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EVENTS AND ROUNDTABLES > Developments in Panama


The Legal 500 Roundtable: Developments in Panama

 Co-hosted with
   Participants included

29th September 2015

Opening Remarks

Tim Girven, Editor, The Legal 500 Latin America


On behalf of The Legal 500 Latin America and also, of course, Patton, Moreno & Asvat, I would like to welcome you all for coming today – especially our honoured and distinguished guests, Ambassador Daniel Fábrega and former UK-Ambassador-to-Panama, Richard Austen; thank you both very much for managing to attend today. So without more ado, I would like to briefly frame this morning’s presentation and discussions.

Effects of Canal Expansion

I think it is very easy to overlook what is going on in Panama today. The scale of the enlargement of the canal in this $4.5 billion project, which will be coming on stream early next year, 2016, simply puts every other infrastructure project, including larger ones in Latin America, in the shade. There are two reasons for this. The first is that the canal will, in effect, redraw the map of the Americas, just as the original canal did a century ago. In shifting from the relatively small shipping-tonnage of 5,000 TEU up to the 14,000 TEU the expanded canal will be able to accommodate, capacity will be almost tripled. This will change sea cargo routes, particularly for solid and bulk goods, moving forward.

The second reason, what is important is that recent Panamanian administrations, not just the current one but preceding ones over the last 10 to-15 years, have managed to put into place a fully-articulated. This is not a one off project like an liquefied natural gas port in Chile, the development of Callao port in Lima or the interconnection of the US and Mexico for gas. This is a project which allows the development of Panama as a whole, the entire country, to move forward. In that sense, we need to think of the two presentations that we’ll be hearing shortly – the first, by Enrique, on shipping; and the second by Ivette, on inbound investment – as two sides of the same coin: and that coin is the country itself, Panama. What we are going to hear about is how the expansion of the Canal will have knock on effects for the internal development of the country as a whole, the development of new business clusters and the development of new economic paths with remarkable logistic facilities and advantages for the businesses that choose to locate themselves there.

UK Panama Relationship

I think it is also relevant that we are having this discussion about Panama in the United Kingdom. It is worth noting that today – and I would imagine that you, Mr Austen, have had no small role in this – the United Kingdom is the third largest investor in Panama. Now, if you think that that puts us solely behind the United States (which has obvious historical links to the country), and Colombia (the major neighbouring country)¹, but ahead of countries with cultural affinity (such as Spain), or economic regional powerhouses (such as Mexico), it shows the extent of the role and relevance of the UK in Panama today. Moreover, we are having this discussion not just in the UK, but in London, the country’s financial centre and a global financial hub.

Just as an aside, I would like to mention that, if you look at financial flows, over the last eight years we have seen far more Latin American related finance coming through London, whereas a decade ago and previously it was purely New York. This is a significant shift, as changes in financial flows (south south included) become more evident, and a lot of new financial reserves –from the Mid- and Far-East– are reaching Latin America via London. In addition, the City is also the global insurance and reinsurance hub, and as such has incredible importance for the shipping industry. The idea of synergies between London and the UK on the one hand, and Panama, its canal and on-going developments there on the other, are not so outlandish as they may at first seem.

Panamanian Progress

What I imagine Ivette will be drawing-out are the knock on effects of the huge investment that the canal expansion project represents, and how that is going to shift the internal development of what –we should remember– is a tiny country: Panama is roughly the size of Wales, and has a population of four million people. If we think that it is only 25 years ago that the country returned to democracy, the development and the strides that the country has taken in an articulated sequential manner have outstripped those of all of its Central American counterparts – including Costa Rica, which should have had certain advantages. I think we will really see this in the development of back offices and I, for one, am aware how many regional general counsels (GC) of important corporations (ie: those with responsibility for the entire Latin American operations of their businesses), are now based in Panama. Be it in terms of maritime or aviation activity, Panama is already emerging as a hub for the Americas and I hope today’s presentations will add to our depth of understanding as to how this has both come about and is likely to develop further in the future.


There are a lot of people round this table who have far more detailed knowledge of these matters than I, and I would not wish to tread on their toes by giving imprecise information. So, I am going to hand you over to Enrique for our first discussion on maritime matters, the expansion project and the implications for shipping, before Ivette gives us her presentation on inbound investment; we will then open the floor to a Q&A on both areas. As I suggested, think of these as two sides of the same coin. Once again, my thanks to you all for being here.

The Transformation of Global Shipping

Enrique Sibauste (Senior Resident Lawyer - London), Patton, Moreno & Asvat

Good morning to all. I would like to give a warm welcome to His Excellency Daniel Fábrega, to the former UK ambassador to Panama Richard Austen, Tim Girven of The Legal 500 and to all our most welcome guests, thank you for being here. On behalf of Patton, Moreno & Asvat, we are grateful for your attendance, and we hope you will enjoy these open conversations in relation to recent developments in Panama.

A historical perspective

The title I have given to this presentation is the transformation of global shipping. Historically, the term “Panamax” was used to name the largest vessels that were able –and permitted– to pass through the Panama Canal; it was a shorthand that was understood the world over. Nowadays we have to begin to talk about post Panamax or “the new Panamax”, and this suggests how it is necessary to consider the evolution of Panama in a historical manner. Panama has not just come into being but rather has been the Panama we know today in potential for a long while – and this is closely related to its geographical location.

