INVESTMENT OPPORTUNITIES IN PANAMA

Presentation outline• Facts about Panama• Logistics and connectivity• Special economic areas• Education and labor force• Business climate• Current and future projects• Investment opportunities

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Why invest in Panama?• Privileged geographic position

• Modern investment laws

• Solid economic growth

• Strong financial center

• Political, economic and social stability

• Qualified and available labour force

• Modern medical and health services

• Country free of natural disasters

• Great connectivity for world trade and communications

• Home to the most important free trade zone in the Western Hemisphere

• Dollarized Economy

Panama facts

Population: 3,395,346Area: 77,517 km2

30,193 miles2

GDPUS$ 16,966.1 millions (2007) US$ 18,425.2 millions (Nov.

2008) GDP Per Capita: US$ 5,080.00

GDP growth11.2 % (2007)

9.2 % (Nov. 2008)

Inflation: 6.1% (2007)

7.7% (Nov. 2008)Unemployment rate: 5.6%

10.0%

10.2%

69.2%

10.6%

Agriculture

Manufacturing

Services

Other industries

Composition of the national GDP

Solid economic growth

World Economic Forum: Panama within the top 5 economies in Latin America in their:– Business Competitiveness Index– Global Competitiveness Index – Global Enabling Trade Report – Financial Development Index

Panama has been ranked among the countries with

lower costs of living, according to ECLAC,

(Economic Latin America Commission) and lower

operating costs .

2001 2002 2003 2004 2005 2006 2007 2008 -

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

12,000.0

14,000.0

16,000.0

18,000.0

20,000.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Foreign Direct Investment

Panama is the number one destiny for foreign direct investment (FDI) in the region.

FDI up to September 2008: USD $1,782 millions.

• Construction• Tourism• Communication• Transportation

• Maritime sector• Financial operations

INVESTMENT DRIVERS:

2000 2001 2002 2003 2004 2005 2006 2007 Sep. 2008

517393

99

7921012 1027

2574

19071782

Source: Contraloria General de la República.*In million dollars

LOGISTICS AND CONNECTIVITY

Panama: A Hub for all sectorsPanama CanalPort SystemInteroceanic RailroadAir Connectivity

GATUNLAKE

ATLANTIC

PACIFIC

Logistic Platform for the world

Panama Canal

Railroad/ Fiber optic cable

Transithmic HighwayPanamerican Highwah

PortsAirports

Great access to world markets

MCCA

(30 MILLONES)

Unión Europea

(384 millones)

CARICOM

(14 millones)APEC

(2.5 billones)

CAN

(100 millones)

MERCOSUR

(212 millones)

NAFTA

(387 millones)

UNCTAD has qualified Panama as the country with best connectivity in Latin

America.

Panama Canal

Access to 144 maritime routes in 80 countries

14,000 ships transit the waterway annually

Movement of cargo of 300 MT/ year

Participates directly in 5% of world trade

Movement of 4.3 million TEU´s up to November 2008

Port SystemATLANTIC• Manzanillo International Terminal -Stevedoring Services of America• Colon Container Terminal - Evergreen Marine Corp• Panama Ports - Cristobal

PACIFIC• Panama Ports Balboa Terminal -Hutchinson Wampoa’s

Container movements

2005 2006 2007 Jan-June 2008

Colon Container Terminal 473,626

614,036

705,252

308,032

Manzanillo International Terminal

1,580,659

1,331,267

1,279,903

708,323

Panama Ports Balboa 663,762

988,583

1,833,798

973,110

Panama Ports Cristóbal 38,173

80,799

166,641

84,169

TOTALS 2,756,220

3,014,685

3,985,594

2,073,634

Expansion of the capacity of the container ports

Post Panamax Panamax

MIT 24 2 130 4,000

CCT 3 5 91 800

PPC - Cristóbal 4 6 107 3,250

PPC - Balboa 10 6 158 3,000

Total - Expanded 41 19 487 11,050

Port Container Yard (acres)

Ship to shore cranes Estimated TEU capacity

(thousands)

Source: Panamenian Maritime Chamber.

The expansion of the port terminals will 3,850 new jobs.

