Panama Geography
The Republic of Panama lies in Central America between the Caribbean Sea and the North Pacific Ocean. There are land borders of 225 km with Columbia (on the west) and 330 km with Costa Rica (on the east). The land area totals 75,990 sq. km. The capital is Panama City. The Panama Canal links the North Atlantic Ocean via the Caribbean Sea with the North Pacific Ocean.
The topography is varied. There are mountains towards the Caribbean coast, while small hills and vast plains lie towards the Pacific side. The climate is tropical and mild.
The highest point is Volcan de Chiriqui at 3,475 m. Panama`s natural resources include copper among other minerals, mahogany forests and fish, especially shrimp.
Panama`s international airport is connected by many international carriers to most world centers. There are two ports, Balboa and Cristobal (at either end of the canal). The time zone is 5 hours behind GMT (= US Eastern time).
Panama Population, Language and Culture
In July, 2006, the population of Panama was estimated at 3,191,319 with half the population residing in urban areas, and the majority of those (over 1m) in Panama City itself. Spanish is the official language, but English is widely spoken and understood in major cities.
Panama Executive Summary
Panama Is An Independent Country With A Canal
The Republic of Panama, between Colombia and Costa Rica, has a population of 3,191,319 (July 2006 est) and a land area of 76,000 sq km. The climate is tropical. Panama is a sovereign democracy with a presidential style of government. In May, 2004, Martin Torrijos (son of Omar Torrijos, who ruled Panama between 1968 and 1981) was elected President. After losing the presidential battle in 1999, Torrijos assumed leadership of his father`s party, sought to reform it, and created a platform based on combating corruption, boosting employment, and reforming Panama`s fiscal system.
Panama was part of Colombia for a while until US helped it to become an independent country alongside construction of the famous canal, beginning 1903. As of the end of 1999, the canal and all its US facilities and bases reverted to Panama, creating a major economic opportunity for the country. The official language is Spanish, but English is understood in business circles. Panama`s currency is effectively the US dollar, with the official Balboa pegged to the dollar but used only for small transactions, while the US dollar is the de facto official currency.
Economy
The service sector contributes 77.6% (2005 est.) of Panama`s economy, which is based on banking, tourism, mining and commerce. The Colon Free Zone is very successful, accounting for around 10% of GNP. The Balladares administration pulled Panama back from a very poor situation between 1994 and 1999, reorganizing debt, trimming state expenditure, liberalizing and privatizing. The government is trying to make productive use of the canal`s facilities with export processing zones and many investment incentives.
Growth had been running at 4% with low inflation, however growth fell from 2.5% in 2000 to only 0.3% in 2001 and about 0.8% in 2002, the rebounding to 4.1% in 2003 and 6% in 2004, partly due to property investment incentives. Growth levels in 2005 were 6.4%.
GDP per head is 7,400$ (2005 est.) and unemployment levels were at 9.8% in 2005.
Panama Colon Free Zone
The Colon Free Zone was established by Law No. 18 of 1948. The Free Zone is the city of Colon at the Atlantic entrance to the canal, and has been extremely successful, more than 1,000 companies are established there, shipping more than 9bn$ of goods annually.
All kinds of processing and manufacturing are permitted within the Free Zone, while administration can be conducted from inside or outside the zone. 80% of a company output must be exported; the remainder can be sold internally (separate books have to be kept).
Companies established in the Free Zone are largely free of taxes.
Panama Banking
The Panamanian banking industry grew during the last quarter of the 20th century into a regional banking centre for Latin American and the Caribbean, due to a variety of factors including the absence of exchange controls, the rapidly increasing volume of trade being conducted through the country (and through the Colon Free Zone in particular), liberal banking legislation and tight secrecy provisions. At the end of 1997 more than 100 banks were licensed in Panama, from more than 20 countries and with assets of about $23bn; however the country responded to international pressure by tightening up on banking regulation, and a number of banks closed their offices in 2000 and 2001. By mid-2005, 80 licensed banks remained, of which 30 had international licenses. Assets amounted to $7bn.
