panama

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O P P O R T U N I T I E S

GENERAL INFORMATION PRESIDENTIAL MESSAGE INTRODUCTION WHY PANAMA? LOGISTIC AND MULTIMODAL TRANSPORTATION CENTER SECTOR TOURISM SECTOR SERVICE SECTOR INFORMATION TECHNOLOGY AND COMMUNICATIONS SECTOR ENERGY SECTOR PRIMARY AND ARTISAN SECTOR

Panama faces great challenges worldwide, and we are preparing for them by carrying out the improvements necessary to allow us to achieve a unified and stronger country in a globalized world. The development of our human resources, as well as promoting new investments, will ensure our advancement in science and technology that will bring us progress and wealth. Panama will continue to offer the services that have made it an international financial center, bringing new technologies to make our country the platform in Latin America for launching new products and services in the international marketplace. Trade will be strengthened by attracting new partners through bilateral free trade agreements, increasing market coverage and eliminating government bureaucracy. Our strategy is based on working jointly with the private sector, improving our competitiveness, training our human resources, seeking new investors, and developing those strategies that strengthen our potential as a logistic and strategic center for the whole continent.

Welcome to Panama.

MINISTRY OF COMMERCE AND INDUSTRY “Facilitating economic development with a social vision”.

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INFORMATION ABOUT PANAMA

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POLÍTICA M I N DIVISIÓN I S T R Y O F C O MDE M ELA R REPÚBLICA C E A N D IDE N DPANAMÁ U S T R Y N W

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Golfo de San Blas

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C A R I B E Colón

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Bocas del Toro Isla Bastimento

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Cristobal

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Lago Alajuela

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Isla Popa

Golfo de Los Mosquitos

PROVINCIA

Ciudad de Panamá

COMARCA

Isla Chepillo

WARGANDI

Bahía de Panamá

Isla Taboga

PROVINCIA

DE CHIRIQUÍ

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Santiago

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Bahía de Parita

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de Burica

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Bahía de Charco Azul

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Bayoneta

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Capital de Provincia Carretera Panamericana Calles Principales Limite Provincial Rios

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Elaborado e Impreso en le SIG del Isntituto Panameño de Turismo

New promotional policies are being developed for markets and sectors such as: agriculture, marine, artisan, industrial and services, with a calendar of activities coordinated with our foreign diplomatic representations for the purpose of evaluating the best opportunities for presenting our export offers.

II SOCIAL AND ECONOMIC INDICATORS

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III GROSS DOMESTIC PRODUCT BY SECTORS AND VARIATION

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I N D U S T R Y

Panama, a candidate for one of the most important logistic centers for transportation and storage of worldwide cargo, with private ports on both sides of the republic, connected by the inter-oceanic railroad, highways and international airports, is capable of offering all kinds of services for handling cargo and passenger attention.

IV. TECHNOLOGY

V. TRANSPORTATION INFRASTRUCTURE

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VI. MAIN TRADING PARTNERS Export (2005): United States 43.52%, Spain 8.88%, Sweden 5.64%, Holland 4.88%, Costa Rica 4.02%, Belgium 2.58%, Guatemala 2.22%, Nicaragua 2.22%, Taiwan 2.08%, United Kingdom 1.91%, Mexico 1.78%, Dominican Republic 1.71%, Honduras 1.62%, Colombia 1.60%, Italy 1.57%, Puerto Rico 1.36%, Colon Free Zone 1.36%, Portugal 1.31%, Republic of China 1.06%, Rest of the World 8.67%.

Imports (2005): United States 27.21%, Colon Free Zone 12.18%, Curacao 11.44%, Costa Rica 4.68%, Japan 4.53%, Petroleum Free Zone 3.95%, Mexico 3.71%, Colombia 3.46%, Brazil 3.06%, South Korea 2.48%, Republic of China 2.38%, Guatemala 2.01%, Spain 1.52%, El Salvador 1.35%, Germany 1.27%, Venezuela 1.08%, Trinidad and Tobago 1.05%, Argentina 1.00%, Rest of the World 11.65%.

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VII. MAIN EXPORT PRODUCTS Melon, watermelon, pineapple, fish, shrimps, lobsters, tuna, beef, coffee, sugar, services.

VIII. MAIN IMPORT PRODUCTS Petroleum and its derivate products, automobiles, heavy equipment, electric and telecommunication devices, medicines, plastic and its manufacture, paper, cardboard and its manufactures, food, clothing, chemical products, shoes, furniture.

IX. HEALTH AND EDUCATION INFRASTRUCTURE

Source: Document “Panama en Cifras 2004”, National Controller’s Office of the Republic of Panama * Statistics Department, Education Ministry of the Republic of Panama ** National Census of Population and Housing (2000) (P) Preliminary records NOTE: In conformity with the actions and modifications introduced by Law 34, of July 6, 1995 and Law 47 of 1946, starting from the year 2000, there will be no graduations in elementary schools.

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IX COSTS AND SERVICES

Source: Direction, Communications Ministry of Commerce and Industry

Construction Cost: B/. 200.00 per mt2 (Average cost) Characteristics: • 15 cms Concrete Flooring • 6.10 mts High • Steel Structure • Insulations • Electricity for Lighting (non Industrial) • Boarding Plant

Source: Home Survey, Controller General of the Republic www.ersp.gob.pa Ministry of Labor and Labor Development

