Latin America’s Financial and Investment Hub
Panama City is a major world center for international banking and related financial activity. The absence of currency exchange controls allows cash to flow in and out of Panama freely, enticing investors to bring their banking activities to Panama. Likewise, the Republic of Panama has identified various parts of the country as Special Tourism Zones, which offer benefits and tax breaks such as property and land tax exemption, a 15-year income tax exemption, a 20-year import and sales tax exemption, and a 20-year income tax exemption for foreign investment. Meanwhile, Panama shows no signs of change in its upward economic progress, with GDP growth upwards of 4.0% in recent years. In its annual report, Moody’s Investor Service states that Panama’s split ratings and stable outlook reflect a manageable fiscal position. Simultaneously, the International Monetary Fund (IMF) rates Panama as one of the fastest-growing economies in Latin America, while Moody’s and Standard & Poor’s have both granted high ranking to Panamanian financial institutions.
Panama: Latin America’s Financial and Investment Hub
Similarly, the country’s politically sound status is confirmed by the Political Risk Services (PRS), which places Panama in the top three countries of its hemisphere in terms of best risk investment qualifications. A democratic constitutional government with excellent infrastructure featuring advanced hospitals, international schools, the modern Tocumen International Airport, and advanced telecommunications, makes Panama a very desirable location for expatriates. Both foreign and local citizens are guaranteed equal treatment in investment and property transactions, reinforcing Panama’s tradition as foreign investment-friendly. Furthermore, according to Canada’s Fraser Institute of Economic Freedom for the World, Panama is amongst the world’s ten freest economies. Therefore, Panama represents an environment conducive for the creation of companies, jobs, and prosperity.
Throughout the last several decades, the Panamanian government has passed more than forty pieces of legislation offering investors special import, tax, and operational advantages, which apply particularly to the tourism, maritime, real estate, and mining sectors. For instance, the Colon Free Trade Zone (FTZ), which is the second largest FTZ in the world, is located at the Caribbean entrance of the Panama Canal. Likewise, the Colon FTZ houses approximately 2,000 merchants and receives over 250,000 visitors annually from countries throughout the world. Panama’s low cost of living and favorable tax exemptions make it an attractive destination for international investment and venture capital. Panama’s tariffs are among the lowest in the region, helping to increase foreign investment and trade in both the public and private sectors. Similarly, some 80% of Panama’s workforce is bilingual, speaking both English and Spanish, particularly those living in the main cities and working for the service industries.
In terms of real estate, Panama’s annual property capital appreciation goes up to 20% and rental yields of average 8%. This upward trend is mainly because the country has an official policy to attract international retirees through numerous tax exemptions and benefits. Lastly, Panama is one of several jurisdictions in Latin America to use the United States dollar (USD) as its official currency, which facilitates transactions, mitigates the risk of inflation and price volatility, and allows international consumers to be more aware of their expenses.