One of the fastest growing economies in Latin America over the past decade, Panama continues to enjoy a positive outlook. While the heavily services-based economy was severely affected by the outbreak of the Covid-19 pandemic in 2020 (with GDP contracting by 18%), it has since rebounded, thanks to high levels of foreign investment and strong activity in the mining and infrastructure sectors, although the country continues to be affected by significant wealth inequality, particularly between urban and rural areas. The World Bank’s recent forecasts predict economic growth of 5.7% in 2023, and 5.8% in 2024.
Panama’s strategic geographic location and dollarised economy, along with the presence of the Panama Canal and 12 active free trade zones, mean it is an attractive jurisdiction for foreign direct investment, receiving one of the highest rates of FDI in the region. As a result, a hefty portion of Panamanian firms’ workload concentrates on advising on inbound investments and assisting prominent multinationals with establishing their regional headquarters in Panama, particularly in the Colón Free Zone and the Panamá Pacífico special economic area (this includes advising on the tax, labour, customs and immigration benefits available to these companies under the Multinational Company Headquarters (SEM) regime).
A financial hub for the region, Panama is home to a large number of domestic and international banks, and the trend towards the consolidation of the market has continued over the last year, meaning that firms have been active in advising on M&A involving key players in the banking sector. Whereas debt refinancing was the main source of work in 2020 and 2021, due to the impact of the pandemic, more recently firms have also assisted with a fresh influx of local and cross-border loans.
Although Panama’s financial system remains focused on traditional banking, the fintech industry in the country is continuing to develop, with firms handling both the launch of start-up businesses and the expansion of established platforms into Panama. Yet the country remains behind regional competitors such as Colombia, Chile and Mexico when it comes to the adoption of technology, in part because of the lack of specific regulation in this space: in June 2022, President Laurentino Cortizo refused to sign a law regulating the use of cryptocurrency unless stronger anti-money laundering controls were included, and in July 2023 the same law was struck down by the Supreme Court.
In addition, although the M&A and financial markets have been stable over the last year, the prospect of the general elections scheduled for May 2024 could create some volatility.
Shaking off the shadow cast by the Panama Papers scandal in 2016 also remains a challenge for the country and its law firms. Since then, Panama has taken steps to strengthen its regulatory regimes and increase transparency, including passing a law requiring resident agents for offshore companies to hold a copy of the company’s accounting records (Law 52 of 2016) and criminalising tax evasion (Law 70 of 2019). Following its inclusion on the grey list of the Financial Action Task Force in 2019, Panama has also implemented an action plan to improve its AML/CFT regime and establish a system to maintain up-to-date information on the beneficial ownership of legal entities. In June 2023, Panama was commended by the FATF for its “substantial progress” in this area and it is expected that the country will be removed from the list in October. Despite this, negative perceptions about the Panamanian business environment still remain.
On the dispute resolution front, the region-wide trend towards arbitration has been reflected in Panama. Although domestic litigation is still the prevailing method for handling disputes, more and more clients are seeking to include arbitration clauses in their commercial contracts, as a result of severe delays in the court system (partly caused by a backlog of cases following the transition from an inquisitorial to an adversarial system in 2016) and ongoing concerns about corruption.
In the energy sphere, Panama’s status as one of only three officially carbon-negative countries in the world (along with Suriname and Bhutan) and its incentives for investment in clean energy sources make it a desirable location for the development of wind, solar, hydroelectric and biofuel projects.
The projects space has been another booming area for firms as the government has invested heavily in recent years in major public infrastructure projects, including the expansions of the Panama Canal, the Panama Metro and Tocumen International Airport. This is likely to continue following the introduction in 2019 of a law regulating public-private partnerships, which has opened up a promising source of new work – in July 2023 bids opened for the first PPP contract under the 2019 law (for the rehabilitation and maintenance of part of the eastern Pan-American highway) and numerous future projects are in the pipeline, as the government has plans for the repair of over 2,000km of roads. The project for the construction of a fourth bridge over the Panama Canal is also nearing a restart, after delays caused by the pandemic and the restructuring of its financing.
Turning to Panama’s legal market, the landscape remains dominated by full-service domestic firms, particularly Alemán, Cordero, Galindo & Lee (Alcogal), Arias, Fábrega & Fábrega (Arifa), Morgan & Morgan, Galindo, Arias & López (Gala) and Alfaro, Ferrer & Ramírez (Afra). Other well-known Panamanian firms include Icaza, González-Ruiz & Alemán, Fabrega Molino, Patton, Moreno & Asvat, LOVILL, Infante & Pérez Almillano, Arosemena Noriega & Contreras, Pardini & Asociados (which has a significant niche in the aviation sector), Quijano & Associates (a notable name for maritime and private wealth law), Cedeño & Méndez (which has established a network of offices across Central America), SB&Co. Legal and Tapia, Linares y Alfaro.
The market also hosts several boutiques, among them IP specialist Estudio Benedetti; dispute resolution-focused practices Britton & Iglesias, Evans Group, MDU Legal and Guevara Legal Bureau (which has an emphasis on criminal law); and, due to the significance of the maritime sector to Panama’s economy, a number of shipping specialists, including Arias B Associates, De Castro & Robles and Avila & Co.
Regional firm Arias has had a presence in Panama for over a decade, while international firms Dentons and, most recently, ECIJA (through a tie-up with local outfit Shamah, Vargas & Córdoba in 2019) have also established a foothold in the market.
Among the recent newcomers to the ranking are corporate and financial services-focused SIGMA International and Global Market Attorneys (founded by former Arias, Fábrega & Fábrega senior counsel Cecilio Castillero) and Virtù Atelier Legal (established by Ana Lucrecia Tovar, who was previously a partner at Fabrega Molino and adviser to Panama’s banking and securities regulators); Delvalle, Escalona, Levy & Corró (an up-and-coming practice set up by former associates from Galindo, Arias & López and Patton, Moreno & Asvat) and IMS Legal (led by Ivette Martinez, who was previously a partner at Patton, Moreno & Asvat).