Panama introduced a new and comprehensive banking law (which covers local trust companies as well) in February, 1999, replacing one that had been in place since the 1960s. The National Banking Commission that previously issued licenses has been replaced by a Superintendency which comprises a Board of 5 Directors and a Superintendent. In addition to increased investigative powers, the new law has tightened general controls and regulations and brought the country`s supervision more in line with the regulatory standards found in European and American banking centres.
Panama`s Low Tax Specializations
Panama has territorial taxation, thus only locally-sourced income is taxed. There are no `offshore` regimes as such other than the Colon Free Zone and the export processing zones. There are more than 120,000 companies in Panama, most of which trade or hold assets externally. It is reasonably easy to form corporations, and privacy is assured. There are no tax treaties. Banking and shipping are Panama`s two main `offshore` industries.
In mid 2005, there were 80 licensed banks, of which 30 had international licenses, and Panama is the world`s largest shipping registry.
Panama Entry and Residence
Panama classifies foreigners entering the country as Tourists, Temporary Visitors, Special Temporary Visitors, Tourist-Pensioners, Immigrants and Investors.
Short-stay visas are issued freely; the Tourist-Pensioner visa is given to those who can demonstrate a designated monthly income from interest on time-deposits in a Panamanian bank; the Investors visa is for those who invest their own capital into local business activity. Immigrant visas cover long-stay working residents.
The employment market is quite closely regulated: the law sets maximum percentages for the employment of foreigners in a business according to its sector. Usually the figure is 5%. However, foreign companies are allowed to fill senior positions with expatriates, up to a maximum of 12% of the staff. It may be possible to agree a higher percentage with the Ministry Of Labour, which is responsible for issuing work permits.
Panama Business Environment
In terms of business and communications infrastructure, the long-term US influence on Panama has been very beneficial, Panama City in particular having the highest international standards.
Panama Import of Foreign Capital
There are no exchange controls in Panama and there is no Central Bank. Foreign investment is welcomed, and may be freely repatriated.
Panama Foreign Investment Regime
The Panamanian government offers foreign and domestic investors alike a range of incentives.
Under Cabinet Decree 413 of 1970 and Law 3 of 1986, companies in manufacturing and processing industries which export all their production receive exemption from most direct taxes and from import duties on machinery and equipment. To take advantage of the incentives, a company needs to register with the Official Registry of National Industry, a department of the Ministry of Commerce and Industry.
These laws were followed by Law 28 of 1995 which offered superior incentives, but only to companies which give up their registration under the previous laws and re-register under the new Law. The main benefits of registration under Law 28 were as follows:
· A uniform fixed rate of import duty on raw materials, semi-processed ingredients and capital assets employed in the manufacturing process; and
· For companies investing in technology in a range of industries, and not otherwise exempted from tax, a tax credit covering up to 25% of their tax bill in any one year.
Other investment incentive schemes apply to agriculture, forestry and housing development, and various aspects of the tourist industry. Tourist sector investments worth more than $300,000 (in the city) or $50,000 (in the countryside) attract exemption from import duties and real estate taxes for 20 years, exemption from capital taxes, and accelerated depreciation.
History:
Just 100 years ago, Panama was one of Colombia’s colonies, dominated by its lifestyle, architecture and customs.
At the turn of the Century, Panama declared its sovereignty and signed a treaty with the United States to complete and operate the Panama Canal. In 1914, controlled by the Americans, the canal became a reality and US culture, custom, and influence, slowly spread out from the Panama Canal Zone to Panama City, northwest along the Pan-American Highway, flooding the newly born Central American country. At the end of 1999, the Panama canal and all U.S. facilities and military bases reverted to Panama, by the terms of the Carter/Torrijos Treaty creating a major economic opportunity for the country.