We start from “El Camino Real”, the Royal Road, which goes back to the times of the Spanish Empire. It was the route used to take the gold from Peru all the way to the galleons of the Spanish conquistadores and back to the old continent and wherever else it ended up. From this difficult beginning, in the 19th century we found ourselves to be the most important point of trans-shipment for those on the United States’ eastern seaboard who were striving to reach California’s gold mines on the West Coast: it made more sense to head for Panama and reach the Pacific there than to cross the US by land. Very quickly, New York financiers realised that this was an opportunity: a railroad was started and by 1855 the construction was complete. Some 15 years after this development, in 1869, the first transcontinental railroad in the US was finally completed. The immediate impact was an economic depression in Panama, as traffic fell away and the number of people coming to Panama to move goods dwindled. We will see that, in ports, this is something that happens very often: as one door opens, another one closes; that is the reality of life.

In 1914, the US helped Panama take over the French-led public enterprise to build a transoceanic canal, and which had ended in a major disaster. The Canal opened in August 1914 and suddenly, instead of going all the way down and round Cape Horn, maritime traffic had an almost 8,000 mile shortcut from the Atlantic to the Pacific or vice versa. As of now, we are expecting the newly expanded Canal to be open and fully operational in April 2016.

The Expansion Project in Detail

Just to give you an example here of what is going on, we have a map of Panama, where we can see the lock development on both coasts:

1. Overview
What is the expansion project? Well, just to give you an impression of the size to it, the Financial Times says that it could contain 22 Eiffel Towers. It has employed the same amount of concrete as would be required to build two-and-a-half Pyramids of Giza, and in total, about 15 million cubic metres of rock have been moved. What’s new? Well, there are new locks: that is, a third set of locks on both the Pacific and Atlantic sides of the canal. Moreover, access on the Pacific coast has been improved with modifications to the approach channel, and there has been renewed dredging of the main channels. The entire expansion project is valued at about $5.25 billion. Who is financing this enterprise? Obviously there are tolls from the shipping clients who use the Canal, and we have the support of a number of multilateral and development agencies, including the Japan Bank for International Cooperation, the European Investment Bank, the Inter American Development Bank, the International Finance Corporation and the Corporación Andina de Comercio.

2. Lock Expansion = larger vessels
It is these new sets of wider (and deeper) locks that constitute the core of the expansion project. One would assume that it would be necessary to halt transportation activity during the expansion process. However, the canal has remained operational throughout the construction work which is actually being carried out parallel to the canal. The scale of the expansion is, as suggested above, simply huge: previously, with its existing locks, the Canal could carry vessels of up to 5,000 TEU. The new Panamax vessels, however, will be carrying 13,000 TEU –almost tripling previous capacity– and will navigate the canal using a completely different line. (I also have a few difficulties visualizing “TEU” (which is a 20ft equivalent unit in a metal shipping-container); suffice to say, the new Panamax vessels will be of greater width, length and draft).

And if we take the third sets of locks on both the Atlantic and on the Pacific sides together, we are talking about the installation of 16 rolling gates in a construction process that began back in August 2009. Moreover, it is also worth noting that the project has created approximately 30,000 new jobs.

3. Routes
The Panama Canal sits at the heart of multiple global trade routes? If we consider a world shipping map, the main route (in terms of volume) serviced by the Canal is that which connects Asia to the East Coast of the United States. In 2012, for example, traffic on this route reached approximately 84.3 million tonnes. Second, in terms of volume, is the route linking the US’ East Coast with South America’s Pacific coast. Then you have the more straightforward (and historical) connection of the eastern and the western sides of the US, and finally those linking Europe to the Pacific – be it the west coast of the US or of southern America. The Panama Canal has long “connected the dots” across the world trade map, and crucially, this has a ripple effect. One may assume that at present, little is happening – but the reality is quite distinct.

In 2012, the Panama Canal handled 218.1 million tons of cargo. The most significant trade route serviced by the Panama Canal involve connecting the US East Coast to Asia (84.3 million tons; 39%), followed by the West Coast South America / US East Coast route (27.6 million tons; 13%). The trade routes are therefore mostly involving partners outside Latin America, particularly the Asia / East Coast route which is the trade route that mostly justified the Panama Canal expansion project.

4. Panamax ready Ports
Across the globe, quite a few key ports are preparing for the new reality that will emerge when the expanded Panama Canal becomes a reality. The map below gives an idea of what is going on: all the green dots mean ports that are already ready for the new post-Panamax size ships. They will be ready to berth those vessels, handle their cargos and do so in the required timeframe. So, we can see that New York, Norfolk and Baltimore are ready; Freeport Bahamas is ready; Suape and Santos in Brazil, and Buenos Aires in Argentina are all ready. On the Pacific coast, Lázaro Cárdenas in Mexico; Prince Rupert in Canada; and Seattle, Tacoma and Los Angeles in the United State, are all ready. Infrastructure expansions and development work has been occurring the length of the Americas and the extent of this work –and its coordinated nature– has perhaps remained largely unperceived. Nevertheless, all these ports are now post-Panamax ready: it is happening.

And in preparation are the ports indicated by the orange dots: Charleston, Miami, Jamaica, and Brazil’s Acu Complex to the East, and Oakland (US), Buenaventura (Colombia) and Callao (Peru) on the Pacific coast. And further afield, Liverpool (UK), is also about to be completed. It too will become a super port, and primarily because of the expansion of the Panama Canal. As I mentioned previously: things go in and out of fashion and ports are no different. Liverpool, of course was for much of the late 19th and early 20th centuries, the predominant global shipping hub. Today it is battling with other ports, such as Rotterdam, to regain –and retain– relevance; its ability to accommodate the new post-Panamax vessels will be a major weapon in the armoury that allows it to do so.

Continuing Growth

We come to the end of this history to date. I think I mentioned when we began that Panama, as a nation, wishes to take up a position similar to that achieved by places such as Singapore or Dubai; that this is the destination the country wishes to reach. Notably, with the development of Tocumen International Airport and Copa Airlines, this is something the country has increasingly achieved in the air-transport sector, where Panama is increasingly not just a regional or hemispheric but truly global hub. A Panamanian miracle.

