within the Panamanian territory. So it indicates to us that we still have a lot [of opportunities] to attract FDI, and how these multinationals can go from using us as a logistics centre to creating more shared services.
Additionally, there is a company in Panama currently mining, Minera Panamá, which has an investment of more than $6bn, a little more than the cost of [expanding] the Panama Canal. Mining is an important aspect of investment in terms of opportunities for the export of copper from Panama.