"To do business in Panama, patience is key"

Over the past decade, Switzerland and Panama have enjoyed streamlined trade thanks to a free trade agreement. The local chamber of commerce provides insights into the market's specifics and advises on precautions that should be taken before venturing into it.

Despite its relatively small size and population of four million, Panama enjoys global recognition thanks to its famous Canal. Positioned strategically at the heart of the Americas, the country hosts numerous international companies that have chosen it as their regional headquarters. Since the signing of a free trade agreement in 2014, Switzerland has been fostering closer commercial ties with this Central American nation as well as its neighboring country, Costa Rica. In 2022, Swiss exports (excluding precious metals) amounted to CHF 198 million to Panama and CHF 223 million to Costa Rica. Stefan P. Zosso, President of the Swiss-Panamanian Chamber of Commerce, foresees numerous opportunities in the region.

What sectors are the most promising for Swiss SMEs in Panama?

Stefan P. Zosso: Currently, there's a robust demand for products and services in the construction and infrastructure sectors. For example, expansions are underway for the metro and highways, along with the development of a terminal for cruise ships. The logistics and freight sector is also thriving, fueled by activity through both the Canal and air transportation. Tourism is experiencing growth and could benefit from our expertise in hotel management and infrastructure development. Furthermore, there are promising opportunities for SMEs or cleantech startups, whether in water management systems, waste recycling, or renewable energy. Robotics and telecommunications are also significant sectors, alongside private education and dual vocational training. Finally, the financial services sector remains attractive for Swiss banks or advisors. It's worth noting that Panama was removed from the FATF list in 2023 and from the European Union's list last March of countries at risk for money laundering and terrorist financing.

Isn't the small size of the local market a deterrent for Swiss companies?

Zosso: Panama operates exceptionally well as a regional hub. Within just a few hours by plane, one can reach the United States or a major Latin American market like Brazil. For example, the country hosts export processing zones where foreign companies establish warehouses to complete the assembly of their products for export to other markets.

Moreover, Panama boasts around a dozen free trade zones. In addition to the free trade agreement with the EFTA (of which Switzerland is a member), Panama has ratified approximately twenty others. This proves advantageous for the re-exportation of Swiss products to other countries.

What other strengths does Panama offer? And why have Swiss companies such as ABB or Nestlé chosen to set up regional offices there?

Zosso: The Panama Canal (accounting for around 10% of the country's GDP) along with its close political and historical ties with the United States, provides economic stability. The dollarization of the economy further enhances its appeal for international trade. Moreover, there are significant tax incentives for multinational corporations. Panama's removal from both the FATF and European Union's high-risk country lists has reinstated confidence in its financial sector.

Another advantage lies in Panama City, the capital, which boasts well-developed infrastructure for transportation, healthcare, education, and more. The city also ensures personal safety, a notable feature in contrast to other Latin American countries. Legally, arbitration courts are available to address any potential commercial disputes. Additionally, Panama is free from natural disaster risks like hurricanes, which are prevalent in other island nations in the region.

What challenges might a Swiss entrepreneur encounter when seeking to enter this market?

Zosso: Panama is known for its bureaucratic processes, which can make registering a business a bit time-consuming. While English is common in business circles and among expatriates, knowing Spanish is often crucial for effective operations. Moreover, there's a level of protectionism in various sectors, making local sales of goods or services complex, especially in fields like education. Though progress is being made, corruption remains a challenge. Additionally, the country has accumulated significant debt, partly due to the impacts of COVID-19, posing a risk to economic stability. Living costs in Panama City are relatively high, and sourcing talent can be challenging. In general, patience is required, and it may be beneficial to send a Swiss expatriate capable of training local staff and overseeing operations on the ground.

Are there any cultural nuances to consider?

Zosso: The concept of punctuality differs from that in Switzerland, so it's important not to take offense. I advise taking the time to build personal relationships with your business partners to establish trust before finalizing any contracts or partnerships. Panamanians rarely say no, so it's crucial to learn to discern signs of refusal or enthusiasm. Hierarchy also carries more weight than in Switzerland, and consulting with various stakeholders can take time. Patience is key in negotiations.


Informations

Biography

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Stefan P. Zosso has resided in Panama for 17 years. He serves as the director of a local family-owned retail business, employing approximately 400 individuals. Additionally, he co-founded the Swiss-Panamanian Chamber of Commerce in 2020 and has been its president since October of last year.

Last modification 17.04.2024

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