This has not been achieved in isolation. In order to get to where we are, to reach this point, the country has approved a substantial amount of legislation over the last few years, in particular in shipping, as detailed. Among other laws, Panama signed a trade promotion agreement with the US, which entered into force in October 2012. We are still fighting with the OECD, to ensure removal from its grey list (an inclusion seen by many as political), and it has recently been confirmed that Panama has moved into phase 2 of the peer review. In relation to investment grade, as previously mentioned by Tim, Panama has been going from strength to strength and the country has remained stable throughout the 2010-2015 period.

As regards double taxation treaties, one of the arguments from the OECD and other member states has been that Panama has not been cooperating with the rest of the world in relation to tax matters. The previous government therefore took a decision in this regard and the country has now signed 20 double taxation agreements, of which 16 are already in full effect. We have also signed 10 tax information agreements; among them, arrangement with the main jurisdictions.


What I have sought to portray here is that we are growing as a nation and as an economy. We are aware that it is not going to be easy. Part of the process, I think, is that Panama further develop the business model it has long used, evolving from the general approach of being a transhipment-point blessed by geography to a true a logistical hub. I think we are taking the right steps together. Thank you.

Tim Girven: Thank you very much, Enrique. It is indeed one thing to expand the canal, and something else entirely to move from ‘doing more of what you are good at’ (i.e. transhipment –where Panama has a century-long history), to amplifying and articulating that into internal growth, and inbound investment in the country. I would like to hand over now to Ivette, to talk to us about the opportunities that are available in terms of inward investment into Panama.

On Inward Investment Opportunities

Ivette E Martínez: Thank you, Tim. Good morning, everyone. My name is Ivette Martinez and I am a partner at Patton, Moreno & Asvat. On behalf of our firm, I would like to welcome you all and thank you for your attendance today: it is a pleasure to have this opportunity to talk to you about investment opportunities in Panama and the highlights of the current economy.

Panama in Numbers

Let’s talk a little about the numbers: Panama has a population of 3.9 million; our current gross domestic product is around $11,000 per capita, and in 2013 the economy grew at a rate of 6.2%. In the first quarter of this year, the growth has been determined at 5.9% (approx.), and the projection for the third quarter of this year is 6%. Such growth rates have been steady for at least the last five years, so the outlook remains good for Panama. Unemployment rates currently stand at 4.8%; with exports at $15.3 billion and imports of $23.5 billion. The country relies heavily on imports and 75% of GDP is driven by services.

Competitive Advantages

Panama has a number of significant competitive advantages:

  • Currency stability: Panama’s legal currency is the US dollar (since 1904), providing stability (no devaluations) and removing the need for exchange controls.

  • Strategic location: as Enrique noted, we are the natural hub of the Americas.

  • Aviation connectivity: Tocumen airport offers more than 130 daily flights to more than 45 destinations in 31 countries, with direct flights to most countries in North America, South America and the Caribbean. The country will have direct flights to Dubai, Turkey and Frankfurt by the end of this year.

  • A banking centre since the 1970s, Panama City is still growing as a financial centre.

  • The port and logistics hub of Latin America: the country currently has seven ports operated by the private sector, both in the Atlantic and the Pacific.

  • Geologically, Panama is not subject to earthquakes and has no history of natural disasters.

  • With Panama City’s ‘City of Knowledge’, the country is an increasingly significant centre for technology and innovation.

  • Facilities adjacent to the Panama Canal are suitable for establishing logistics centres and other business opportunities.

  • A strong bi-lingual tradition and a pool of English speaking professionals in most important industries and services.
Multinational Entity Regime

The general framework

One of the drivers of Panama’s competitive advantage is a 2007 law that established a special regime to foster the arrival and establishment of multinational entities in Panama – and by “multinational entity”, I am referring to any company that services its affiliates and subsidiaries located elsewhere (in other jurisdictions), from Panama. Any group with assets of at least $200 million can seek one of these multinational-headquartered-company (MHQ) licenses, so long as it is only providing services to (its own) companies that are operating outside Panama, and can thereby benefit from a tax exempt regime. I will come back to this point.

Permitted Activities

The licence is indefinite and permits legal activities in sectors including: management services, logistics & warehousing, technical assistance to companies, financial management, accounting, consulting, electronic processing, operational support and any other activities the headquarters would provide to its group companies as included in the application. There are currently more than 110 companies registered in this manner, including high profile companies such as Maersk (shipping), Proctor & Gamble (consumer goods), LG (electronics), Caterpillar (construction equipment), CEMEX (construction materials) , Nike (sports equipment and apparel) and Heineken (brewing) –indeed, a number of these have UK operations.


What are the conditions for obtaining this special regime? Basically, one has to carry out the activities indicated in the application. You cannot be an MHQ company and at the same time undertake local operations. Any such activities must remain separate in distinct legal entities. Nor can you share the personnel of an MHQ with local personnel. Finally, operations must begin within six months of the licence being obtained.


Among the tax benefits, foremost is the exemption from income tax. Because we have a territorial regime and the MHQ will be providing services to companies outside of Panama, company revenues are considered non-taxable or ‘exempt income’, and therefore the MHQ will not pay any tax in Panama. There is also the option to negotiate special conditions with the tax authorities with regards to the consolidation of earnings and the payment of taxes generated elsewhere.

There are also immigration benefits. One advantage of an MHQ is that you can relocate personnel from other offices around the world to Panama - and of course benefit from the advantages and quality of life that Panama offers. All immigration processing is carried out through a ‘one-stop-shop’ expedited service, and while such staff are required to be covered by private insurance, those arriving from overseas are tax exempt in that respect. Another point with regards to labour is that while, in general, Panama has restrictive labour legislation (i.e.: there is a ratio of Panamanian personnel that must be hired with respect to foreign personnel), for MHQs, those ratios are either not applicable at all, or are considerably more flexible.

