Panama´s Opening Doors to Investment:Reverted Areas of the Panama Canal Zone
Dulcidio De La GuardiaVice Minister of Finance
Ministry of Economics and Finance
London, September 2010
Why are Multinational Companies driven to Panama?
Major drivers for shifting operations to Panama include political stability, strategic location, sustained economic growth, investment grade rating, and great logistical connectivity
• Central location with modern infrastructure
• Investment grade with dollarized economy
• Great connectivity with region
• Efficient telecommunications infrastructure
• Modern multimodal logistics platform that facilitates global commerce
• Tax and importation incentives of law 41
• Immigration flexibility
• Special economic and free trade zones
• International financial center
• No capital flow restrictions
• Lower cost of living and security
• Eco-tourism and biodiversity
Additional Benefits of Investing in PanamaAdditional Benefits of Investing in Panama World Economic ForumWorld Economic Forum
“Panama ranked 53rd and had the largest improvement in the region based on infrastructure quality and economic stability”
2
Panama leads the region with stable macroeconomic indicators
3
Despite the global crisis, Panama outperformed expectations with the highest growth rates in the region averaging 8.2% between 2005 and 2009
• Real GDP growth rate 4.9% in the first quarter of 2010.
• FDI inflows averaged over 7.0% of GDP since 2003 and reached US$1.7B in 2009.
• Resilient public finances as the deficit was only 1.0% of GDP in 2009.
• Inflation averaged less than 2.0% in the past 40 years.
2.2
4.2
7.5
5.6
10.110.7
2.4
4.9
12.2
2.93.6
4.9 4.5
5.1 5.2
3.0
-1.1
4.2
2002 2003 2004 2005 2006 2007 2008 2009P 2010 -Q1
GDP Grow th (% change)
Global GDP Grow th (%change)
Source: National Institute of Statistics and Census, Central Bank Peru, Central Bank Brazil
* Fitch estimations for Nominal GDP 2009 of Brazil and Mexico
FDI as % of GDP
Panama´s economic performance is the strongest in Latin America
Panama´s economic performance is the strongest in Latin America
Construction, 4.4
Manufacturing, 7.6
Banking, 6.6
Commerce, 7.2
Free Zones, 7.1
Telecomm, 5.6
Transportation, 5.3
Agriculture, 4.5
Marine Ports, 1.7
Utilities, 3.0
Hotels, 2.6
ACP, 4.7
2002-09 Share of GDP (% total)
Source: INDESA
Different sectors contribute to Panama´s growthDifferent sectors contribute to Panama´s growth
Source: National Institute of Statistics and Census
Value-added sectors continue to grow despite global crisis
Canal revenues grew 4.9% from 2008-2009 while the Suez Canal decreased by 20.3%
Canal revenues grew 4.9% from 2008-2009 while the Suez Canal decreased by 20.3%
Tourist expenses doubled in 5 years and is driving growth
Tourist expenses doubled in 5 years and is driving growth
4
Reexportation of goods and services in the Colon Free Zone grew 11.4% in 2009
Reexportation of goods and services in the Colon Free Zone grew 11.4% in 2009
High value-added sectors continued to grow in 2009 despite global crisis• Logistics center with Panama Canal serving 144 maritime
routes in 80 countries with 14,000 transits in 2009.
• The Canal´s US$5.3B expansion will enable it to capture 50% market share by 2020 and reach 3.5B people
• Great connectivity as Copa Air offers direct flights to 45 destinations in 22 countries.
• The Tocumen International airport will add 12 new gates to increase capacity to 9 million passengers by 2020.