HUB of the Americas - COPA Airlines• Transports cargo and passengers through

126 daily flights from Panama to a big network of routes including the Caribbean, North, Central and South America.

• Will offer access to a total of 45 destinations and 21 countries from Panama, before the end of 2008.

• By the end of 2008 it will have a fleet of 43 modern and efficient aircrafts, including 28 Boeing 737 Next Generation airplanes and 15 Embraer jets. This represents one of the youngest fleets in America.

Panama, closer to the World

• Direct flights from/to Panama to 54 different destinations.

• 14 international airlines

Expansion of the Tocumen International Airport• Phase 1 was completed with the improvements of the passengers terminals• Phase 2 - August 2008 – 2010

– Tender for the construction of a new linear dock on the nor-occidental side and 12 new boarding positions .

– The reference price announced in Panama Compra is of 51.8 million dollars and the deadline for the presentation of proposals is October 20, 2008.

• Phase 3 – planned for 2015– Five new boarding positions on the southwest side. – Expansion of the platform to the front– New boarding positions (12)– New parking areas

• Phase 4 - 2025-2030– Expansion of the platform to the south– New boarding positions, 65 in total– New parking areas– New and specialized commercial zone.

Connectivity. TelecommunicationsPanama is connected to the world through 5 fiber optic

submarine cables

Uruguay

Colombia

Gu

ya

na

Surinam

e

Fr. Guiana

Brazil

Peru

Ecuador

Mexico

Bolivia

Chile Argentina

Venezuela

Bermuda

Miami, FL

Hon

dura

sCost

a RicaPan

ama

Belize

Gua

temalaNica

ragu

a

Paraguay

St. CroixCayman Is.

Maya 1Arcos 1SACMACPan American

Dominican Rep

Puerto Rico

Bahamas

ArubaCuraçao

United States

“Most globalized economy of the region.” AT Kearny Index

(2007) /Global Chronicle.

“Ranked among the top three countries in LA with the best logistics and connectivity”

World Bank.

EDUCATION AND LABOR FORCE

Available labor forceLegislation

Programs for the improvement of human resource

Human ResourcesAs of August 2008 the estimated economically active population of Panama is of 2,356,900 people.

GRADUATES: HIGH SCHOOL UNIVERSITY

2003 58,503 18,927

2004 58,721 18,655

2005 61,284 17,800

2006 59,235 19,679

2007 63,919 (e) 21,765 (e)

Source: Contraloría General de la República de Panamá

Labor Legislation

Employees must be paid at least twice a month.

The Government establishes minimum wage schedules for specific activities as per a determined geographical area.

The Labor Code states that the labor contract must in writing, for an indefinite or definite period of time, or for a specific project.

Salaries can be fixed by unit of time (month, fortnight, week, day or hour) task, or specific job.

Human Resources Development• English for Life. Government initiative to improve the level of

English among high school and university students in order for them to be more competitive in the job market

• IFARHU. Supports the development of the human resource of Panama, through educational assistance, credits for studies and scholarships.

• SENACYT. Promotes technology, science and innovation as tools for sustainable development of the country

• Connected to Knowledge. Connect 1,000 public schools to internet in 4 years thru solar energy and wireless access

• COSPAE. Technical training private center. Programs prepared upon request from private sector

INADEHwww.inadeh.gob.pa

Government institution responsible in training the labour force with technical training, in order to achieve social and economic development.

Areas of training: EnglishTICsCommerce and ServiceIndustrial AgricultureConstruction

INADEH – Training programs15%

28%

26%

23%

8%

Graduates from INADEH 2004-2008

9,31933,383

42,021

188,729

133,310

SPECIAL ECONOMIC AREAS

Colon Free ZoneExport Processing Zones and Call CentersCity of KnowledgePanama - Pacifico

Colon Free Zone• Is the largest free zone of the Western

Hemisphere, being the major trading center for Latin America and the Caribbean.

• Area of 680 hectares (1680 acres) and a planned expansion of 200 hectares.

• 250,000 annual visitors and 2,462 companies

• International commercial exchange by September 2008: USD $13,095 millions (increase of 12.1%)

• Offers monetary advantages and tax benefits

No income tax, sales taxes, import duties or any other national taxes on call centers export operations.