The Panama-Pacific Special Area


Another special regime that provides numerous advantages, particularly with regards to logistics and other activities related the canal is that of the Panama-Pacific Special Area. Established in 2004, this is an area of more than 2,000 hectares, located on Panama’s Pacific coast at the site of a former US base. When the land reverted back to Panama with the canal treaties in 1999, the infrastructure was re-purposed to help establish the special area. It is administered by a governmental entity called ‘Panama Pacifico’, or the Panama-Pacific Agency, which manages the registration of companies so as to benefit from this regime. The Agency also has a ‘one stop-shop’ facility allowing for the processing and licencing of labour permits and all associated matters. The master developer of the area is London & Regional Panama, which won a bid to administer the facility, and manages or develops both commercial and residential real estate in Panama Pacifico. London & Regional has committed to invest more than $700m over the course of four years, with a total economic impact of more than $4 billion.

Tax Incentives

The Panama Pacifico offers tax incentives in relation to the rendering of services to entities located outside Panama; the sale of products, equipment and goods; the rendering of services to passengers and ships in transit through the canal; the rendering of aviation services, repair and maintenance, high technology, multi-modal logistic services and call centres, are all activities that are expressly tax exempt under the statutes of the Special Area (although I also note that this is not an exclusive list). These activities are exempt from income tax, dividends, transfer of funds overseas and VAT (which is 7%).

Labour and Immigration Regime

The Special Area also offers an advantageous labour and immigration regime for the staff of Panama Pacifico entities. Where Panamanian legislation is more restrictive, there is the possibility of negotiating exceptions; rotating shifts, week days other than Sundays, vacation time, and grounds for dismissal are some of the issues which differ from Panama's existing labour regime. As previously mentioned, visas are handled through a special window at the agency.

Breakdown by Sector
Financial Services and Banking


As I mentioned, Panama has been a financial and banking centre since the 1970s. The country has more than 150 banks established under a number of different types of licence. Primarily, there is the general licence which allows the carrying out of all operations; this requires capitalisation of $10 million. Then there is the international licence, which allows banks to carry out banking transactions that are not consummated in Panama but abroad. And finally there is the representational licence, permitting the operation of a representative office to promote and market your banking services from Panama.


License application is a two step process. First one obtains a temporary permit which allowsthe bank’s articles of incorporation to be registered, after which it is necessary to capitalise the bank. After this procedure has been completed, a permanent license is granted: this requires the bank to begin operations within six months. Before it does so, there is an inspection process undertaken by the banking superintendents who provide final confirmation that the entity is authorised to begin operations.

Key Principles

The banking authority in Panama works very closely with the regulatory body of the bank abroad, ensuring that it is compliant and that all banking group requirements are met. With the US dollar as legal currency, Panama has no central bank because since there are no exchange controls; and while bank secrecy remains a very solid aspect of local Panamanian legislation, there are nevertheless very strict 'know-your-client' regulations. As a result, it is time consuming to open a bank account in Panama since the banks are very strict in enforcing these requirements and there is strong corporate governance. There is also a fixed annual tax that all banks have to pay.

Maritime Operations

Port Management

Turning to a matter that both Enrique and Tim have mentioned, the main drivers of Panama’s economy currently are ports, logistics and of course the Panama Canal itself. Ports were managed by the government until the early 1990s, when a public bid process was initiated; all ports are now privately operated. The advantage of the current port regime is that all the operations and associated contracts have been raised to the status of a law, thereby giving legal stability to the substantial investments made in the ports sector.

The tariffs that ports pay -primarily on the movement of the containers- are unified and standardised across all facilities and are revised every five years. Approximately 90% of containers moved in Panama are in transhipment – this high percentage is obviously a reflection of the country's strategic location. Perhaps the role of the ports and logistics sector is better indicated by noting that it currently represents approximately 24% of the country’s GDP. A further reflection of its crucial role is the recent establishment of a ‘logistics cabinet’, or department, comprised of several government entities, and which is tasked with foster the further development of the sector and ensuring the adoption of best-practice guidelines.

Panama Canal

Perhaps I can also give a little additional information on the Panama Canal: 5% of global maritime commerce passes through the Panama Canal. Since 2000, the Canal has paid over $10 billion to the national treasury and its contribution constitutes some 6% of the country’s annual GDP. The annual income of the canal is approximately $2.4 billion and its total assets amount to $11.2 billion.

The legal framework of the Panama Canal Authority gives it constitutional standing. It operates under an exclusive set of laws that provides legal stability to all the canal operations. The contracting regulations of the Panama Canal Authority are separate and independent from the central government regulations, and those regulations have been set up as an example, as a model, and our public contracting law has been adapted to include features of the Panama Canal Authority regulations because of the efficiency and the transparency that it has provided.

There is a projected bid for a port to be launched by the Panama Canal in canal area in a site called Corozal. It suffered a bit in the assembly because the Panama Canal Authority wanted to grant the same tax exemptions to Corozal. That did not pass through the assembly, but it is expected that it will be refiled again. There is also a projected bond issuance to finance an additional bridge over the canal, a third bridge of approximately 450 metres.



Moving on to another industry, energy generation is also controlled by the private sector. Here I’d like to focus upon renewables. Recent legislation has been designed to foster renewable energy. Wind parks are subject to a licence issued by the National Public Services Authority and power purchase agreements (PPAs) are generally for 15 year terms. The total amount of bids in wind energy must be 5% of annual consumption of the wholesale market. There are also tax exemptions available for these projects in relation to import tax, accelerated depreciation, and exemption from national tax for 15 years. Tenders for solar projects are approved by the regulatory entity for wind and solar and are requested through a state owned transmission entity called ETESA, which sets the reference price.


