Panama: Moving expats to the isthmus
Aiming to be the Singapore of Latin America, Panama’s non-protectionist policies and geographical advantages have spurred ten years of growth and investment. In the past year alone, K2 have seen a 400% rise in relocations in to Panama, Central America’s Southernmost country, making it a point of focus for us in 2014.
Between 2009 and 2014 Panama’s GDP grew at an average rate of 8% per year, spurred on by an explosion of public investment in infrastructure. One successful beneficiary of the windfall was Panama City’s first Metro System, which opened in April of this year, whilst another, the expansion of the Panama Canal, has been strained with rising costs and labour woes.
Aside from strong growth driven by shipping, Panama’s relatively constrained import taxes and traditionally business friendly policies have encouraged multinational companies to establish regional headquarters in Panama. The $15bn expansion of the Panama Canal is expected to transform Atlantic-Pacific freight, enabling vessels with almost 2.5 times the current capacity to pass through its locks, including those capable of carrying commodities such as liquefied natural gas. The incentive for freight use is great, and may provide savings of up to 30% for freight routes from Asia to the East Coast USA.
Based upon these predictions, many of K2’s clients are seizing the opportunity to establish regional headquarters in Panama. But whilst business is booming, Panama’s equality index is one of the worst in the world, and some multinationals are finding local staffing difficult- leading to a boost in expatriate assignments.
Increasingly, corporations are reclassifying their presence in Panama as a regional head office, facilitating their application for a MHQ (Multi-national Companies Headquarters) license. Since 2007, MHQ licenses have provided significant benefits to employers, ranging from tax breaks and employment quota exemptions, to freedom from work permits for foreign nationals.
If growth, flexible licensing and international mindsets were not enough to tempt relocating companies, Panama’s stable economy may prove an additional lure. The US dollar is legal tender in Panama, and local currency, ‘Balboa’, is pegged to the dollar at a steady 1:1 ratio- attractive in the often tumultuous economies of South America. The country is international in every way- and scores of international banks operate in the territory.
The logistics: Moving expats in to Panama
As Latin American countries go, Panama is one of the most welcoming to expats. Whilst bureaucracy is still relatively high, the process of importing household goods is fairly straight forwards and supports policies which opt for un-furnished accommodation. It is crucial to note that as with many Latin American countries, the Assignee’s original passport will be required when importing personal effects.
- Accommodation options. Whilst furnished accommodation is available for short term stays, long term rentals are mainly unfurnished, with white goods provided. Shipping policies should prepare for unfurnished accommodation for any long term assignments in the country.
- Customs requirements. K2 work with Assignees, guiding them through Panama’s customs requirements and importation process, which will vary dependent on individual employment statuses and nationalities. At the time of writing, relocating Assignees are required to surrender their original passports for customs clearance of their effects. In order to achieve duty free clearance, they must also be in possession of their Panaman Residency card- although if the application is still in process, a solicitor’s letter confirming this will be sufficient.
- Timings. At the time of writing, Panama’s customs department aim to clear all shipments within 4 to 6 days. Inspections are obligatory, and every shipment entering the country will be opened and examined. Assignees must be physically present during the inspection, which is usually carried out at the port, and business trips or travel should be planned around these dates to avoid high holding charges. Delays at the port do often occur with little or no forewarning, and K2 manage each Assignee’s expectations throughout the process.
- Shipping restrictions. Panama has a strictly enforced list of prohibited items, all of which are dutiable or may be confiscated if included in shipments of personal effects. The list includes food, alcohol, pornographic material, ammunitions, and any new electronic items.
- Costs. Inspection fees and port charges are potential ‘additional’ costs, and should be included in the cost estimate of any projected Assignments to Panama. K2 brief clients at the time of quotation, facilitating accurate and transparent overviews of costs.
With recent changes to the Panaman government, and a global economy escaping from turmoil, much hangs in the balance for this unique country. K2 are pleased to have played a role in supporting the development of our clients in Panama thus far, and watch with interest.
About the author: Katherine Bitterli, K2 Corporate Mobility
Katherine has over four years’ experience in global mobility and project management, managing numerous group projects for K2, including the design and build of a technology platform- Ascent, and rebrand and launch of website in 2013. She has also completed several short term assignments to deliver projects internationally, in Singapore, USA, Sweden and South Africa.
Lead contributer: Esteban Vela, K2 Corporate Mobility
Esteban Vela is K2 Corporate Mobility’s Assistant VP of the Americas, and has led several group projects across South America, including relocating regional head offices for one of the world’s leading brewers, and new location support for a NYSE listed American banking and financial service corporation.
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The Economist (2014). Elections in Panama. Towers and power. Available: http://www.economist.com/news/americas/21601829-surprise-winner-promises-sweep-panamanian-politics-clean-towers-and-powers . Last accessed 16th May 2014.
The Economist (2011). A Singapore for Central America?. Available: http://www.economist.com/node/18959000. Last accessed 16th May 2014.
Financial Times (2014). Panama president’s wife sets sights on power. Available: http://www.ft.com/cms/s/0/89d551d0-d03c-11e3-8b90-00144feabdc0.html#axzz31t8XRO7K. Last accessed 16th May 2014.
Sedes de empresas multinacionales (2014). MHQ. Available: http://www.sem.gob.pa/en/index.php. Last accessed 16th June 2014.
Worldbank. Panama. Available: http://www.worldbank.org/en/country/panama. Last accessed 16th May 2014.