International trade plays an important role in Panama’s economy. For many years, Panama has had trade agreements with Taiwan. On July 9th, however, Panama severed ties with Taiwan and struck a trade agreement with The People’s Republic of China. It took two months of negotiations to make the trade deal happen.
With this free trade deal, Panama will follow Peru, Chile and Costa Rica, becoming the fourth Latin country to have such an agreement with China. The Panama and China trade agreement includes more than 20 regional, bilateral and multilateral negotiations in the sectors of aviation, maritime and tourism.
Representatives from multiple trade and agricultural private sectors including the Chamber of Commerce, Panamanian Association of Business Executives (APEDE), the National Union of Agricultural Producers, Panamanian Association of Exporters (APEX), Association of Users of the Colon Free Zone Industries and Agriculture of Panama (CCIAP) and the Trade Union of Industrialists of Panama (SIP). This group was under the name of the International Trade Negotiations Commission. Various public sectors of the Panamanian government, including the Department of Foreign Affairs, the Authority for Consumer Protection and Defense of Competition, the Department of Economy and Finance and the Department of Agricultural Development and Health also participated in the negotiation process.
Panama and China have been participating in trade with each other for years. China has played a major part in Panama’s economy, providing 33% of all imports into Panama. The Panamanian government chose to pursue a trade deal with China for multiple reasons including China currently having the second largest economy in the world, is the main supplier of the Colon Free Zone, is the second largest user of the Panama Canal and has many important company headquarters located in Panama.
Setting up a Free Trade Agreement with China has many benefits to the country of Panama and its people including:
- Improve Panama’s tourism, education, logistics, migration, trade and transport
- Will lead to the opening of three Panamanian consulates in China (in Guangzhou, Hong Kong and Shanghai)
- Enhance Panama’s economic relation with China
- Bring to Panama vast amounts of foreign direct investments in infrastructure, tourism, logistics, finance and maritime, which would increase Panama’s GDP
- Benefit Panama’s exports by granting them access to a large market
- Improve Panama’s foreign direct investment gain
- Make Panama the strategic, central, focal point of the Belt and Road Initiative in Latin America
- Make a key distribution center for Chinese products in Latin America
- Strengthen Panama’s financial sector by supporting the internationalization of the renminbi currency
- Improve Panama’s ability to increase its world financial value
- Generate better quality growth, opportunities for employment and development prospects
- Improve the infrastructure of Panama’s economy
- China has prominently pushed to support infrastructure projects in Latin American countries through the One Belt One Road Initiative which lends funds to Latin American countries to develop and bolster their infrastructure
- Bolster Panama’s shipping and logistics sectors
- Make Panama less dependent on the United States by diversifying the countries it trades with
Mata & Pitti Attorneys have helped many international businesses and corporations successfully set up offices and headquarters in Panama. We are a Panamanian law firm that can help you navigate the legal and business regulations and requirements of the Panamanian government to expand your business operations in this economically growing country. Contact us today to learn what you need to do business in Panama.