With respect to solar, there is also a specific law providing the guidelines. Solar plants are also subject to a licence. PPAs in this sub-sector are set at 20 years and there are similar tax exemptions as above: import, accelerated depreciation etc.


Finally, and just to give you a brief overview, legislation governing biomass generation projects was passed along with that for solar and wind power. Here activity is regulated not by the National Public Services Authority but by the Secretariat of Energy, which also regulates and authorizes the production, mixing, commercialisation, transfer, storage and import of biofuels. This activity remains in a relatively fledgling stage but it is important to know that it constitutes an option, that there is interest in biomass energy, and that companies can benefit from similar exemptions and conditions as with other renewable kinds of energy. Thank you very much for your attention.


Tim Girven: Thank you very much, Ivette. Before we open the floor to questions, perhaps I can just seek to sum up a little and frame what is under discussion here. We are looking at a country that is fundamentally moving from being a transhipment space to a logistical hub, one which is able to offer value added processing for goods both passing through the canal and arriving for subsequent ongoing distribution into the Latin American region, be it Central America or further south; and beyond that, one which is also offering significant stimuli to inbound invest, particularly in key sectors such as power generation.

We mentioned the Panama Pacifico, but that is just one of 20 new special economic areas offering the fiscal and labour benefits that have been described. We are talking about a country that is already established as a banking hub with over 90 banks, and moreover, of a ‘dollarised’ economy with no central bank, and no problems, therefore, with devaluation. Tocumen Airport, which we can also consider as another aspect of the country’s hub function, is the second busiest in the Americas. I must admit, as discuss this in London, that I find it sadly ironic that here in the UK, we are still talking about Heathrow expansion. Mexico too, has been talking about the expansion of its international airport for 10 years, and is only now beginning to clear land and move ahead with the project. Meanwhile, Tocumen Airport is on the third phase of its expansion, and, as Ivette mentioned, not only has daily flights to all the major capitals in the region but also to the vast majority of secondary cities in countries across throughout the Americas.

Another area that we have not really mentioned –and one in which there are undoubted opportunities- is tourism, a sector which remains relatively under-developed as yet, even though we have seen the capability of the region to attract tourist investment and development as demonstrated by neighbouring Costa Rica which to some degree markets itself as an eco-destination. That is an entire area that awaits further development in Panama. We have touched on energy and renewables. One thing we should also perhaps mention – and again, this comes into the role of the country as a hub – is its potential future development in terms of all aspects of telecommunications. If we think back to the maps that Enrique showed us illustrating the flows moving through the canal, it is worth noting that there are five fibre optic cables that also utilise the canal, positioning the country strongly for future developments in the telecommunications sector which have barely been explored as yet.

We should also mention that there is a major mining development in the country. There is a $6 billion investment, currently in process, which has the potential to lift the country into a top five position as regards copper production, as well as producing silver and at a more modest level, gold. All of which is to suggest that, despite its relatively small size, we are not simply discussing a country that is limited to transhipment, but one which is demonstrating the foresight to articulate the experience and profits of a century of transhipment into broader development in the country. I would also mention that there are other ongoing social infrastructure opportunities. Most notably, or perhaps simply most high profile, are the second and third lines of Panama City’s nascent tube network, but there is also other social infrastructure. There is further road development to be undertaken to expand links between Panama City and the country’s second city, David, near the Costa Rican border. We are actually looking at a breadth of investment opportunities in a country that is far more varied than is generally perceived in the exterior. Perhaps I could ask those of you who actually have some investment experience in the country – Piotr, I know you are in the real estate sector; Yvonna, you have been working in renewables – to share your basic impressions of how easy it has been to move into the country and do business there, so that it is not just Panamanian nationals who are selling the country to us! Can you give us your perspectives on the experience of arriving and doing business in the country of late, in the last five years or so?

Piotr Piecha: I am happy to start. I am Piotr Piecha; I work for a company called Columbus Frontiers. My job is to find investors into Panama. Two of my founding partners actually reside in Panama.

Thank you for outlining the drivers of the Panamanian economy. They are very compelling, as you can see, for the inward investment flow into the country. What we observe and why we identify Panama as an attractive place for investment is the relatively low pricing of the underlying assets. Within this persistent growth of GDP, we expect to see re-pricing of the underlying assets, especially in the sphere of real estate development. I am talking about development now. We identified the area east of Tocumen Airport as a most compelling area. It is quickly developing into a major logistical centre for the country. For us to do business in Panama, it is easy. We love the bilingual nature of local businesses; we love the fact that it is a dollarized economy, so you do not have devaluation issues; and we find that the rule of law is strict. Unlike many of Panama’s neighbours, the country should be an easy, compelling story to sell.

However, we are fighting with a huge level of ignorance –especially in the developed world– about the opportunities in Panama. When I travel around and see people in the UK, Switzerland, and Germany and, perhaps to a lesser extent, Spain, we find that, once you have shown pictures on your iPhone of Panama City, people are shocked. ‘Are you sure this is Panama City; you are not showing me pictures of Miami or Dubai?’

One of the challenges for us is the amount of work we have to do before we can convince somebody to commit capital. That is my challenge, so conferences of this type or the event that was organised last week [Panama Invest 2015] is making my job a little bit easier, but the lack of awareness of global financial investors about this blatantly clear investment opportunity is what remains, for me, is the most difficult part. It is not the legal aspects of our work in terms of protecting the rights of our investors in the country, but bringing people in.

Tim Girven: Thank you very much. Yvonna, can I ask you to give your perspective?