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L A S

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INTRODUCTION

From the discovery of America, Panama’s geographic position has been one of its most valuable assets, facilitating the mobility of men and wealth from the Atlantic to the Pacific. Today, modernization and globalization has allowed us to continue providing this service, on land, by sea and air, from the most sophisticated and advantageous logistical platform in the Western Hemisphere. The Panama Canal has been in operation since 1914, making world trade easier, serving 120 maritime routes to over 80 countries and, in 1948, the Colon Free Zone was inaugurated, becoming the second most important free zone in the world offering warehousing and the redistribution of goods worldwide. With these new assets, in addition to modern highways, an inter-oceanic railroad communicating the terminal cities of Panama and Colon in only one hour, and modern private ports operated by international firms such as Hutchison Whampoa Limited, Stevedoring Services of America, and Evergreen Marine Corporation, have made Panama the ideal location for handling cargo coming from Asia en route to the east coast of the United States, from the east coast of the United States to the west coast of South America, and from Europe to the west coast of the United States and Canada, among others. International cargo movement will continue its growth rate as a result of the participation of countries such as China, India and others in world trade that have brought new investment projects to serve this new demand such as the modernization of the Panama Canal and of the actual ports, and the construction of a mega-port at the

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Our tropical climate and varied tourist attractions make Panama a preferred destination for travelers who will find picturesque indigenous and colonial towns, white-sand beaches, coral reefs of indescribable beauty, cool mountains, tropical rain forests with lush vegetation, and the home of a myriad species of flora and fauna.

Pacific entrance of the Panama Canal that will allow us to handle seven million containers annually. These new projects provide opportunities for other related services, such as repairing and cleaning containers, tugboat services, disposition of garbage and waste, handling hazardous materials, and others. In the last few years, Panama has become the center of attraction for many investors seeking opportunities, not only in port activities and cargo handling, but in other unrelated areas such as tourism, homes, entertainment, health, education, generating clean energy and others. The reasons are: Panama is easily accessed; uses the US dollar as legal tender; permits free currency movement; has an international banking center; worldwide communications; excellent living conditions; free from major natural disasters; the largest and most efficient maritime hub with seven private ports and two oceans; an international air transportation hub serving over thirty destinations in America; natural resources; qualified workforce; social security; political stability and modern legislation that equally protect the interests of nationals as well as foreigners. The new strategy for national development designed by the Ministry of Commerce and Industry seeks to open new markets, promote exports, prepare offers for the competitive export of goods and services, and for promoting investments focused on the following economic sectors: service, tourism, multi-modal transportation and logistics center, energy, information technology and communications, and agricultural trade. For more information, please visit our offices or see our website at: www.mici.gob.pa

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WHY PANAMA?

Panama is a country dedicated to service, and enjoys a privileged geographic position that has allowed it to be one of the most important logistics centers in the Western Hemisphere for importing, warehousing and distributing worldwide cargo; a bridge for travelers to the entire American Continent, and provider of efficient and modern communication services. It is a country that promotes trade, national as well as international, and enjoys economic, political and social stability. In fact, even before America was discovered, Panama had been a bridge between North and South America for hundreds of species and a myriad of people. To that extent, many centuries later, in 1826, when the liberator, Simón Bolívar, stated: “if the world had to choose its capital, the Isthmus of Panama would be selected for this august destiny, situated as it is at the center of the globe.” Our nation has gone on to be more than a passage, and has become a modern logistical platform for sea, land and air transportation. The Panama Canal is its main center of activity, transporting over 278 million metric tons of cargo (containers, grain, petroleum and its derivatives, among others), and today serves more than 120 maritime routes to over 80 countries worldwide, complemented with container terminal systems in the Pacific and the Atlantic that serve as transshipment and cargo redistribution centers moving 2.3 million TEU’s (20' equivalent units) of containerized cargo annually. Additionally, we have an inter-oceanic railroad that moves about 100,000 containers yearly from coast to coast. The Colon Free Zone, the most important in the Western Hemisphere, with an annual trade surpassing $12 billion, is also located in Panama. The development of the Panama-Pacific Special Economic Area at the former Howard Air Force Base will serve as the designated area for the production of high technology goods and services. We provide efficient air transportation service at the Tocumen International Airport, currently undergoing upgrading, in a comfortable and safe environment for all travelers who visit our country and expeditious and efficient attention to those in transit who do not have to go through immigration or customs. Copa Airlines operates its Hub of the Americas at the airport, offering over 36 destinations to 21 countries in America with excellent

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connections, some of them with two flights daily, to the most important cities in Latin America. Local airlines with excellent service are also available for direct flights to the main cities in the interior of the country. Thanks to our strategic geographic position and our narrow waist, Panama has become the point of convergence for the five submarine fiber optics cables, making it the ideal location for telecommunications companies and data centers because of the advantage of being connected to North and South America, Europe, Asia and the Caribbean, benefits that have been enjoyed by companies such as MCI, Cable & Wireless, and Telefónica Móviles (Movistar), all offering first-class cellular phone and internet services, both locally and internationally. Our prestigious International Banking Center, with over seventy recognized international banks governed by the principles of the Basel Convention, registered during the IV Quarter of 2005 assets in the order of US$44.915 billion. From the birth of the Republic in 1903, we have used the US Dollar as legal tender which has allowed us to enjoy an inflation rate below 2% for the last forty years with no risk of devaluation. Our health and medical services are internationally recognized as mentioned in Strategy+Business Magazine wherein Panama earned first and second place by having the two best private hospitals in the Central American region. Our hospitals are equipped with state-of-the-art medical technology, and are affiliated to world-famous hospitals such as the Baptist Hospital in Miami, Florida, and Johns Hopkins Medicine International in Baltimore, Maryland. Panama has the finest international hotel chains, such as the Intercontinental, Marriott, Radisson, Barceló, Meliá, Sheraton and Crowne Plaza, just to mention a few, all with excellent restaurants and lo-