Today we find Panama to be a modern, international financial center that is a tax haven for off shore company formations, private banking, and the Colon Free Zone. Second only to Hong Kong, Panama is a word leader in Maritime Registration. Visitors find Panama to be a safe, comfortable, and inexpensive destination.
The Geography and Natural Resources:
The Republic of Panama lies in Central America between the Caribbean Sea and the North Pacific Ocean,linked by the Panama Canal. It is bordered on the west by Columbia
and Costa Rica to the east. The capital is Panama City.
The topography is diverse. There are mountains along the Caribbean coast, while small hills and vast plains lie on the Pacific side.
The climate is tropical and mild. The highest point is Volcan de Chiriqui,at 3,475 meters (11,390). Panama’s natural resources include copper among other minerals, mahogany forests and fish, especially shrimp.
Population, Language and Culture:
The Republic of Panama has a population of 3.2 million (July 2007 est.) with half the population residing in urban areas, and the majority of those, over 1 million, in Panama City itself. Spanish is the official language, but English is widely spoken and is legislated as the country’s second language.
Panama is a sovereign democracy with a presidential style of government. Martin Torrijos (son of Omar Torrijos, who ruled Panama between 1968 and 1981) was elected President in May of 2004 and has worked to combat corruption, boost employment, and reform Panama’s fiscal system.
Panama’s currency is effectively the US dollar, with the official Balboa pegged to the dollar but used only for small transactions.
Panama has the highest rating for tourist safety from Pinkerton Intelligence Services and a low crime rate in general.
The presence of the Panama Canal ensures that the international community will not allow Panama to become unstable politically.
Settled primarily by an Agrarian population soon after Spain had claimed the area, most transactions have always been completed with
the “hand shake”, although a written contract is encouraged.
The culture of Panama derived from early European music, art and traditions that were brought over by the Spanish to Panama.
Dance is a symbol of the diverse cultures that have mixed in Panama. For example, the tamborito is a Spanish dance that was blended with Native American rhythms, themes and dance moves. The local folklore can be experienced through a multitude of festivals,dances and traditions that have been handed down from generation to generation. Local cities host live Cuban, Reggaeton, Colombian,
jazz, blues, salsa, reggae and rock performances. Regional festivals take place throughout the year featuring local musicians and dancers.
Panama’s diverse culture
is also reflected in the traditional products, such as woodcarvings, ceremonial masks and pottery, as well as in its architecture, cuisine and festivals. In earlier times, baskets were woven for utilitarian uses, but now many villages rely almost exclusively on the baskets they produce for tourists.
Economy and Banking:
The Panamanian banking industry grew during the last quarter of the 20th century into a regional banking centre for Latin America and the Caribbean. As of mid-2005, 80 licensed banks were operational in Panama, of which 30 had international licenses. Assets for these banks amounted to $7 billion.
Panama introduced a new and comprehensive banking law (which covers local trust companies as well) in February, 1999, that has tightened general controls and regulations and brought the country’s supervision more in line with the regulatory standards found in European and American banking centers.
The Colon Free Trade Zone was established in 1948. Known as the “Zona Libra”, it is located at the Atlantic entrance to the canal, and has been extremely successful; more than 1,000 companies are established there, shipping more than $9 billion of goods annually and accounting for 10% of the GNP.
All kinds of processing and manufacturing are permitted within the Free Zone, while administration can be conducted from inside or outside the zone. Eighty percent of a company output must be exported; the remainder can be sold internally. Companies established in the Free Zone are largely free of taxes.
There are no exchange controls in Panama and there is no Central Bank. However, the National Bank of Panama is, in fact, the “clearing” house for incoming and outgoing monetary transactions. Foreign investment are welcomed. Banking and shipping are Panama’s two main offshore industries.
Panama does not have any tax treaties. It has territorial taxation, thus only locally-sourced income is taxed. There are no offshore regimes as such other than the Colon Free Zone and the export processing zones. There are more than 120,000 companies in Panama, most of which trade or hold assets externally. It is reasonably easy to form corporations and privacy is sacred.