Yvonna Balysz: Hi, everybody. I am a legal counsel at Solarcentury. We are a solar panel EPC contractor and developer, and we also make solar panels. We have been in Panama for a couple of years now, and in August our first solar plant in Panama, which is the first solar plant in the country, was connected to the grid. It is 10MW, and I have to say, it has been a very big learning curve! We are originally a UK company, so our headquarters are in London, but we could not have established this plant without having partners in Panama and really integrating ourselves into the country. We established a company in Panama City and made use of everyone locally. I think it has also been a learning curve for the authorities. You mentioned ETESA, Ivette, we found ourselves in a circumstance where we were about to connect [to the grid] only to be told that we required additional documentation since it had never been done before!

We are really proud to be a company behind the first connection of a photovoltaic plant in Panama, and we are looking to connect many more. From my personal perspective, working here in the legal department based in London, the amount I have learnt is incredible - primarily because doing business in Europe, let alone in Latin America, is extremely different. You have to understand the culture; you have to understand the mind-set; and we have lots of Spanish people working here in London as well as many Latin Americans working in Panama; fortunately I speak Spanish as well, so that has really helped.

Tim Girven: I think the issue of bilingualism, that possibility of being able to arrive in the country and work largely in the English language -or at least have the option of doing so when necessary- is a major plus for the country; and frankly it is something no other Latin American nation can offer. I think we should also highlight the fact that Panama does not have the same pressing security issues effecting a number of countries in the region: in Central America the ‘northern triangle’ of Guatemala, El Salvador and Honduras in particular; to the south, Colombia too has –until relatively recently– had grievous problems, although obviously it is to be hoped that the peace accord will finally be signed there; and Mexico continues to have significant issues, although matters have improved since the sexenio of the previous administration. I think this is another significant plus that Panama offers, especially for UK and Western European businesses looking to develop ties in Latin America. Many of you here are representatives of law firms with a global footprint, and what I have witnessed over the last decade is of course that many of the firms you represent have been moving into Asia, but there will come a moment at which some of these firms will also have to turn their attention in a more profound way to the one remaining region where they do not have a strong footprint, and that is Latin America. I think that, at that moment, Panama is really going to come into its own.

Can I open the floor to any questions? Are there any particular points from the conversation or from the presentations that one or other of you would like to pick up on, maybe in relation to ship finance, maybe in relation to the specifics of investment opportunities?

Jocelyn Carnegie (ForestFinance): My comment is more of a statement to back up the last two. Five years ago, I established a company in a special economic area (the City of Knowledge) and, whilst there were sometimes frustrations, culturally and also legally I think – bureaucratically if you like – between what we refer to as common law and civil law (although I am not a lawyer), it was largely a very smooth and very welcoming experience for a British company seeking to establish itself there. We now work with another company, also established in the City of Knowledge. In fact Forest Finance’s non-European HQ is actually in Panama, so we reach out to all the other Latin American countries in which we are currently operating –we are in Bolivia, Colombia and Peru– from our base in the City of Knowledge.

Tim Girven: Jocelyn, would you characterise Forest Finance as a small and medium enterprise at this moment?

Jocelyn Carnegie: Yes.

Tim Girven: So you have found that there has been a welcoming attitude for a smaller organisation? You have not had to be an economic heavyweight to go in and attract attention and good service.

Jocelyn Carnegie: No, absolutely not. Forest Finance is perhaps a €25-€30 million company. The company that I established –literally– upstairs from Forest Finance, actually in the same building, is a very small, a couple-of-million a year IT company. Yes, it was very welcoming and very, very easy.

Tim Girven: Excellent, thank you very much.

Richard Austen (UK Ambassador to Panama 2006 11): Can I just add that I would not disagree with anything I have heard here today? Almost five years after I left Panama, I still retain a great deal of respect and interest in the country. Several British companies arrived while I was ambassador: we have already mentioned London & Regional, but I should just specify that the two major developers behind that organisation, the Livingstone brothers, are British and so it is a British company. Cable & Wireless is there. SABMiller took over the Cerveceria Nacional when I was there, and produce two of the most popular beers in Panama, so it is definitely a good place to be!

Panama has always been very helpful. When I was there, Panama was on the UN Security Council for two years and we had very good cooperation with Panama on a number of issues then. I found it a very good place to work and I also found a lot of people were very interested in the country. There are other London-listed UK-plc’s, such as Aggreko, a company that produces generators, which is active there (in 2010 Aggreko provided 100MW emergence back-up power capability to Panamanian grid operator, EGESA). Their regional base is there. JCB were there. A lot of big British companies have already demonstrated considerable interest in Panama. It is a good place to do business. I am slightly out of date because it is nearly five years since I left, but I still retain a great deal of respect for Panama and certainly want to fly the Panamanian flag.

Tim Girven: Thank you very much indeed. Are there any questions from the legal partners amongst us in relation to what we have been hearing this morning?

Malcolm Entwistle (Hill Dickinson): What process is there in place for tourism? Is there any structure? Say somebody like (tour operators) Thomson or TUI were interested in the country, who would they discuss it with?

Daniel Fábrega (Panamanian Ambassador to the UK): Thank you. I would like to reiterate what I said last week to those who participated in Panama Invest: Panama is open for business, and – thankfully– business is doing very well in Panama. One of the main handicaps that we have, as has just been mentioned, is that many people have little knowledge of Panama. One of the main problems is that at present there is no direct flight from London to Panama. Every ambassador, every administration, has been trying to achieve that, unfortunately without success so far. This is part of my job now: to try and convince companies such as Virgin or BA to come to Panama.

In terms of tourism, there is a tourism board and you should feel free to seek their advice, but you can also –and this goes for everyone here– use the embassy as a resource and think of the embassy as a friend. We can offer you guidance, depending on the sector you are involved in, according to your needs. It is important for people to go to Panama, to visit the country, and that is what I mentioned in last week’s speech, because a lot of people, when they talk about Panama say: ‘Well, it is in Central America, perhaps it has security issues’. A lot of people, well-educated people, do not know that we have the US dollar as our currency, which as we have noted today, is a very strong plus-point for the economy.