• Hotel capacity will expand to 7000 new hotel rooms from 20 projects coming online in the next 2 years
• The UN awarded Panama with the best connectivity regionally supported by a modern telecom structure that is globally connected via 5 fiber optic submarine cables
Entry of passengers residing abroad (‘000)
Panama Canal total traffic: Number of transits
Source: ACP
Expenditures by tourists (US$ billion)
Toll Revenues (US$ billion)
Exports of goods, services and income by sector (US$)
14,721 14,702 14,342
7,330
1183.91317.5
1438.2
360.0
Source: National Institute of Statistics and Census
Panama is recognized as a financially prudent choice for investors
5
The investment grade rating will create benefits in Panama such as lower borrowing costs, less investment risk, and a higher degree of confidence in the financial sector
Feb'10 Jun'10 Change
International Monetary Fund 1.8% 5.0% + 3.2%
World Bank 1.3% 2.8% + 1.5%
CEPAL 2.5% 4.5% + 2.0%
INDESA 4.0% 6.9% + 2.9%
Panama Economy Insight 1.6% 4.5% + 2.9%
BBVA 3.5% 4.5% + 1.0%
Standard & Poor's 2.5% 5.0% + 2.5%
+ 2.3%Average
The economic outlook is promising for investors. Real GDP growth rate to surpass 6% in 2010
The economic outlook is promising for investors. Real GDP growth rate to surpass 6% in 2010
Panama is the 5th country in Latin America to obtain investment grade
Panama is the 5th country in Latin America to obtain investment grade
Moody´s Investors Services
“Panama is a regional hub for trade, finance and transportation that will support its growing economic resilience and diversification”
INV
ES
TM
EN
TIN
VE
ST
ME
NT
SP
EC
UL
AT
IVE
SP
EC
UL
AT
IVE
RIS
KY
RIS
KY
Panama is promoting new business development in the Reverted Areas
6
Discover the potential of developing and investing in commercial activities strategically located in the Reverted Areas of the Panama Canal and in terminal areas of the Atlantic and Pacific
6
Maritime Services Cluster
Tourism & Events
FishingIndustry
Nautical Training
RetailSales
Insurance Services
SupplyChainMgt
Ship Yards
Telecom
LogisticsCluster
Air, Land, & SeaCargo
Railroad
StorageYards
CommercialBusinessServices
Airports
Port Development
Colon Free Zone
Telecom
The Reverted Areas offer an incredible range of incentives and opportunities for investmentThe Reverted Areas offer an incredible range of incentives and opportunities for investment
The reverted assets have a unique history and are strategically located
7
The Reverted Areas will be developed to compliment the expansion of the canal and the modernization of ports
• The Canal Treaty of 1977 reverted the operation of the Canal along with 147,386 hectares of land in the former canal zone back to Panama.
• 5,000 hectares of reverted land is available for private sector development and concessions.
• The reverted assets along the Panama Canal and in the terminal areas of the Atlantic and Pacific will become a regional hub for commerce.
Reverted Areas accessible to 3.5B billion potential customers at the crossroads of the world
Reverted Areas accessible to 3.5B billion potential customers at the crossroads of the world
LAGO GATUNLAGO
GATUN
Canal
Railroad/Fiberoptics
Trans-isthmus highway
Pan-American highway
Ports
Airports
Canal
Railroad/Fiberoptics
Trans-isthmus highway
Pan-American highway
Ports
Airports
PanamaCity
Source: ACPTransit the Canal
Feeder Services
Atlantic coast opportunities for touristic and housing developments
8
Sherman North266.5 Hectares
Sherman North266.5 Hectares
Residential José Dominador Bazán (old Fort Davis) 380 hectares
Residential José Dominador Bazán (old Fort Davis) 380 hectares
Valuable investment areas for hotels, university campuses, technology research centers, residential complexes, and commercial centers
Atlantic coast areas for potential logistical services investments
9
Telfers 100 hectares
Telfers 100 hectares
Sherman South – Lemon Bay228 hectares
Sherman South – Lemon Bay228 hectares
Competitively situated for port development, industrial manufacturing, container storage, combustible bunkering, thermal electricity generation plants, shipyards, etc
Pacific coast areas for tourism and housing development opportunities
10
Altos de Batele160 hectares
Altos de Batele160 hectares
Veracruz380 hectares
Veracruz380 hectares
Altos de Batele
Ciudad de Panamá
Amador
Howard
Clayton
Veracruz
Ciudad de Panamá
Amador
Howard
Clayton
Prime investment areas for hotels, universities, technology research centers,
residential complexes, and commercial centers
Pacific coast areas for potential logistical services investments
11
Corozal East 43 hectares
Corozal East 43 hectares
Pedro Miguel – Red Tank90 hectareas
Pedro Miguel – Red Tank90 hectareas
Ciudad de Panamá
Amador
Howard
Clayton
Ideal locations for port development, industrial manufacturing, container storage, combustible bunkering, thermal electricity generation plants, shipyards, etc
Conclusions: Bright outlook for investing in Panama
12
• Strong economic growth and political stability.
• Investment grade based on sound fiscal disciplinary measures.
• Regional connectivity to open new long term business opportunities.
• Major fiscal and immigration incentives designed for Multinational Companies.
• Exciting new opportunites for private sector development of over 5,000 hectares of reverted assets for logistical, manufacturing, R&D, touristic and residential housing projects.
• The government is marketing reverted areas that would be ideal for the logistical development of ports, transport services and telecom, such as Telfers in the Atlantic and Corazal West in the Pacific
• In addition, the areas of Sherman and Altos de Batel could become luxury tourist destinations.
Panama is a destination for foreign investment with the strongest economic performance of emerging markets regionally
Panama offers a positive outlook for future investment with many competitive advantages:Panama offers a positive outlook for future investment with many competitive advantages:
Thank You
Reverted Assets Management UnitReverted Assets Management UnitMinistry of Economics and FinanceMinistry of Economics and Finance
www.mef.gob.pa/uabrwww.mef.gob.pa/uabr