US President Obama made the Panama-US Trade Promotion Agreement (FTA) legal on October 21, 2011, but the FTA’s final implementation date has not been formally announced.
The date is dependent on Panama enacting a series of internal improvements as agreed upon by both governments. Panama’s Minister of Commerce, Ricardo Quijano, has said it will come into effect on October 1.
The FTA in short:
For Americans considering Panama as a place to do business, or as an export-import destination, following is a synopsis of benefits as reported by the Congressional Research Service published in April 2012.
• 88% of American industrial and commercial exports will be classified as ‘duty-free’, and tariffs on other products will be reduced or phased out over 10 years.
• More than 50% of American farm exports will be duty-free immediately. Tariff quotas for other farm products will be phased out over 17-20 years.
• The Panama-US sanitary and phytosanitary accord recognizes American food safety inspection as meeting Panamanian standards. This will fast track meat and poultry exports.
• Telecommunications, government procurement and Foreign Direct Investment controls are also on the list. (It should be noted that tech companies and foreign investors are already strong and active in Panama.)
The Office of the United States Trade Representative gives the following activity 2011 overview:
Panama is the 52nd largest goods trading partner, totaling $8.6 billion in two way trade. Exports totaled $8.3 billion – imports totaled $389 million for a trade surplus with Panama of $7.9 billion.
Panama was our 32nd largest export market. The top export categories were oil, $4 billion, machinery, $624 million, aircraft, $517 million, electrical machinery, $478 million and other, $340 million. Agricultural exports to Panama totaled $494 million. Top categories include grains $89 million, wheat $47 million and snack foods, $46 million. Panama was our 101st largest supplier of imports and totaled $389 million. Top categories were Special Other, $128 million, fish and seafood, $81 million, gold, $64 million, sugar cane, $38 million and bananas and pineapples, $20 million.
In terms of labor exchange, here are a few notable possibilities. Certain professional licenses will now be available to Americans in Panama such as accountants, chiropractors and doctors.
Another coup is that American lawyers and engineers can be certified. Restrictions on internal business licensing will be less strict. On the Panama side, Panamanians can use US-based portfolio managers for mutual funds.
Offshore, taxes and the IRS
This sector of the TPA is arguably the most important for American business in Panama.
Panama has been a secure offshore domicile for nearly 100 years. Americans and American businesses can protect their assets by placing them under bearer-share, Panama International Business Corporations (IBCs) and or Panamanian Foundations. Advantages include owner secrecy, no revenue reporting or taxes on monies earned outside of Panama, among others.
The Panamanian banking system supports the offshore sector, and is actually famous for its transparency. It even adheres to the ‘Know Your Customer’ statutes in terms of bank accounts and money transfers.
This post is also available in: Spanish