This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to
Last Published: 11/14/2016
Law 18 of 1948 established the Colon Free Zone (CFZ), which is now the second largest free trade zone in the world, after Hong Kong. Most merchandise (clothing, footwear, electronics, pharmaceuticals, medicines, perfumes, cosmetics, liquor, cigarettes, textiles, bedding, linens and fine jewelry) is transshipped from the Far East (particularly China, Hong Kong, and Taiwan) through the CFZ to other parts of the Western Hemisphere (particularly Venezuela and Colombia). Through 2015, the CFZ imported/exported $21 billion, down from 24 billion 2014, $27 billion in 2013 and $30 billion 2012. The 20 percent decrease over the last three years is due to the changing logistics capabilities of Chinese manufacturers, political and economic troubles in Venezuela and an ongoing trade dispute with Colombia.

Law 41 of 2004 provides for the development of “Panama Pacifico Special Economic Area” in the former Howard Air Force Base to encourage investment in the area, particularly in the logistics sector. Establishing a company in the SEA can be done in as little as six months. Many large American firms including Dell, WR Grace, 3M, SAMTEC, VF sourcing Latin America, Grainger, Singapore Technologies Aerospace, and Caterpillar are among the 246 multinational companies located there.

Law 32 of 2011 provides updated regulations for the development of free trade zones (not including the Colon Free Zone) in an effort to broaden the Panamanian economic development while promoting investment in former U.S. military bases transferred to Panama. The law also includes specific labor and immigration provisions that are more favorable than the current Panamanian labor code. The government also provides numerous tax incentives to companies that operate in free trade zones. Companies, whether Panamanian or foreign, operating in these zones may import inputs duty-free if products assembled in the zones are to be exported. There are currently 18 free zones with 155 companies registered. They face difficulties due to Panama's higher-than-regional-average wages, limited existing industrial base, and weak infrastructure, particularly outside the Panama-Colon Corridor. Law 25 of 2006 also provides for the development of call centers; 80 companies are currently licensed by ASEP to operate call centers.

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Panama Economic Development and Investment