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cal and international cuisines. Additionally, there are several large shopping malls offering a wide variety of products including electrical appliances, perfumes, jewelry, clothing and art of the finest brands, as well as entertainment such as casinos, modern movie theatres, concert halls, museums and sporting centers for all ages. Our tropical climate and various tourist attractions place us among the preferred destinations for travelers who will find picturesque native and colonial towns, white-sand beaches, coral reefs of indescribable beauty, cool climate mountains and tropical forests with lush vegetation, and a myriad of fauna and flora species. With an excellent roadway network, you can travel the country in only six hours because of the short distances. These advantages are acknowledged by several prestigious international publications such as Harper’s Bazaar, National Geographic Traveler and other magazines that have chosen Panama as “the best place to live.” Panama City is cosmopolitan, with an excellent trouble-free quality of life, juridical and personal security, freedom of religion, and the comforts of the major capitals of the world. For these reasons, Panama has been chosen by important multinational enterprises such as Samsung Electronics, Inc., DHL, DELL, Hutchison Port Holding Group, HSBC, BICSA, Scotia Bank, Assicurazioni Generali, PanAmerican Life Insurance Company, and many more as their centers for regional operations. International organizations have also established themselves in Panama, including UNICEF, UNDP, OAS, Spanish International Cooperation Agency (AECI) and Bladex, among others. Panama offers goods and services at reasonable prices, compared to its nearest neighbors, and has Free Trade Agreements (FTAs) with Taiwan, El Salvador, Singapore and Chile. We are in the final stages of negotiating FTAs with the United States and Central America, one with the European Union, and we are in the process of joining the G-3. We are vying for being the headquarters of the Free Trade Area of the Americas (FTAA), and we are members of the World Trade Organization (WTO). All these advantages and many others are offered by Panama to enterprises and investors, and we invite all to strive to strengthen international trade in a pleasant and safe environment in a peaceful country that provides quality of life and tranquility to its residents.

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LOGISTIC AND MULTI-MODAL TRANSPORTATION CENTER SECTOR Panama, a candidate for one of the most important logistic centers for transportation and storage of worldwide cargo, with private ports on both sides of the republic, connected by the inter-oceanic railroad, highways and international airports, is capable of offering all kinds of services for handling cargo and passenger attention. In recent years, millionaire investments have been made in construction and modernizing the port system by some of the world’s most important companies, such as Hutchison Port Holdings and Evergreen Corporation, resulting in the capability of moving over two million containers in 2005. We continue with the process of adding new ports, including the project for constructing a mega port at the Pacific entrance of the Panama Canal that will permit augmenting port operations.

We are in the process of modernizing and enlarging the Tocúmen International Airport to allow a greater number of flights to and from Panama by increasing the modern positions for departures and arrivals from 14 to 27, as well as larger commercial and circulation areas. New equipment is being obtained for service and support, such as: elevators, a modern incoming, departing, and in transit baggage-handling system, an integrated flight information system, and for renovating the air conditioning system. Work is also in process for remodeling the cargo terminal and renovating its runways. The new premises should be ready in early 2007. From time immemorial, Panama’s geographic position has been a valuable asset facilitating moving wealth and people through the narrowest

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point of the Central American Isthmus to destinations in North and South America. At the outset, gold and other riches were shipped to Spain. Then there were the Portobelo fairs, the California gold fever and, finally, the construction of the Panama Canal, completed in 1914, that permitted the passage of thousands of vessels, serving more than 120 maritime routes to more than 80 countries. The railroad, operated by Kansas City Southern Railways from the U.S., with an investment of over $60 million, moves cargo and passengers between the terminal cities of Panama and Colon, promoting international trade through the Colon Free Zone, the largest duty free area in the Western Hemisphere. The Colon Free Zone, created in 1948, now has over 2,000 companies with import and export operations worth more than $11 billion, and contributes with 7.9% of the Gross National Product. The new administration, in its effort to strengthen the international competitiveness of its services, is implementing new technological services to expedite trade, reduce expenses and increase transportation efficiency. The Panama-Pacific Special Economic Area (AAEEPP) located at the former Howard Air Force Base (former United States Southern Command military base) that reverted to Panama, covers approximately 2,005 hectares (4,954 acres), has infrastructure ready for use and land available for construction. The AAEEPP is only 15 minutes from Panama City, the railroad, and the Port of Balboa, and one hour from the most important ports on the Atlantic side, which also has a first class airport. All this makes the AAEEPP the ideal place for developing the Logistic and Multi-modal Transportation Center of the Americas. The AAEEPP offers fiscal, labor, and migratory incentives, special customs regulations, and single-window (one-stop) service for investors, and is destined to be a high technology industrial manufacturing center, an air logistics center, and a repair and shopping center in Panama serving the world. Panama has more than 94,000 hectares (232,274 acres) and 7,000 reverted buildings as a

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The Colon Free Zone, created in 1948, now has over 2,000 companies with import and export operations worth more than $11 billion, and contributes with 7.9% of the Gross National Product.

Photo: Courtesy of Manzanillo International Terminal

Photo: Courtesy of Tocumen, S.A.

Photo: Courtesy of Tocumen, S.A.

consequence of the Torrijos-Carter Treaties, many of which are still available to be used for carrying out transportation, storage and cargo distribution, tourism, housing and other activities. We also have a modern highway network that covers the whole country and permits us to reach as far as Alaska. There are more than 71 airports, and Copa Airlines’ Hub with daily flights carries cargo and passengers to 36 different destinations in 21 countries in America. There is also the International Techno-Park in the City of Knowledge, seeking to

develop new business opportunities by creating new poles of competition to promote productivity and competitiveness. With Law No. 25 of 1992, special regulations were created for establishing and operating Processing Zones for Export. Defined as tax-free zones and free enterprise, we are actively inviting new companies to participate with activities aimed at producing goods and services for export, benefiting from the available incentives in addition to the logistic and strategic facilities offered by Panama.