Entry and Residence:
Panama classifies foreigners entering the country as Tourists, Temporary Visitors, Special Temporary Visitors, Tourist-Pensioners, Immigrants and Investors.Short-stay visas are issued freely; the Tourist-Pensioner visa is given to those who can demonstrate a designated monthly income from interest on time-deposits in a Panamanian bank; the Investors visa is for those who invest their own capital into local business activity,and the Immigrant visa covers long-stay, working residents.
The employment market is quite closely regulated: the law sets maximum percentages for the employment of foreigners in a business according to its sector, typically set at 5%. However, foreign companies are allowed to fill senior positions with expatriates, up to a maximum of 12% of the staff. It may be possible to agree to a higher percentage with the Ministry Of Labor, which is responsible for issuing work permits.
Low Cost of Living:
Panama isn't a cheap destination, but it is certainly affordable.
You can expect to spend about 25% to 75% less to live here than in the United States, depending whether you live in Panama City or outside of Panama City. Groceries will cost about 20% less than in the States. In Panama one may go to the movies for $3.75 and $2 on Wednesdays! Monthly fees for the brand new Summit Golf and Resort complex, the top-rated course in Central America, according to WorldGolf.com, are $135 a month, a fraction of what you would pay for a similar membership in the States. New cars and electronics costs are comparable to the United States. Medical expenses are less that one-quarter of the U.S. and retired persons can get up to a full 50% off that already low cost! A typical dentist visit will cost only $35.
Getting to Panama:
Panama’s international airport is connected by the many international carriers of most world centers offering direct flights. Presently, there are two ports, Balboa and Cristobal (at either end of the canal) with a third Pacific mega-port currently under construction and financed by China. The time zone is equivalent to US Eastern time.
General info:
Population: 3.2 million (growth rate 1.3%)
Size of country: 78,000 sq km (30,420 sq. mi) - slightly smaller than South Carolina.
Capital city: Panama City (population 1 mil)
Location: Panama is bordered The Caribbean Sea to the north; The Pacific Ocean to the south; Columbia to the east; and Costa Rica to the west.
International airport: Tocumen, Panama City (PTY)
Climate: Tropical; the Rainy Season is from May to November and the Dry Season is from mid November to May.
Language: Spanish; English is a strong second language.
System of government: Democracy, led by President Martin Torrijos.
Time zone: Eastern Standard Time.
Electricity: Same as the United States, 110V.
Currency: The U.S. dollar also referred to as balboas. The native currency (balboa) is no longer in circulation, although the country does mint its own coins, which can be used interchangeably with U.S. coins.
Military: The military in Panama is prohibited by the constitution, same as in Costa Rica.
Telephone country code: 507
Religion: Roman Catholic (85%), Protestant (10%), Other (5%).
Life expectancy at birth: 75.89 years (77.4 years is the U.S. Average).
Business hours: 8 a.m. to 5 p.m.
Media: Eight daily newspapers (six in Spanish, two in Chinese) and about 20 weekly and monthly periodicals. Six television stations, of which three are non-commercial. 80 commercially-run radio stations.
Education: Provided by both state and private sector; 90% literacy.
Economy: Based mainly on a well-developed services sector that accounts for 75% of GDP: the Panama Canal; banking; the Colon Free Trade Zone; insurance; container ports; flagship registry; and tourism.
Exports: $5.9 billion
Primary trade partners: USA, EU, Central America & Caribbean, Japan
Imports: $6.7 billion
GDP: 26.04 billion (2006 est.)
GDP - real growth rate: 8.1% (2006 est.)
GDP per head: $8,200 (2006 est..)
Unemployment Rate: 8.8% (2006)
Annual growth: 10% (!!! 2007)
Inflation rate: 1.1%
Major industries: Banking, construction, petroleum refining, brewing, cement and other construction materials, sugar milling, shipping and agriculture.
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