Special employee stability regime

Special vacation schedules

Export Processing Zones – Call Centers

City of Knowledge www.cdspanama.org Created by law N°6 of 1998

Former Southern Command base, it is now a private International complex for R&D

Offers benefits to companies and entrepreneurs who wish to promote direct relationship between

technological development and business for advanced productivity.

It´s objective is to create synergy with International Universities, Research Centers and

International Organizations.

Panama Pacifico• The site of the former Howard U.S. Air

Force base • 1,400 hectare Special Economic Zone

adjacent to the Canal and 15 minutes to Downtown Panama City.

• The creation of a world-class global business hub and master-planned community.

• London & Regional brings international expertise as master planner.

• $405 million in new development from 2008 to 2015. $78 million development in 2009 alone.

• The creation of a world-class global business hub and master-planned community over the coming years.

Panama Pacifico• Development includes:

• Commercial centers• Logistics, distribution and manufacturing• Corporate headquarters• Call centers• Technology campus• Mixed-use downtown area (Town Center)• A variety of residential neighborhoods• Championship golf and community

amenities• Tax Law 41 of 2004 provides compelling

legal, fiscal and labor incentives.

• Companies can lease space, purchase land or build-to-suit custom facilities.

• Area accomodates future company growth.• Carefully designed in the natural setting of

mountains, valleys and tropical rainforest.

BUSINESS CLIMATE

Available servicesGovernment modernization and development strategy

Laws that promote investment Free Trade Agreements

Competitve service market

Local DomesticLong Distance

ServicesLong Distance International

Mobile CommunicationsVoice and DataPrivate Voice

Circuit

High Speed InternetBroadband

Data CentersSatelite and Cable TV

Efficient international banking system

US Dollar as the legal tender

92 banks

Total assets – US$ 68,742 millions

(December 2007)– US$ 25,697 millions

(October 2008)

– Increase of 22.1%

Insurance and Reinsurancewww.superseguros.gob.pa

• Regulated by the Insurance and Reinsurance Superintendence

• Over 41 national and international insurance, reassurance and captive insurance companies

• Creates job offers for over 2,100 people.

• Total assets of USD $1,012.7 million

Government Modernization

• Panama EmprendeTo open companies online

• Panama CompraOnline government purchases

• Panama Tramita Online processing system

Modern laws to promote investment

Easy Opening of Companies

TourismFilm LawCall Center

Legal Stability of Investments

Consumer Protection

Intellectual Property

Merchant Marine and Flagging of ships

Export Processing Zones

Multinational Headquarter Law1

98

765

43

10

2

Free Trade Agreements

•FTA’s with: El Salvador, Taiwan, Singapore, Chile. •Concluded negotiations with: USA, Honduras, Costa Rica, Nicaragua and Guatemala.

•Present negotiations with: European Union, CARICOM, Cuba and Canada

CURRENT PROJECTS AND INVESTMENT OPPORTUNITIES

Panama Canal Expansion ProjectEstimated costs of $5,250 M ensuring competitiveness of the waterway and consolidating Panama's logistics position.

12,000 TEU

It will have an impact in the national economy of 1% to 1.2% above the GDP growth.

Summary of Expansion Program

•Four international consortia will participate in the bidding for the design and construction of the third set of locks. 30 different countries comprise the consortia.

•Three of the five dry excavation contracts for the Pacific access were awarded •The project administrator Mizuho Corporate Bank Ltd and the financial and legal consultant Shearman & Sterling LLP, firms were selected.

•By the end of 2008 the program had an approximate advance of 15 to 20% and the core of the project will be during 2009 until 2011.

•In April 2008 the appropriate financing structure for the project was determined.

•US$2,300 million were financed, this is not the final amount yet, since it will depend on the construction of the third set of locks, which is the largest bidding package.

Panama Canal Expansion Program : An Update

Energy• Oil Free Zones:

– Based on the National Energy Policy – Regional Center (2005)

– To promote new investments– Tax exemptions

• Ethanol: – Potential for the development of ethanol made of

Sugar Cane, a mixture 80/10 – (gasoline/ethanol).