Investment opportunities: * Expansion and modernizing the Panama Canal. * Construction of the Mega Port at the Pacific entrance of the Panama Canal. * Expanding the ports on both sides of the Isthmus. * Expanding the Panama-Colon Trans-Isthmian highway. * Moving containers at the national level. * Repair and maintenance of containers. * Shipyards for repairing vessels. * Supplying fuel. * Tugboat service. * Maritime agencies. * Security and ship inspection services. * Garbage collection service. * Handling hazardous materials. * Cargo movement at airports. * Establishing companies in the Howard Area for manufacturing high-technology products. * Logistic and warehousing services for moving goods on the Pacific seaboard of Panama. * Specialized services in information technology, communications and call centers. * Housing. 23

TOURISM SECTOR

When Law No. 8 of June 14, 1994 went into effect for promoting tourist activities, it created a series of fiscal incentives and benefits that, in addition to the excellent living conditions, the absence of natural disasters, the use of the US dollar as legal tender, Copa Airlines’ Hub of the Americas with direct flights to major cities and capitals in the American Continent with frequencies of up to twice a day to certain destinations, and the largest port services in Latin America, have increased attractiveness of investments in various segments of the tourism industry. Our privileged geographic position, solid finances, personal and juridical security, political and social stability, are more reasons that make Panama the perfect destination for visiting, residing and investing. These conditions have led to having large hotel chains such as Sheraton, Radisson, Crowne Plaza, Meliá and Barceló, among others, to establish themselves here. Panama has more than 16,700 rooms available in the country to accommodate our visitors. There are groups of investors who are developing eco-tourism projects at beaches, mountains and islands, in addition to sport fishing and underwater projects. Restoring Colonial Panama and the Casco Antiguo has attracted new and varied investments in the tourism industry. The large shopping centers and malls, as well as entertainment centers, have created new investment niches. Among the projects being developed is having Panama designated as the Home Port for cruise ships. We are negotiating with some cruise lines that have expressed interest in Panama becoming a departure and destination port for their ships because of the conveniences and benefits our country offers. This project

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should be ready by 2008. During the 2004-2005 cruise season that runs from September through May, we received over 300 cruisers whose passengers were able to see what Panama has to offer, creating a marked interest in choosing our country as a destination for their next vacations. When Law No. 9 of June 1987 was promulgated, incentives were created for retirees and pensioners who establish their second home in Panama, offering them new, safe, and comfortable retirement areas with varied climates and much lower costs of living. We have also developed mass tourism programs for beaches and mountains that have been the mainstay of the Panamanian Tourism Institute’s (IPAT) offer: “Panama, the route to be discovered.” We have analyzed the possibility of creating strategic alliances with countries like Cuba, the Dominican Republic and others to promote multi-destination routes. Eco-Agricultural Tourism is another interesting program combining sustained tourism with environmental protection, as well as exploiting Panama’s social and cultural wealth for those seeking peace and tranquility, and to be in contact with nature. We are strengthening the traditional destinations with services, infrastructure and business chains, developing new and novel tourist destinations such as: Panama City’s Tourist Route which includes eco-tourism, national parks, the Panama Canal locks, Chinatown, Colonial Panama; the Colonial Caribbean Route that leads to shopping at the Colon Free Zone; Portobelo and Palenque de Esclavos; the Kuna Yala Caribbean Route and the Gnobe Buglé Caribbean Route, all offering the opportunity of knowing the culture and way of life of the most important ethnic groups in our country, their bright sun and beaches; the Route of Panamanian Traditions and the Dry Arch to learn about the folklore, customs and traditions of our people, and the Recreational Route to the Beaches of Panama. We continue to strengthen recreational, ecological, business, alternative health and socio-cultural tourism.

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SERVICE SECTOR

From the discovery of the South Sea, Panama has been considered as a country of excellent service. 76.2% of the Gross Domestic Product (GDP) has come from the service sector. Our Financial Center, strengthened by modern legislation in accordance with the principles of the Basel Convention, the free movement of capital, the absence of a Central Bank, the use of the US dollar as legal tender, along with the banking system’s stability, have made Panama a trustworthy destination for more than 70 banks from 45 countries, with assets exceeding $44 billion. There are three types of banking licenses: the General License allows banks to carry out local and foreign operations; the International License only allows foreign operations, but also permits participation in the local inter-banking market; and the Representative License that is granted to foreign banks with offices established in Panama from which they can promote their services and visit actual and potential customers. The new banking law maintains the fundamental elements of confidentiality and the identity of its depositors. However, it does not prevent Panama from having strict regulations to prevent money laundering. The Banking Superintendence, the governing banking entity, also supervises fiduciary transactions and grants the respective licenses for their various activities. Ninety percent of the existing licenses have been granted to banks established in Panama. Insurance activities go back to the beginning of the 20th century, when US companies began operating in Panama. For many years, the insurance industry operated in the framework of the Code of Commerce until in 1956 when a new law went into effect regulating this

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Panama has its Conciliation and Arbitration Center, founded in 1994, sponsored by Panama’s Chamber of Commerce, Industries and Agriculture and other business groups to offer the business sector the services of administering arbitrations and conciliations as modern alternatives to resolving commercial controversies.

activity, and finally in 1966, Law No. 59 was passed, and is in effect today, granting autonomy to the Superintendence of Insurance and Reinsurance to duly supervise and oversee the insurance sector. We now have 18 insurance companies with national and foreign capital, 6 reinsurance companies regulated by Law No. 63 of September 19, 1996, and 2 captive insurers and 5 captive insurance administrators under Law No. 60 of July 29, 1996, that oversee juridical persons that carry out insuring and reinsuring particular or specific risks previously authorized by the Superintendence of Insurance and Reinsurance. Stock exchange activity began with Cabinet Decree No. 247 of 1970, but it was not until 1989 that a group of businessmen founded the Panama Stock Exchange, seeking to strengthen the financial market and creating new financing mechanisms. As of 1990, the stock market began to be the scenario for a greater number of stock market operations, and new actors arose, such as stockbrokers, institutions for payment, transfer and liquidation of stocks. This brought on Decree Law No. 1 of July 1, 1999, which is the regulating framework in force governing stock exchange operations and all actors in this field. Panama has its Conciliation and Arbitration Center, founded in 1994, sponsored by Panama’s Chamber of Commerce, Industries and Agriculture and other

