Panama boasts the largest free zone in the Americas and the second largest free zone in the world – the Colon Free Trade Zone. Located at the Caribbean entrance of the Panama Canal, the Colon Free Zone has access to three mega-ports in the Atlantic and one in the Pacific.

The government of Panama has established the Colon Free Zone as an autonomous institution. The administration of this institution is operated and managed by its board of directors, an executive committee, and the general manager of the institution.

Nilda Iris Quijano, the general manager of the Colon Free Zone Administration, who is completing her five-year term at the end of this year, indicates that the free zone area covers 450 hectares, (1.73 square miles) divided into two sites. “There is the commercial area of showrooms in Colon, which is within the old city limits, and the commercial warehouse and storage area located in France Field.”

The administration is also building a second commercial area of showrooms, which is currently in progress. “There are approximately 2,500 companies established in the segregated area which generate permanent employment for over 27, 347 persons,” Quijano said. “The annual commercial transactions or commercial movements of the Colon Free Zone generates US$16.16 billion in imports and re-exports. In addition, we are expanding daily. So we are very valuable to the economy of Panama,” said Quijano.

CFZ represents 8 per cent of panama’s GDP

The share that the CFZ pours into the Panamanian economy is estimated to be almost US$1.3.billion. This represents almost eight percent of the GDP. “This contribution makes the Colon Free Zone one of the biggest pillars of the Panamanian economy,” she said.

The ports of Colon serve not only Caribbean Sea commerce, but also that of the Atlantic and Pacific Oceans, North and South America.

Companies operating within this commercial area include MottaInternational, Sony Corporation, LG Electronics Panama, Samsung Electronics Panama, Bristol Laboratories, May’s Zona Libre, Pioneer International Latin America, Waked International, and dozens of other companies. These companies have trade and distribution links from companies in Asia, North America, and Europe, and, due to the advantages offered by the strategic location of the Panama Canal and the Colon Free Zone; they can all tap into the markets of the Americas.

These companies attract more than 250,000 customers, from all parts of the world every year. Most of the customers are from Latin American and the Caribbean. Tourists from all over the world, including Europe, United States, and Canada, also visit the free zone.

The most important products found in the trade zone are clothing, electronics, shoes, pharmaceuticals, perfumes, liquors, cigarettes, textiles, and watches. Statistics show that the two clients with the largest purchasing index are Venezuela and Colombia. The country where the most imports originate is China – both the mainland and Hong Kong. Others include Taiwan, United States, Japan, Korea, France, Mexico, Italy, Switzerland, United Kingdom, and Germany.

The success of the Colon Free Zone can be attributed to a combination of factors. The geographical location—right next to the Panama Canal—is the main factor in the decision to channel goods from large industrialized countries to consumer markets in Latin America and the Caribbean. But there are other contributing factors, many of them having to do with the competence of the Panamanians who are running the show. These include the U.S. dollar as legal tender, a large banking center, a highly developed insurance and reinsurance industry, several state-of-the-art container ports, and a business-friendly political environment.

The Colon Free Zone offers tax exemptions on imports and re-exports. Trade advantages include special tax incentives. There is no corporate tax for companies in the free zone. In addition, dividends paid on profits from foreign trade operations and from direct sales are not subject to a dividend tax. Any incoming merchandise stored in or leaves the free zone for a foreign country is exempt from taxes, charges, or any type of tariff. ≤