Foreign Direct Investment

Panama is the country receiving the most FDI in Central America. According to UNCTAD's World Investment Report 2022, FDI flows recorded a growth of 203% in 2021, to USD 1.844 million (compared to USD 607 million in 2020 - which was the lowest level in almost two decades, as a result of the economic crisis triggered by the Covid-19 pandemic). To counter the economic impact of the pandemic, the government launched several infrastructure construction projects (mainly of highways, railways, and bridges) and approved a new investment incentive scheme, mainly in the form of tax benefits, aimed at multinational companies that conduct operations from Panama and provide manufacturing services. Furthermore, 2021 was marked by a recovery in M&A activity, with notable acquisitions in the telecommunications, retail, warehousing, and logistics and distribution sectors - including the acquisition of the Galores Group by Emergent Cold Latin America and and the purchase of the Panamanian operations of América Movil by Liberty Latin America. Panama's main FDI partners are the US, Colombia, Canada, the UK and Switzerland. There are many sectors in Panama in which to invest, especially construction, financial and business services, distribution agencies, real estate, software development and sales companies, wholesale and retail businesses, and import and export services in free zones. To date, the two sectors with the highest levels of FDI are wholesale and retail trade, financial activities and insurance.

Panama enjoys important financial and investment freedoms: commercial operations are, in general, subject to the rules of transparency. In addition, the tax rate for households and businesses is moderate, and there are many tax and duty advantages in the Colón Free Zone (CFZ). The strategic geographical position of the country, its dollar-driven economy and the specialisation of its economy in strategic sectors (banking and maritime traffic) are all factors that attract FDI. The country also has a modern infrastructure, strong political stability, and highly developed real estate, tourism, and banking sectors. However, Panama still faces a high level of corruption - particularly in the public service - a slow judicial system, and is subjected to its neighbours economic and political situations. Still, the government actively encourages FDI, and do not legally differentiate between national and foreign companies. Additionally, the country also encourages multinational companies to open regional headquarters in Panama, through a variety of tax incentives. Furthermore, in order to promote FDI in the country, the government recently created ProPanamá, a new Export and Investment Promotion Agency. Panama is known to be a hub for Latin American consumers looking for competitive prices on goods, services and commodities. The financial and insurance sector has always been a very attractive sector in terms of investment. This is due to the quality and reputation of the financial and banking sector. In addition, Panama has a very attractive tax system, which gives it a clear advantage in attracting foreign investment. Among the major investments the country has seen in recent years is the acquisition of the Multibank Financial Group by the Colombian Grupo Aval Acciones y Valores SA in 2020.