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Photo: Courtesy of the Communications Department of the MInistry of Commerce and Industry

business groups to offer the business sector the services of administering arbitrations and conciliations as modern alternatives to resolving commercial controversies. In 1997, Panama’s Chamber of Commerce, Industries and Agriculture agreed with the InterAmerican Development Bank (IDB) on a project to improve the use of alternative methods to resolve

Photo: Courtesy of Manzanillo International Terminal

conflicts (arbitration, mediation and conciliation). National legislation regulating this activity is under Decree Law No. 5 of July 18, 1999. Today, Panama’s Conciliation and Arbitration Center is a solid institution, with its own juridical person, offering its many customers comfortable and modern offices, highly qualified personnel, lists of formally trained and experienced arbiters, mediators and conciliators with

excellent negotiating abilities in diverse business areas. It is worth mentioning that Panama is also known for having important law firms, with international offices and correspondents who will assist you in handling all legal and administrative matters. We also provide ship registration, an important segment of the international maritime field, auditing and accounting services, and many others.

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Photo: Courtesy of the Communications Department of the MInistry of Commerce and Industry

INFORMATION TECHNOLOGY AND COMMUNICATIONS SECTOR

The Republic of Panama is the ideal location for companies in the field of Information and Communications Technology (ICT) to provide innovative services worldwide. In keeping with its motto “Pro Mundi Beneficio” (“For World Benefit”), Panama has the potential to become the “Digital Bridge of the Americas.” Its competitive advantage lies in creating value and competitiveness for other countries that move forward by using its developed service platform that includes a commercial trade and logistics center around the canal and an international financial center. Additionally, we have an International Technological Park seeking innovative companies that produce, assemble or process high technology goods or provide services with similar features destined to be sold in the local and international market. In the last decade, Panama has developed a strong and stable telecommunications infrastructure providing high quality service through a large network. This ability to offer that service substantially exceeds local demand. The five main submarine fiber optics cables that converge at the Isthmus of Panama communicate North and South America with the Caribbean and the rest of the world (MAYA, ARCOS, SAC, PAC and PanAmerican) provide that service, guaranteeing the broadband, redundancy and security necessary for telecommunications and information technology services. It is said that Panama has connections compa-

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rable to those offered in the largest cities worldwide, but at much lower costs. A growth is foreseen in the infrastructure because of deregulation in the sector, which is in progress at this time. On the other hand, companies in the electrical transmission field are also investing in telecommunications infrastructure, developing fiber optics networks. These factors, added to Law No. 54 of October 25, 2001, granting benefits to commercial call centers, has influenced the decision of international companies to have offices in our country. Likewise, the City of Knowledge’s Technological Park has a high-technology data storage operation, Internet Data Center, which has made Panama the doorway for Latin America to have access to Internet and telecommunications, allowing those companies to have an infrastructure with servers dedicated to electronic commerce, meeting the most advanced network safety requirements in the market. Panama offers a sophisticated telecommunications system operated by renowned and prestigious companies from the United States and Europe. The ICT services sector in Panama represents a healthy industry, with a stable financial record and good potential growth, expediting business operations creating a world market within the reach of all. Also, engineers and information technologists, mostly university graduates, are available at very competitive costs. On the other hand, the “Electronic Government”

Panama is known as a country that is most qualified for developing electronic commerce directed to Latin American markets, for which reason our goal is to have a part of these transactions carried out through our territory and that our logistic and transportation services be used for their distribution.

initiative carried out by the Secretariat of the Presidency for governmental innovation is moving ahead, providing business opportunities for consultation companies, data bases, systems integration, televised teaching and many alternative services that will allow expediting steps carried out by the government or by the private sector through said measure. Through Law No. 43 of July 2001, electronic documents and signatures are legally recognized. This law provides juridical equality to both traditional and electronic trade thereby expediting business transactions. Panama’s Ministry of Commerce and Industry, with the help of the Science and Technology Secretariat, developed the Digital Signature Project, which is a group of characters that accompany a document or electronic message as a means of formally identifying the author of said document. This permits a means of fast, secure and trustworthy com-

munications among its users. Panama’s Chamber of Commerce, Industries and Agriculture, with the support of the Inter-American Development Bank, is executing the “Development of Electronic Trade in Panama” project to increase the competitiveness of small and medium Panamanian enterprises in the electronic market by means of expanding the use of information and communications technology. The Panamanian banking sector follows Agreement No. 5 of 2003, issued by the Banking Superintendence, which regulates online banking activity, permitting reduced operation costs and increasing the competitive level. Panama is known as a country that is most qualified for developing electronic commerce directed to Latin American markets, for which reason our goal is to have a part of these transactions carried out through our territory and that our logistic and transportation services be used for their distribution.

Photo: Courtesy of the Communications Department of the MInistry of Commerce and Industry

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Panama also has Law No. 15 of August 8, 1994, that protects authors’ rights on literary, instructive, scientific or artistic works arising from intellectual creations, which guarantees and safeguards the results of research and development of new technologies. The above gives advantages for the following operations: * Commercial Call Centers that serve the regional market thanks to qualified bilingual personnel. * Data Centers/VoIP communications services. * Applied Services providers. * Bio-Information Technology Application Development Center, thanks to the existing biodiversity and research institutes such as the Smithsonian Tropical Research Institute (STRI). * Regional Training Centers in Telecommunications, Information Technology Security and Free Software. * Research and Development for new telecommunications technologies, such as third-generation (3G) Universal Mobile Telecommunications System (UMTS) at the campus of the City of Knowledge. * Local content development for mobile phones: Software for text messaging and multimedia, Wireless Application Protocols (WAP), Regionalizing melodies and logos, games development, etc.

