Craig DempseyPanama is Latin America’s leading destination for foreign business expansion. Thanks to its incredibly attractive tax laws and lack of foreign ownership controls, incorporating in Panama is a highly viable commercial move to do in 2020. Panama’s government has consistently been open to and encouraged foreign investment, leading to its global status as a business hub.
2019 has seen steady economic growth as well as the country’s sixth democratic presidential elections since the United States ousted dictator Manuel Noriega in 1989. Compared to some of its neighbor countries, Panama has maintained a stable economy and political rule in recent history. A popular spot with foreign investors and expatriates for business opportunities and an appealing lifestyle, Panama continues to be an attractive option for your business expansion in 2020.
A Growth Leader in Latin America
Although GDP has slowed down in 2019, Q3 of this year still showed a 2.9% growth. The industries that actually increased output are the ones to watch. Notable developments were seen in agriculture, transport, education, and real estate. A general election was held in May, which expectedly affected investor confidence.
In 2020, Panama is expected to continue being one of the top 3 fastest-growing economies in Latin America, at 5.5%. Inflation will continue to increase, currently forecasted at a healthy 2.1% in 2020, according to Trading Economics. Large free trade and special economic areas will continue to excite international investors looking to incorporate a company in Panama. Increasing investment from Chinese firms may incentivize other countries to investigate commercial opportunities and encourage multinational business expansions to Panama.
The country has already ratified a post-Brexit deal with the United Kingdom to ensure their two-way trade volumes achieved in 2018, of around US$90 million, do not diminish.
Panama also hosted the China-Latin America business Summit in December, signaling the country’s importance to the Asian powerhouse. The Summit is instrumental in connecting leaders and business visitors together, possibly furthering the idea of a free trade agreement between Panama and China. Thirty bilateral agreements are already signed, and China’s economic interests in the region are no secret.
Laurentino Cortizo, Panama’s newly elected president, has also promised to strengthen Panama’s relationship with the US. Therefore this will be a trading relationship that will need to be carefully managed considering current trade tensions.
New tourism campaigns are expected to attract 275,00 American and Canadian visitors into Panama in 2020. The Fund and Copa airlines have launched two large-scale travel campaigns, with a combined value of up to US$12 billion. The potential results will massively affect Panamanian businesses. American tourists currently drive most of the income generated in Panama’s tourism industry. Cortizo will continue to push growth in this sector in the coming year, encouraging greater numbers of investors to incorporate a company in Panama and participate in the booming tourism industry.
Large-scale investments have been made along the Panamanian province of Chiriquí to target their Costa Rican neighbors over the border. Extensions of existing shopping centers, as well as the construction of new ones, are designed to attracting shopping tourism from Costa Rica and other Latin American countries. Hilton has plans to establish a new hotel in the city of David, which will draw more tourists to the region. Panama’s tourist numbers declined in 2019, so these large-scale developments are highly targeted at increasing those numbers come 2020.
An Increasing Bilingual Workforce
The government launched “The Panama Bilingual program” aims to graduate 260,000 bilingual students into Panama’s economy by 2020. This will help boost the competitiveness of the labor market, attracting foreign investors from all over the world, and supporting cheaper business expansion into Panama. Sourcing local staff at competitive wages can help better new businesses chance of survival. Young Panamanians are motivated by increasing opportunities and the possibilities of working alongside skilled expatriates.
Considering Panama is the second biggest free-trade zone in the world, a bilingual workforce is critical to maximizing the trade opportunities that come with business expansion to Panama. As more foreign companies set up trading companies, having staff that can communicate with your international customers and speaks the local language can make a big difference. As well as on the ground staff, having access to quality bilingual accounts, lawyers, and recruiters will ensure you your business affairs remain legally compliant.
Real Estate and Dynamic Startups
An explosion of startups operating in Panamanian real estate has changed the way the industry works. The real estate market will continue to be extremely competitive, going into 2020. Therefore it will be for agents and buyers alike to focus on high-value, differentiated properties and developments. Increasing numbers of tourists and ex-pats mean it’s a great time to invest in short-term and long-term rentals. Tech startups are helping to bring new developments to this market. Knowing how they can benefit you and your incorporated company in Panama could be a game-changer for commercial success.
GoGetIt is a new virtual real estate portal that combines traditional agent listings with those on social media. Users can provide and receive references, making the process of securing a lease that much quicker and transparent. Hazud is another revolutionary platform. Real estate professionals can access 3D renderings of real estate to show to developers and future buyers, on the spot. Once saved to the Hauzd Clouds, the renders can be accessed from any platform. The user-friendly technology means no tech experience is necessary.
Foreign Investment as a Priority
The ‘Visión 2030 Panama’ scheme was introduced by the last government’s Vice President Isabel de Saint-Malo of Alvarado and President of the Council. The program encourages foreign investment and development of a smart city for current and future generations, leveraging the macroeconomic stability created by the Panama Canal and other infrastructure projects announced since. More significant technological development is key to supporting newly incorporated companies in Panama.
This year, the country has awarded a South Korean joint venture a 54-month contract for construction of the third line of Panama’s metro railway. Large foreign organizations should be motivated to seek out and apply for further large-scale infrastructure tenders in the coming year.
Furthermore, the ‘Friendly Nations’ visa scheme, which comprises of 50+ countries, should be on your radar if you’re considering incorporating a company in Panama in 2020. The residency requirements cover those who want to set up a new corporation or work at an existing company in Panama.
An additional incentive for those expanding their business to Panama: ‘Microbusinesses’ that earn up to US$150,000 are exempt from income tax for their first two operations, under Law 72 of 2009. This tax break can make a significant difference in the survival of your business when starting. These two schemes complement the government’s overall plan to encourage foreign investment as they streamline and simplify setting up a life in Panama.
2020 holds excellent prospects for those looking to expand their business to Panama. Additionally, it is also an excellent option for investors looking to find existing projects or create new corporations. 2019 has been strong for Panama economically, with the forthcoming year forecasted to be even better. The government’s focus on making its national workforce more competitive will growth within the sizeable existing service industry.
Likewise, foreign firms will look to the domestic labor market for expertise to guide their business expansion to Panama’s thriving market. Commercial production began at the Cobre Panama copper mine, signaling the lucrative potential of Panama’s mining industry. Large-scale tourism campaigns should drive foreign investment flows, with particular opportunities in the real estate market. Cortizo will look to mark his first year in office by implementing promising economic initiatives to drive growth further.
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