Panama – A gateway to Latin America

Panama – A little known distribution centre for Latin America

Panama is a major re-export zone and a key logistics hub because of its location, which gives easy access to Latin American and Caribbean markets.

BY SUHAYL ABIDI

Situated in the middle of North and South America, Panama has been one of the fastest growing economies worldwide over the past decade. Its economy is based primarily on a well-developed services sector, accounting for about 80% of GDP – with the Panama Canal as the largest economic contributor. The services sector includes the canal, banking, tourism, logistics, activities in the Colón Free Trade Zone (CFZ), insurance, container ports, and flagship registry. The re-export trade for CFZ is over US$ 30 billion per year.

CFZ is the second largest trade zone in the world, after Hong Kong. Over 3,000 companies have operations in the CFZ. It is frequently visited by Wholesale Clubs of Latin American countries. These are groups of wholesale or retail merchants which make consolidated purchases. So, in the CFZ, an Indian exporter can sell to a merchant duty free, and expect to see his products distributed and retailed throughout Central America, the Caribbean, and the Andean region of South America. Indian exporters can take advantage of numerous distribution companies in Panama Free Zones. Sectors which can benefit are textiles & garments, pharma & surgical products, food items, handicrafts, building hardware, specialty chemicals, etc.

Panama has rapidly developed private banking and insurance industries, two sectors that value both the confidentiality afforded by the country and its monetary stability, a consequence of its currency peg with the US$ at a 1:1 exchange rate. Benefits you can avail through Panama include:

Reduce Complexity: You sell in dollars to a CFZ merchant. The entry is duty free and you are only selling to one entity. Finally, the CFZ is co-located with some of the world’s largest transshipment ports.

Reduce Financial Risk/Make

More Money: You are selling to established CFZ merchants. They, in turn, make their money by showcasing your products. In addition, you do not have any duties to pay, as they are the responsibility of the final buyer

It is economical for exporters to stock and sell through CFZ companies rather than incurring separate marketing costs in each target country. Exporters can use these facilities to increase their market size, introduce new products and find new customers.

After the success of CFZ, Panama has built 5 Free Trade Zones and exporters can look at the specific advantage they offer.

_____________________________ Suhayl Abidi is Research Advisor, GOG-AMA Centre for International Trade & Consultant, Centre for VUCA Studies, Amity University. Views are personal.