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ENERGY SECTOR In August 2005, the National Government implemented the National Policy on Hydrocarbons and Alternative Energy for the period of 2005-2020, with a series of measures to deal with the world crisis caused by increasing prices of petroleum-based products and to counteract the possible lack of energy due to shortages or exorbitant prices that could mean a threat to the country’s economic and social development. The political energy guidelines are based on short, medium and long-term measures that would eliminate being dependent on petroleum, create savings and generating clean energy taking advantage of the benefits granted by the Kyoto Protocol under the Clean Development Mechanism (CDM) in which the countries may obtain funds to invest in new energy projects. An immediate action has been to offer the alternative of using Liquid Petroleum Gas (LPG) as vehicular fuel that would mean savings for consumers and the State. We have signed a memorandum with Colombia for the importation of natural gas, which is a clean high calorific fuel for home use, vehicles and generating electricity. Corrective measures will also be implemented in power consumption in the public sector. Taking advantage of what Panama has to offer, such as: its logistic platform that permits connections by land, sea and air; seven private ports in the Atlantic and the Pacific, a US dollar economy, and an international financial center, the government seeks to make the country an “energy hub”, promoting, among other projects, a regional refinery that would process heavy crude from South America and Mexico

to supply the demand for petroleum and its byproducts to Central America and the west coast of the United States. There is an actual demand in Central America for 370,000 barrels of crude per day, and there is no refinement capability in the region to satisfy that demand which creates a market that Panama could supply facilitated by legislation that would permit construction of new refineries, granting fiscal benefits on earnings resulting from exports of the final product. Additionally, advantage can be taken of the facilities offered by the existing pipeline, owned by Petro Terminales, S.A. (a mixed capital enterprise in which Panama has a major share) that unites the Pacific and Atlantic coasts, the storage tanks and the existing port facilities and adequate depth. This project will also bring benefits in producing electrical energy as the estimated demand for the coming years should increase by more than 400 MW for the Central American market, and Panama as part of the Central American Electrical Interconnection System (SIEPAC) would permit us to supply the demand of the five Central American countries. Recently, agreements and memoranda of understanding on energy matters have been signed with the Bolivarian Republic of Venezuela, among other aspects of the supply of petroleum, finished products, storage, etc. All of the above is part of the initiatives taken by the present administration for the purpose of Panama becoming a center or energy hub for the region. Additionally, Law No. 8 of 1987 will be revised, which will regulate activities related to hydrocarbons, and we will promote petroliferous exploration.

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The guidelines of the National Policy on Hydrocarbons and Alternative Energy cover: • Diversification of the Energy Balance. Actually, 65% of our energy consumption comes from petroleum for which we will diversify our dependency using natural gas and seeking and promoting other sources of renewable energy (biomass, photovoltaic, solar, wind power, etc.) • Independence and sustainable energy. We will develop our own sources of energy such as hydro energy, wind power, solar energy, biomass energy and energy sourced from peat (fossil fuel formed by an accumulation of partially decomposed vegetable matter, found usually in bogs). • Taking advantage of Panama’s geographic position to set up processing plants for lubricants, establishing a regional refinery and a liquefied natural gas (LNG) plant, using the storage capability on a regional level, using the Panama Canal for tankers transporting crude, and the only trans-isthmian pipeline in the region, from Chiriquí to Chiriquí Grande in Bocas del Toro (131 km), and becoming the Regional Energy Center for redistribution to the Central American region. • To promote the use of new non-contaminating technology and developing renewable energy sources, such as solar energy, wind power and biomass to protect the environment. Also being considered are other projects for remote communities, such as improved kitchens that will reduce the use of firewood and consequently eliminating harmful smoke emissions. • Introducing and promoting new technologies. Using LPG in vehicles, and other technologies approved in international markets. • Rationing energy consumption. Designing energy-saving programs. Law No. 41 of July 1998, the General Environment Law of the Republic of Panama, creating the National Environment Authority (ANAM), indicates that it is the na-

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tional environment policy to stimulate and promote sustainable behavior and the use of clean technologies to reduce the levels of waste and contamination of the environment. Also, it states that it is the government’s responsibility to promote producing and using renewable energy and the use of clean technologies. The State promotes the development of renewable energy sources following the guidelines of the Kyoto Protocol, the savings and efficient use of energy, and supporting viable alternatives for generating electricity at low costs. In August of 2004, Law No. 45 was approved, and establishes incentives for promoting Systems for Hydroelectric Generation and Other New Sources, Renewable and Clean, which supports the State’s policy that seeks to promote producing and using renewable energy as a means of developing a more friendly behavior with the environment. We are actually promoting this law through our participation in international fairs where we present a portfolio of hydroelectric projects and reforestation that employ clean development mechanisms (CDM) that allow developed countries to comply with part of their commitments to reduce the emissions of greenhouse gases under the Kyoto Protocol by investing in these projects. We have two feasibility studies that brought up the Wind Power Map and the Geothermic Map of Panama that reflect the potential in different areas nationwide for generating energy by these means.

Investment opportunities: * Constructing a regional refinery for processing and supplying petroleum and its byproducts.

Panama has a great potential for developing projects for generating energy that involve using renewable energy sources, such as: * Solar energy: Approximately five and a half hours of sunlight daily. * Hydro resources: We have large rivers in different provinces that can be exploited for hydroelectric power plant projects. * Wind power resources: Studies made reveal that we have a substantial potential for generating electricity using wind power in the provinces of Veraguas (Cerro Tute), Los Santos (La Miel) and Chiriquí (Boquete and Hornitos). * Peat resources: In Changuinola (Bocas del Toro province), an 80 Km2 area with an average thickness of 8 meters of peat was found that could become the second source of energy generation after the hydroelectric plants. * Biomass resources: There are projects for using state-of-the-art technology to produce ethanol from vegetation and agricultural waste. Ethanol could be used for fuel, electricity and organic chemical products.