I would like to say to everyone here who has not been to Panama: go! Visit Panama, see for yourself, and we will help guide you. In that way, you will gain a 360-degree vision of the different opportunities that we have to offer. The tourism sector is one of the main opportunities in Panama. We have created a strong offering in Panama City itself. We still have challenges as regards infrastructure, hotel infrastructure for example, on both the Pacific and the Atlantic coasts, but this constitutes an opportunity. I would also suggest that in the next five years, it is something that will have developed strongly so as to cater to the growing flow of tourists who are already visiting. Until recently, Panama was only operating as hub in relation to tourism, but now it is increasingly catering to a whole range of tourist preferences, from gastronomy, and shopping and sight-seeing, to fishing, bird watching, and eco-tourism; which is to say, we have a range of opportunities in that particular sector.

The embassy also gets together on a monthly basis with Copa, the local airline. Not only does it currently service 77 destinations but it is also still growing (As we publish this transcript, Copa had just announced the acquisition of its 100th aircraft). The main approach adopted by the airline as a core aspect of its business model is to grow the servicing of secondary cities, and this has proved very helpful. They just purchased $6.6 billion worth of planes from Boeing, which is a lot of planes, primarily for Panama – no one could have imagined this until very recently. When I was going to school, I think Tocumen moved about 500,000 travellers a year; today it is around 8 million, and in the coming four years we are going to be moving 80 million. Along with Dubai, Panama is today one of the major hubs in the world and is growing at between 12 and 14%; it’s an impressive figure. With that said, I would reiterate my earlier point: use the embassy as a friend, as somewhere you can come to and we will help you in any particular sector that you need help with.

Tim Girven: Thank you very much, ambassador. Malcolm you also mentioned fishing when we were talking earlier: for those of you who are interested, it is the only country in the world where you can go fishing in the Atlantic in the morning and then fishing in the Pacific in the evening – so there are a lot of fringe benefits (laughter).

Daniel Fábrega: You can have your coffee in the Pacific and then your croissant in the Atlantic 45 minutes after that.

Tim Girven: I know there are a number of us here who are specifically involved in the shipping sector, so perhaps I could just ask a general question of you, Enrique. How do you see ship-finance moving forward, with this shift and this move to the new post Panamax 14,000 TEU vessels? Do you see growth in that area? Do you see that as something which Panama is specifically going to be involved in, particularly via London with its tradition in this specialist sub-sector?

Enrique Sibauste: I am of the opinion that it will, definitely be an area of growth. Recently, Panama has been losing business because of the limitations of (the old) Panamax capacity. In 2013, Maersk stopped using the Canal due to the limitation of the size of vessels, so having a customer –and client–like Maersk coming back to Panama amplifies the opportunities that we will have. Certainly, I think, with the completion of the Canal expansion programme, Panama will be back on the map for many shipping lines. I also wanted to mention that, when you are looking at the commercial routes, we are very much competing with the Suez Canal, but the Panama route is quicker; so, when we manage to complete this (which we foresee for April 2016), we will most definitely be fully back in business, and it will undoubtedly be a good development for the entire country and its economy. And to take advantages of these economies of scale marine freight-lines will need to run bigger vessels through the canal, because that is what will drop the price of freight in relation to import and export in all the surrounding areas.

Daniel Fábrega: I wanted to point out that the canal was originally developed with a model based on the fact that those who were using the canal employed 4,500 TEU ships which are, or were the workhorse they required. Yvette mentioned that that transport flow currently generates something like $2bn worth of revenue a year. However, with the expansion it is forecast as generating in the region of $4bn worth of revenues a year; but it is not only an important source of income, in doing so (expanding the canal), you have also created new business. We’ve not mentioned the LNG facility that is going to service both the local market and the regional market. There is the expansion of the port facilities themselves, for the port of Balboa, which is currently moving 450,000 TEU but which will have a capacity of around 2m TEU by mid-2017; the expansion is driving considerable development in the economy.

In terms of infrastructure development, including social infrastructure, energy and transportation, the government has something like $28bn worth of investment; that is a lot of money for a small economy like Panama. We have the only metro (Underground) in Central America, and we are currently adding both a second line and third line. That in itself is going to be a $6.3bn investment. The expansion of the ports which I just mentioned adds a further $3.3bn. The mining development we mentioned earlier is a $6.2bn project, and there is also investment in social housing, education and a range of projects related to social programmes, which is somewhere around $11bn. So, a lot is happening in Panama and, once again, I would encourage you to go and see for yourselves so as to really grasp the scale of what is happening.

Tim Girven: On that note there is a story –possibly apocryphal–from 2011/2012, when Manuel Noriega was being returned to the country following his prison sentences, first in the US and then in France. Obviously he was being flown back and, apparently, when he saw the city from the plane, he fainted, because he no longer recognised the city that he left back in 1990. It is absolutely remarkable; I don’t know if we have any pictures of the Panama City horizon but as Piotr mentioned, you would think you were in Dubai or in Miami, and, frankly, I think the city and the country is going to take on a role very similar to that of Dubai or Singapore. It is a remarkable city and I think it is going to become an increasingly important country. There are, as noted earlier by Jocelyn, real opportunities for UK small and medium size enterprises to work into Panama, to use it as a regional hub, particularly as Western European attention finally turns to Latin America in a more significant manner, after the last 10 or 15 years when it has been (overly) fascinated with Asian markets.

As His Excellency has noted, please use the embassy here in London as your point of contact, as your portal. If anybody wishes to discuss legal matters in detail, please contact colleagues here from Patton Moreno, and, if there are any more questions, this is your opportunity. Otherwise, perhaps we can have a further five or ten minutes of private conversation before we wrap up for today.

