Some of the top business leaders in the world recently took time to explain why Panama is an important part of their international expansion plans.
In an article prepared for Bloomberg, executives for Procter & Gamble, 3M, Dell, and others discussed the strategic importance of Panama and the benefits of doing business in the country. Instead of simply the Panama Canal, Panama offers a variety of advantages to multinationals, which has led many companies to establish regional operations here.
As the headline of the article notes, “business used to just pass through Panama.
Now it’s run from there.”
“In Panama, we have found a business-friendly environment with an open-door policy,” says Juan Fernando Posada, P&G’s president for Latin America.
Procter & Gamble was the first multinational firm to move its Latin America headquarters to Panama under the 2007 Multinational Headquarters regime, known locally as the SEM. Multinationals locating regional headquarters in Panama pay reduced income taxes for services rendered, no dividend taxes, and receive a wide range of support for immigration and labor issues.
“There are definitely very clear factors that made Panama a good decision to strategically locate our Latin America HQ,” Posada says in the article, which was produced by the government. “The economic and political stability that the country enjoys, security, its financial services and definitely the easy air interconnection with the rest of the region.”
Since Panama passed the SEM law, 175 multinationals have established regional headquarters in Panama, accounting for $1.2 billion in investment, according to the government report. In a sequel of sorts, in February, Panama enacted a new set of rules, similar to SEM, that extended the same type of benefits to manufacturing facilities.
At PPR, we see the impact of these laws on a daily basis. Our property management division has relationships with many of the biggest firms, helping their employees find housing. Many of those renters turn to owners and investors, as they spend more time in Panama.
Executives make it clear that it’s more than the tax breaks, the dollarized economy, and financial benefits that make Panama a great place to do business. In addition to the logistics, infrastructure, access to raw materials, and transport facilities, “the underlying political and economic infrastructure that keeps commerce flowing smoothly is just as essential as all the cranes and vessels in Panama’s ports,” the article notes.
Panama has enjoyed free and fair elections for more than 30 years and has a dollarized economy with almost no inflation over the last century, the article reminds readers. For the last 15 years, the country’s economic growth hovered around 7 percent, prior to the Covid crisis, leading the rest of Latin America.
“Legal stability is very important—you have to compare that to the rest of the countries in Central and Latin America,” says Enrique Aguirre, General Director of 3M for Central America and the Caribbean. “The rule of law is clear. And U.S. companies feel very comfortable here, perhaps because of the history the two countries share.”
The testimonials from executives included in the article make it clear that Panama offers a wide variety of benefits for multinationals.
“We decided to establish in Panama due to its economic and political stability, security, strategic geographic location, and the availability of highly qualified professionals,” says Tom Sweet, CFO of Dell Technologies. “This country has excellent conditions to attract investments.