* Systems for generating biogas and biological fertilizers by processing waste from an agro-industrial farm (porcine) located in Veraguas province. * Pilot plan for solar energy refrigerators for artisan fishermen. * Drip irrigation through photovoltaic energy systems for sustainable agriculture and rural development in the central provinces. * Designing, promoting and implementing a national biofuel program. * Generating biogas and organic fertilizer sourced from biomass produced by agricultural activities. * Technical assistance for designing a renewable energy and energy-efficiency plan for the Republic of Panama. * Designing and implementing an energy efficiency program for the commercial, industrial, residential and government sectors. * Strengthening the capability of the Inter-institutional Environmental System (SIA) for evaluating the environmental impact and auditing studies for projects and companies in the renewable energy sector. 37

PRIMARY AND ARTISAN SECTOR

In 2005, Panama had a sustained growth with a record 11.66% in exports, amounting to $839 million, and it is expected that 2006 will be even closer to one billion dollars. This is due largely in part to the free trade agreements with Taiwan and El Salvador that have helped diversify the portfolio of countries that buy Panamanian products. And with the coming into effect of the treaties with Singapore and Chile, and finalizing the negotiations with the United States, encouraging perspectives will permit the growth of Panamanian exports. The Ministry of Commerce and Industry (MICI), through the EXPORTA program dedicated to promoting exports, promotes and strengthens the rural sector’s agricultural exports and industrial agriculture, utilizing new tools such as financial assistance, technological assistance programs, and using windows at international fairs and trade missions as a more direct method of reaching international markets. The products with the greatest interests in the international markets are those known as “non-traditional products,” such as: pineapples, melons, watermelons, calabash, yucca, yam, handicrafts, beef and fowl, among others. We seek to increase growth opportunities for the existing nontraditional products, and to find and develop new products that meet the demands of international consumers. The MICI helps investors with means that develop our export offer. An example would be creating export and strategic alliance consortiums, programs for promoting exports, training programs, improved access to information and automation of services to the private sector, and strengthening the protection of exports with export insurance programs to motivate and to ensure payment of exports. New promotional policies are being developed for markets and sectors such as: agriculture, marine, artisan, in-

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dustrial and services, with a calendar of activities coordinated with our foreign diplomatic representations for the purpose of evaluating the best opportunities for presenting our export offers. We seek to attract investors that not only want business opportunities with local partners, but that also bring new techniques in processing, packing, conservation and added value that improve the quality of their products, fill the niches in the market, and provide new products with greater benefits.

Business opportunities are arising in the following areas: * Processing frozen fruits and vegetables. * Processing vegetables in flour, puff pastries and pastas. * Processing dehydrated fruits and vegetables. * Processing chopped fruits and vegetables for salads. * Animal nutritional supplements with fruits and vegetables as raw material. * Processing nectars for yogurt, natural cheeses and beverages. * Processing sausages and special hams. * Processing fish and seafood. * Processes for extracting oil from agricultural products. * Processing alcohol and its byproducts. * Processing juices, pulp, concentrates and marmalades. * Designing and producing artisan works for dress purposes. * Designing and producing artisan products for home use (furniture, decorations, etc.) 39

Photo: Courtesy of Panama Canal Authority

Why invest in Panama? You will find Panama to be the ideal choice for investments and business because of the advantages listed below: • A country dedicated to service that promotes business opportunities. • Political, social and economic stability. • Low levels of inflation. • The US dollar is the legal currency, and prevents devaluation problems. • Its worldwide renowned International Banking Center with strict international standards. • The center where worldwide fiber optics telecommunications converge. • The most important free zone and modern logistics platform in the Western Hemisphere serving the world. • Legislation guaranteeing juridical security, fiscal and tax incentives for investors. • Excellent natural resources, with almost unexploited virgin jungles, beautiful beaches and immense marine wealth, and the ideal tourist and cruise ship destination. • Cosmopolitan city, multicultural and multiethnic, with a modern infrastructure, excellent shopping centers and large hotel chains. • World-class health and medical services with the most highly rated hospitals in the region. The Ministry of Commerce and Industry’s National Office for Promoting Investments offers investors the following services in order to facilitate investing in Panama: • Provide investors with assistance to expedite investment-related procedures. • Actively promote investments in various designated economic sectors. • Attend to actual and potential investors, providing support and continuity in order for them to successfully achieve their goals and realize growth in their investments. • Identifying and assisting in evaluating business opportunities in Panama so that investors can arrive at decisions to establish operations in the country. • Coordinate interviews for investors with government entities and associations of the private sector.

