Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
Corruption is Panama’s biggest challenge. Panama ranked 111 out of 180 countries in the 2020 Transparency International Corruption Perceptions Index. The U.S. and other international investors have voiced concerns about corruption and inconsistent treatment of investors and businesses. Instances of questionable government practices have affected U.S. investors in Panama. These include bidding procedures, land titling, adhering to contract obligations, lack of payments, and a slow and lacking judicial system. The United States continues to stress the need to increase transparency and accountability in the judicial process and government procurements. The Panamanian government’s history of delaying payment to suppliers and contractors continues to be a liability that U.S. and Panamanian companies endure when doing business with the government. We encourage U.S. companies interested in pursuing public tenders in Panama to apply for support from the U.S. Department of Commerce’s Advocacy Center. We recommend that U.S. citizens interested in purchasing property in Panama consult with a qualified lawyer, a list of which can be provided by the Embassy’s American Citizens Services section. The World Bank’s Doing Business 2020 report notes that Panama has risen to 87 out of 190 countries on the Registering Property indicator, though it still ranks 141st in enforcing contracts.
To respond to business challenges and in an attempt to create a level playing field for companies, the Cortizo administration reformed the public procurement process and signed a new public-private partnership (PPP) law, which went into effect in December 2020. The PPP law covers construction, maintenance, and operations projects valued at more than $10 million.
Panama’s inflexible labor laws are a source of concern for prospective investors. Firing practices are excessively regulated reducing labor mobility and inhibiting hiring. While inexpensive in global terms, Panama’s minimum wage is relatively high in a Central American context, with required annual increases which vary depending on the sector. Also, competent technical employees fluent in English can be challenging to find. These labor issues, coupled with exceptionally high electricity costs, result in higher-than-average unit production costs in Panama. To attract more foreign investments, Panama have two regimes where they can benefit from: EMMA, to facilitate the establishment and operation of manufacturing multinational companies, and SEM,Panama’s Multinational Company Headquarters program (SEM).