The Colon Free Zone (CFZ) was developed as a result of the economic depression at the end of World War II, although the concept was in existence as far back as the beginning of the Panama Canal.

According to the CFZ administration, the concept was conceived in 1917, three years after the opening of the Panama Canal. However, it was not until the end of the the Second World War that Dr. Enrique A. Jimenez, president of the Republic of Panama in 1945, made the free zone project a reality. He recommended that George E. Roberts, vice-president of the First National City Bank of New York, examine the plans for the creation of a free zone area in Colon and which had been submitted to the Government in 1929.

On June 17, 1948, Panamanian legislation created the Colon Free Zone as an autonomous institution. The founders of the Colon Free Zone were Augusto Guillermo Roberto Eisenmann, George S. Bennett, Herbert Toledano, Agustin Cedeño, Galileo Solis, and Manuel J. Castillo who is now 103 years old and the only founder alive.

Castillo recalls, “We of the Colon Chamber of Commerce experienced much hardship trying to get the Colon Free Zone started in 1948. When we finally got the government to make the law, and make a financial contribution, we could not get the Americans to give us the space in the jurisdiction of the railroad so we started the Colon Free Zone in the city itself. The first offices were opened on 5th street in the Arboix building, afterward we were moved to the low floor of Portobelo building in one of the four multi-families located at 12th street, Melendez Avenue in the in the City of Colon.” The first manager of the Colon Free Zone was Silvio Salazar. Among the first companies that established operation were Peikard Zona Libre, S. A., Parke Davis, Pfizer, Motta International, and the Schering Corporation.

Giovanni Ferrari, whose father came from Italy, worked on the Canal and later started Farmazona, now one of the largest third party logistics companies in the Colon Free Zone, reflects, “We have to recall why the free zone was born in the first place. It started out because of an economic depression that hit the city of Colon.

Colon’s post-war depression

The American pharmaceutical company, Parke Davis, was among the first companies to be established in the Colon Free Zone

“That depression came about because the local economy was geared for the purveyance of the large military contingent that the U.S. placed here,” Ferrari explained. “There were an inordinate amount of troops stationed here in Panama. At that time, the Panama Canal was deemed a very important military strategic asset to the U.S., regarding the movement of the navy from one ocean to the other. We have to remember that in the Second World War the U.S. was fighting in the Pacific as well as in the Atlantic. Therefore, the ability to move their warships easily from one side to the other was a definite advantage. And of course, it was protected as best as possible, with a large military presence. When the war finished a large part of these troops went home. This meant that the local economy took a dive.”
Painting a picture of the Colon Province in the 1940s, Ferrari said, “During the war years we had shops and night entertainments for these soldiers who were not actually sent to action sites, as they never had to fight the war here. Nevertheless, since they were in Panama anyway they kept busy and the economy was very much geared to their presence here. When they left the U.S. of course realized that had caused an economic problem.”

The Colon Free Zone established as an economic recovery measure
United States experts analyzed the problem and recommended strategies to reactivate the economy. “One of the ways they found was making use of the ports that were near the canal as an area which the ships could either drop off or pick up goods to deliver to their next port of call.” The establishment of a free zone became an economic recovery measure for the province.

The Colon Free Zone started out very small
“The free zone started out in a very small area, it was a part of the town,” he continued. “It had no walls, it had no structure per se, and it was just part of Colon City. The first companies that established themselves here in the Colon Free Zone were American pharmaceutical firms. Some of them are still present, some were taken over or merged with others. These include Beck and Dickenson, and Bart Davis, companies which indeed manufactured goods here in the Colon Free Zone. They distributed to nearby countries.”

Pharmaceutical firms from Europe followed. Soon Japanese companies also realized that if they wanted to compete with the then very strong American electronics firms of the time, it was profitable for them to keep their inventories in the Colon Free Zone so they could ship them into the nearby markets very efficiently, very quickly.

“So companies like Sony and Panasonic also made very extensive use of the zone’s facilities and still do nowadays with very large operations.” Ferrari indicated that although it all started with pharmaceuticals and the chemical industry followed by the electronics industry, there were also local companies.

The general manager of the Free Zone Administration, Nilda Iris Quijano, said “today, our mission is focused on getting new investors and our operating businessmen exploring new markets.” She added, “The strong relationship with our customers, enable us to offer at all times an optimum quality service, having the infrastructure of the seaport facilities, the railroad, the Enrique A. Jimenez Airport and trading areas to create the Multimodal Logistics Center of the Americas,” Quijano added.