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DIRECTORIO DE INFORMACIÓN / DIRECTORY OF INFORMATION

Ministry of Commerce and Industry Ministerio de Comercio e Industrias Apartado 0815-01119 Panamá, República de Panamá Tel. (507) 560-0600/0700 Fax (507) 560-0656 Web http://www.mici.gob.pa Reverted Areas Unidad Administrativa de Bienes Revertido Apartado 0816-02886 Panamá, República de Panamá Tel. (507) 211-9600 Fax (507) 211-9700 Web http://www.ari.gob.pa Ministry of Economy and Finance Ministerio de Economía y Finanzas Apartado 0816-02886 Panamá, República de Panamá Tel. (507) 507-7008/507-7600 Fax (507) 507-7053 Web http://www.mef.gob.pa Presidency of the Republic of Panama Presidencia de la República de Panamá Zona1, Ministerio de la Presidencia Panamá, República de Panamá Tel. (507) 527-9600 Fax (507) 527-4622 Web http://www.presidencia.gob.pa Ministry of Agricultural Development Ministerio de Desarrollo Agropecuario Apartado 0816-0111 Panamá, República de Panamá Tel. (507) 507-0600 Fax (507) 507-0952/0954 Web http://www.mida.gob.pa General Comptrollership of the Republic of Panama Contraloría General de la República de Panamá Apartado 0816-01521 Panamá, República de Panamá Tel. (507) 510-4777 Tel (507) 510-4100 Web http://www.contraloria.gob.pa General Customs Office Dirección General de Aduanas Apartado 0816-02886 Panamá, República de Panamá Tel. (507) 506-6202 Fax (507) 506-6210 Web http://www.aduanas.gob.pa City of Knowledge Ciudad del Saber Apartado 0816-03991 Panamá, República de Panamá Tel. (507) 507-0111 Fax (507) 507-0118 Web http://www.cdspanama.org Ministry of Health Ministerio de Salud Apartado 0816-06812 Panamá, República de Panamá Tel. (507) 512-9100 Fax (507) 512-9229 Web http://www.minsa.gob.pa Panamanian Industrial Guild Sindicato de Industriales de Panamá Apartado 0819-05411 Panamá, República de Panamá Tel. (507) 230-0169 Fax (507) 230-0805 Web http://www.industriales.org

National Secretary of Science, Technology and Innovation Secretaría Nacional de Ciencia, Tecnología e Innovación Apartado 0816-02852 Panamá, República de Panamá Tel. (507) 507-0000 Fax (507) 507-0007 Web http://www.senacyt.gob.pa Ministry of Public Works Ministerio de Obras Públicas Apartado 0816-06734 Panamá, República de Panamá Tel. (507) 507-9400 Fax (507) 507-9419 Web http://www.mop.gob.pa National Bank of Panama Banco Nacional de Panamá Apartado 0816-05220 Panamá, República de Panamá Tel. (507) 505-2000 Fax (507) 505-2150 Web http://www.banconal.com.pa Ministry of Foreign Affairs Ministerio de Relaciones Exteriores Apartado Panamá 4, República de Panamá Tel. (507) 511-4100/4200 Fax (507) 511-0416 Web http://www.mire.gob.pa Superintendency of Insurance & Reinsurance Superintendencia de Seguros y Reaseguros Apartado 0832-1653 World Trade Center Panamá, República de Panamá Tel. (507) 560-0512 Fax (507) 560-0518 Web http://www.mici.gob.pa/sector_seguros/ Superintendency of Banks Superintendencia de Bancos Apartado 0832-2397 World Trade Center Panamá, República de Panamá Tel. (507) 506-7800/7900 Fax (507) 506-7700/7989 Web http://www.superbancos.gob.pa National Migration & Naturalization Office Dirección Nacional de Migración y Naturalización Apartado 0830-00147 Panamá, República de Panamá Tel. (507) 507-1826 Fax (507) 507-1830 Web http://www.panamatramita.gob.pa Civil Aeronautical Office Dirección de Aeronáutica Civil Apartado 0816-03073 Panamá, República de Panamá Tel. (507) 501-9000/9099 Fax (507) 501-9214 Web http://www.aeronautica.gob.pa Administration of Colon Free Zone Administración de la Zona Libre de Colón Apartado 0302-00512 Colón, República de Panamá Tel. (507) 475-9500/9524 Fax (507) 475-9592 Web http://www.zonalibredecolon.com.pa

National Environmental Authority Autoridad Nacional del Ambiente (ANAM) Apartado 0843-00793 Panamá, República de Panamá Tel. (507) 500-0855 Fax (507) 500-0822 Web http://www.anam.gob.pa Panamanian Tourism Bureau Instituto Panameño de Turismo (IPAT) Apartado 0816-00672 Panamá, República de Panamá Tel. (507) 501-7000 Web http://www.ipat.gob.pa Social Security Administration Caja del Seguro Social Apartado 0816-06608 Panamá, República de Panamá Tel. (507) 503-0623/0627 Fax (507) 503-0621 Web http://www.css.org.pa National Institute of Aqueducts and Sewers Instituto de Acueductos y Alcantarillados Nacionales (IDAAN) Apartado 0816-01535 Panamá, República de Panamá Tel. (507) 523-8640 Fax (507) 523-8502 Web http://www.idaan.gob.pa Ministry of Government and Justice Ministerio de Gobierno y Justicia Apartado 0816-06715 Panamá, República de Panamá Tel. (507) 512-2000 Fax (507) 512-2032 Web http://www.gobiernoyjusticia.gob.pa Maritime Authority of Panama Autoridad Marítima de Panamá Apartado 0843-00533 Panamá, República de Panamá Tel. (507) 501-5101/501-5183 Web http://www.amp.gob.pa Panama Canal Authority Autoridad del Canal de Panamá P. O. Box 526725 Miami, Florida 33152-6725 Tel. (507) 272-1111 Web http://www.pancanal.com Chamber of Commerce, Industry and Agriculture of Panama Cámara de Comercio, Industrias y Agricultura de Panamá Apartado 0816-07517 Panamá, República de Panamá Tel. (507) 207-3400 Fax (507) 207-3422 Web http://www.panacamara.com/ National Security Council Consejo Nacional de Seguridad Apartado 0816-06764 Panamá, República de Panamá Tel. (507) 514-0001/0000 Fax 514-0063 Panama-Pacific Special Economic Area Agency Agencia del Área Económica Especial Panamá-Pacífico Apartado 0843-05522 Panamá, República de Panamá Tel. (507) 316-0000 Fax (507) 316-0003 Web http://www.aaeepp.gob.pa

MINISTRY OF COMMERCE AND INDUSTRY Edison Plaza, Third Floor, Ricardo J. Alfaro Avenue & El Paical. P.O. Box 0815-01119 Paitilla, Panama. Phones: (507) 560-0600 / 560-0700 Fax: (507) 560-0656

www.mici.gob.pa