Thursday, June 11, 2015

Doing Business in Panama - Part III

Panama City, Picture by Juliette Passer

The Bilateral Investment Treaty (BIT) between the governments of the United States and Panama was signed on October 27, 1982, entered into force in 1991 and was amended in 2001. The BIT with Panama was the first such treaty signed by the U.S. in the Western Hemisphere. The BIT ensured that, with some exceptions, U.S. investors receive fair, equitable, and nondiscriminatory treatment, and that both States abide by international law standards, such as for expropriation, compensation and free transfers.  

The Trade Promotion Agreement (TPA) between the United States and Panama was signed by both governments in 2007. Panama approved the TPA on July 11, 2007. President Obama signed the trade agreement with Panama on October 21, 2011. With the October 31, 2012 implementation of the TPA, the investor protection provisions in the TPA have supplanted those in the BIT. However, until October 30, 2022, investors may choose to invoke dispute settlement under the BIT for disputes that arose prior to entry into force of the TPA, or for disputes relating to investment agreements that were completed before the TPA entered into force.

The TPA protects U.S. investment and assists Panama in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector. The TPA also includes sections on customs administration and trade facilitation, sanitary and phyto-sanitary measures, technical barriers to trade, government procurement, investment, telecommunications, electronic commerce, intellectual property rights, and labor and environmental protection. TPA also provides a new set of opportunities for U.S. businesses interested in investing or exporting to Panama.

Panama also has bilateral investment agreements with many other countries, such as the United Kingdom, France, Switzerland, Germany, Taiwan, Canada, Argentina, Spain, Chile, Uruguay, the Czech Republic, Netherlands, Cuba, Mexico, Dominican Republic, Korea, Ukraine, Sweden, Qatar, Finland, and Italy, while actively pursuing negotiations with other countries.

Picture by Juliette Passer

 In addition to domestic economic indicators, Panama received another boost of confidence from the global investment community with recently improved sovereign and country risk ratings.  In 2012, Moody’s raised Panama’s sovereign debt rating to Baa2 and improved their outlook for Panama from “stable” to “positive”. Panama’s sovereign debt is also rated as investment grade by Fitch (BBB rating) and Standard and Poor’s (BBB rating).

As detailed in this summary, Panama has made significant strides in integrating into the global economy, by leveraging its unique geographical position and turning into a trade and logistics hub. By strengthening and building institutions to ensure that the context for this growth and social development is a market economy designed to stimulate higher levels of efficiency and competitiveness, it has thus created room for private initiative to play a decisive role while consolidating its position as one of the fastest growing economies in the Region.

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