• Refinery Projects:– Puerto Armuelles – 350,000 b/d – Oxy and QP – America’s Energy Center – Industrial Park – Atlantic

• Bio Diesel: For processing palm oil-96% diesel – 5% biodiesel.

• Law No. 52 of July 2008, creation of National Secretary of Energy

Cartagena

Colon

Guajira

Bio energy

Hydro generation

Refineries

v

Tank storageRegional

Energy Hub Gas pipeline

GUATE ESTEGUATE NORTE

PANALUYAEL CAJON

RIO LINDO

SUYAPA

AHUACHAPANNEJAPA

15 SEPTIEMBREPAVANA

PL.NI.

TICUANTEPE

CAÑAS

PARRITA

Fecha entrada: Mayo 2007

Line of 230 KV between all

countries

CO

PA

CR

NI

HO

GU

ES

300 MW

300 MW

300 MW

300 MW

300 MW

MODELO ENERGÉTICO

RIO CLARO

VELADERO

Operation of a wholesale power generation market.

Line of 1830km, with capacity for up to 300 MW

Through SIEPAC, Panama will have access to Guatemala, Honduras, El Salvador, Costa Rica and Nicaragua.

An electric energy integration project that began in June, 2006.

Possiblity to export power to 5 countries.

Energy

Tourismwww.atp.gob.pa / www.visitpanama.com

Law N° 8 of 1994, offers benefits to tourism oriented activities. Law No. 2, 2006, grants concessions to operate tourist activities on coast and islands.

Visitors entering PanamaJanuary – December 2007: 1,428,395 January – December 2008: 1,600, 000

Nowadays, 16,000 rooms available.

2007-2012 Project of 104 new hotels (22,227 rooms)

Panama is Home Port for Royal Caribbean Cruise Line

Law Decree Nº 2 of 1998 which promotes and regulates casinos.

5 ethnic groups

Flora and Fauna Beaches

Enchantment of the Seas

Historical landscapes

.

• Copper Deposit potential– Petaquilla (Colon) 1,500 millions tons,– Cerro Colorado (Chiriquí) 4,500 millions tonsA medium grade of 0.76% copper, using a 0.4% copper cutoff grade. Estimated investment US$7,000 Millions.

• Manganese – Province of Colon

• Gold – Province of Veraguas, Colon and Chiriquí

• Silver – Province of Veraguas, Colon and Chiriquí

Mining

Construction

2003 2004 2005 2006 2007 2008

883.4 473.8 931.0 1,007.5 1,302.9 1,222.65

*Million US Dollars

Construction industry represents approximately 5.8% of the GDP

Bridge on the Changuinola River Provincia of Bocas del Toro

•Length of 458 meters

•Investment cost of $7 million dollars

•Main entry to Puerto Armuelles, in the Province of Chiriquí.

Highway and Road Panama-Colon

•Currently on the second stage

•Investment of $215.8 million

•A new road of 70 km

Road infrastructure development

The project will be in divided by:

1. The construction of filling 25 hectares in the Bay of Panama.

2. Construction of a freeway of 2.6 km, with 4 lanes of 3.50m of width each one.

3. Construction of 3 interchanging lanes (bridges).

Coastal Band Project

• Government support for this project

• Center for scientific exchange and learning

• Center for the promotion of Panama´s Biodiversity.

• Worldwide symbol of environmental protection.

Frank Gehry´s design

Biodiversity Museum

Cleaning of the City and Bay of Panama

To recover the Bay of Panama in order to have a better city, improving the environment and a better management of natural resources.

Appropriate drainage and collectors plants, that will treat raw sewage before reaching the bay.

Investment of US$350 millions

Completed in 2011

Current projects being developed in

Panama

Colon Free ZoneHoward

OXY-QP Cerro Colorado

AESRed Frog

HarkemPetaquilla

Petaquilla Energías

Panama Ports CompanyGantrap

PSA CCT

Hewlett PackardCaterpillar

MITCEMEX

Other Investment Projects

Ports America3M

THANK YOU!www.mici.gob.pa