Piotr Piecha: Two comments if I may, one is a bit of a joke and the other one is a question. I had representatives of one of the largest real estate companies, Shahani Group, here recently. I was very proudly showing them around London and telling them, ‘Oh, this is the Shard’, and they looked and said: ‘Oh, we have three of those.’ But more seriously, I am frequently asked, ‘Well, you are talking about the enlargement of the Panama canal, but what is happening with the other one?’ They’re referring of course, to the Nicaraguan canal project; I have my theory and my spiel on it, but I wanted your view, ambassador, as to how you are handling those questions?

Daniel Fábrega: You can never underestimate Chinese investment but it has to be said that as currently projected, it does not make much sense financially. They say it is going to cost $50bn, but by our estimates –and we have prior experience (!)– the development of a canal in Nicaragua would really cost something around $70bn. Moreover, it would/will have a tremendously negative impact on the environment, and that is going to be a cause of major difficulties. At the peak of the expansion project, Panama has 15,000 employees at work. It would take between five and ten times that to build a new canal. Most importantly, perhaps, no one has seen a picture of the project. There are only PowerPoint presentations, which are very nice and pretty but, other than that, no one has seen an actual picture, so the whole project remains shrouded in doubt if one follows it on a day-by-day, week-by-week, or month-by-month basis. Again, we do not underestimate the money that the Chinese have at their disposal, but does it really make any sense? We are monitoring that.

Tim Girven: If I could just add a point on there, a very famous Nicaraguan novelist, Sergio Ramirez, has written a fascinating essay about the Chinese project to build a canal in Nicaragua. [“Un cuento chino contado por un herbolario chino” in: Crecer a Golpes - Crónicas y ensayos de América Latina a cuarenta años de Allende y Pinochet (Diego Fonseca - Ed.)] Even if we concede that it may make geopolitical, if not financial, sense, to date –as the ambassador has just pointed out– there is no solidity to this plan. There is a notional route, but this involves grave environmental costs, not least the hydrological impacts upon el Gran Lago de Nicaragua, basically turning it into a swamp. The figure who has been named as the head of the organisation that would theoretically be financing this alternative canal is not a known figure and has not track record or independent standing. The whole thing –at least to date– is something of a chimera. The other issue here, of course, is that by the time such an alternative was actually constructed, Panama would have enjoyed a 10-or-15 year lead time to take any further steps it thought necessary to retain its competitive edge.

Piotr Piecha: I would also mention that the Nicaraguan route is an area of seismic activity.

Daniel Fábrega: That is correct.

Jocelyn Carnegie: Yes, that is what actually led to the building of the original canal in Panama in the first place. The Nicaragua project is a crazy plan. I have explored that whole route by boat on fishing trips and things like that, and while I am not an engineer, in my lay opinion it is from every aspect, crazy.

Daniel Fábrega: The person behind the project has never delivered anything tangible. He does not have a good track record, so it remains very doubtful.

Tim Girven: It is very murky. Nobody really knows who he is or where this financing would actually come from; especially at a moment of Chinese retrenchment on all fronts, I think there are grave question marks over the plan. (See: Nicaragua’s $50bn canal plan delayed -

Piotr Piecha: Could it be that the Chinese are trying to negotiate better tariffs with you?

Daniel Fábrega: I do not think so. Actually, the Chinese are very interested and keen on undertaking further investment in infrastructure in Panama, so they have been talking with key government officials on a constant basis so as to have a more significant participation in all the infrastructure projects currently under development and planning.

Tim Girven: My apologies, ladies, gentleman but I have to draw things to a close. My thanks to all of you; especially His Excellency, Ambassador Fábrega. Mr Austen, thank you again, especially for waving the flag for Panama. It has been a pleasure to have you all here this morning and we appreciate your taking the time. Enrique, Ivette, thank you both very much for your presentations. Thank you all for attending.

As we publish this transcript, specialist Colombian design-company Arquitectura e Interiores (AEI) has announced it is to open in the country after several years working with Panamanian investors. Company director Marta Gallo noted “Panamá is growing and developing. It is a country that has welcomed AEI with open arms over the past few years and we are proud to be hear, to generate employment, to bring innovation in design and corporate architecture and finally to bring greater productivity to Panamanians in their work. The company’s local clients include Grupo Shahani, PwC, Tropigas, and Felipe Motta.


  • Tim Girven, The Legal 500 Latin America
  • Enrique Sibauste, Patton, Moreno & Asvat
  • Ivette E Martinez, Patton, Moreno & Asvat
  • Maria E. Bobadilla, Patton, Moreno & Asvat


  • Daniel Fábrega, Panamanian Ambassador to the UK
  • Richard Austen, UK Ambassador to Panama 2006-11
  • Yvonna Balysz, Solarcentury
  • Sam Batchelor, Ince & Co
  • Jocelyn Carnegie, ForestFinance
  • Aixa I Diaz Hansell, ForestFinance
  • Malcolm Entwistle, Hill Dickinson
  • Nick Gray, Slaughter and May
  • Sam Hoexter, UK Export Finance
  • Richard Howley, Norton Rose Fulbright
  • Kristin Konschnik, Withers LLP
  • Gerard Matthews, London Shipping Law Centre
  • Piotr Piecha, Columbus Frontiers
  • Philip Rymer, Reed Smith
  • Kate Silverstein, Watson Farley & Williams
  • Paul Spindler, Kingston Smith Magda Torres, Kingston Smith
  • Justin Turner, Curtis Davis Garrard LLP Luis D Ureña, Panama Wildlife Conservation
  • Jonathan Ward, Stephenson Harwood Emeline Yew, Watson, Farley & Williams