In 1948 the Republic of Panama began a project to solve two basic needs at both the national and international levels. One, the modernization of the economic service sector, and the other, a mechanism without precedent to streamline regional commerce on a large scale. The Colon Free Trade Zone has been in operation since then; one of the pillars of the Panamanian economy. The Colon Free Trade Zone has access to diverse maritime routes and the frequency of transport has converted the Colon Free Trade Zone into a priveliged place in which to conduct international business. The existence of the International Financial Center, an efficient ports infrastructure, airports, free circulation of the United States dollar, an infinite number of tax incentives, and an agile communications network, are some of the factors that facilitate the business dealings of Colon Free Trade Zone users. Currently, more than 1,600 businesses use the facilities and services offered in the Colon Free Trade Zone for imports, warehousing, assembly, re-packing, and re-exporting a wide range of products from electronics to chemical products, beverages, tobacco, furniture, clothing, footwear, jewelry, and a variety of other products.
The Colon Free Trade Zone is a commercial showcase par excellence for the whole continent. Here cutting edge electronics are displayed beside sophisticated perfumes and the international fashions most in demand.
Imports and Exports registered in the Colon Free Trade Zone surpass 5 billion dollars annually, directed towards a market of more than 525 million consumers.
There are many elements that support the commerical activities from transport to comercial operations, 6 airports, 5 ocean ports equiped with up-to-date cargo handling facilities, spacious container terminals, the Pan-American highway originating in Alaska, the trans-isthmus highway which extends from the Caribbean to the Pacific, a trans-isthmus railway, the Panama Canal through which pass annually 12,000 merchant vessels from 75 different countries, who also are supplied by the providers that operate from the Colon Free Trade Zone.
Additionally, of the more than 120 banks from diverse countries throughout the world that make up the International Financial District of Panama, more than 20 participate in the financial activity of the Colon Free Trade Zone from their offices and branches located within the Free Trade Zone commercial center.
The Colon Free Zone offer key advantages for the international firms that wish to improve their presence in the Latin American markets, the most significant of these advantages being:
Position. The location of Panamá is ideal to forward goods to the Central American, Caribbean , and South American regions.
Consolidation, logistics. The establishment of a warehouse in the Colon Free Zone allows reception of goods from various sources and to fill orders of the buyers from one single point and under one invoice.
Transport connections. The presence of three main ports at both ends of the Panamá Canal, a modem airport, and surface transportation to Central America - all with excellent frequencies and international connections - allow orders to be shipped quickly to their destination.
Import and export procedures. The documentation required for the entry and exit of goods is simple and expeditious. Merchandise that transits through the Colon Free Zone are not subject to import or export taxes.
Experience. Branches of multinational firms as well as local companies that provide the warehousing and forwarding services on behalf of foreign corporations operate in this zone as early as the late 1950's.
Cash flow. The movements of funds in and out of Panamá are not restricted, and it occurs mainly in United States dollars, currency of legal exchange in the Republic of Panamá.
Fiscal incentives. The net earnings on the reexport operations are exempt from income tax, as well as the dividends declared on such earnings.
All of these factors, combined with the national currency, the Balboa (US dollar), a modern communications system, and efficient tourism services, enhance the ammenities available to Colon Free Trade Zone users while they conduct their business in Panama.
The Republic of Panama is located at the center of the western Hemisphere, bordered to the north by the Caribbean Sea, to the south by the Pacific Ocean, to the east by Colombia, and to the west by Costa Rica. Panama is world renowned for its free trade zone and for its interoceanic Canal strategically constructed in the years 1904-1914.
The Republic of Panama is located at the most slender point of the American continent. The Panama Canal, with its unique location at the shortest route between the Atlantic and Pacific Oceans, offers a short and relatively inexpensive transit option between two great oceans, has considerably influenced the patterns of world commerce, has driven growth in developed nations, and has given the push necessary for economic expansion to many remote areas of the world.
Three lockgates raise ships to the level of the Gatun Lake, 26 meters above sealevel. Each one, at 33.5 meters wide and 306 meters long, take between eight to 15 minutes to fill with water. By means of the Pedro Miguel and Miraflores Locks ships desend to the Pacific Ocean first to a level of 9.4 meters, then, in two stages, to sealevel. The Miraflores Locks possess the highest lockgates to handle the tide changes of the Pacific, which can vary by up to four meters. Among the peaceful achievments of man that have significantly contributed to world progress, the construction of the Panama Canal stands out as exceptional. The Canal provides easy transit for ships that navigate between the Atlantic and Pacific Oceans.
In a defined area of 400 hectares, the Colon Free Trade Zone is located at the Caribbean entrance to the Panama Canal in the province of Colon, and is considered the second largest free trade zone in the world and the largest of the Western Hemispere. Due to its unsurpassed geographic position and access to the most important and up to date ports of Latin America, four in the Caribbean and one in the Pacific, the Colon Free Trade Zone could be called an International Ports Center.
Consistent with its historic role as host to the principal Atlantic and Pacific ports connecting North and South America and Europe, Panama has developed an impressive ports infrastructure led by MIT, Evergreen, Cristobal and CCT in the Atlantic and Balboa in the Pacific. The Colon port which includes the MIT, Evergreen, Cristobal, and CCT terminals, has become one of the leading container ports in Latin America.
The Colon Free Trade Zone offers its users special tax regulations. Tax Free is the key phrase when one explains the operational advantages of the Colon Trade Zone.
In line with the demands of a modern era which demands changes in all spheres, currently huge steps are being taken to expand operational patterns of the Colon Free Trade Zone and introduce manufacturing and packing, for which there is great demand.
Within the Free Zone a large number of businesses offer transport services for martime, air, and land cargo from and to any destination in the world. Local and International cargo companies offer personalized service 365 days of the year, making it possible for merchandise to arrive at its destination in record time. Due to the concentration of businesses in a 400 hectare closed area time is optimized in the transfer of goods from warehouses to the businesses responsible for cargo shipment.
The convenience of the Trade Zone to port facilities, railroads, land infrastructure, and airports, as well as the future integration of such facilities within the Trade Zone itself facilitate the timely arrival of goods to their destinations. Personalized attention and monitoring are offered by courier firms, multinational cargo companies, shipping companies, and airlines that offer services for the transfer of goods to their respective recipiants.
Before leaving, entering, or transfering cargo from and to the Colon Free Trade Zone the firm responsible for each cargo shipment must file a declaration of commercial movement with the Free Trade Zone Administration registering its transaction in the proper format indicating the type of movement performed (entrance, exit, or transfer). In this way control of the commercial activity that takes place within the zone is maintained.
Commercial Transactions
The movement of goods within the Colon Free Trade Zone, better known as 'Commercial Movement' is directly administered by the Office of Commercialization or the Office of Commercial Operations.
All transactions, excepting that of tax settlement, must be reported in a form known as the Declaration of Commercial Movement which cost US$ 7 each and are sold at the Cashiers' Desks in minimum quantities of ten or more.
In the Free Trade Zone there exist four basic transactions in the management of goods which can be divided into the following categories:
Entrance of Goods Declaration: all businesses must present this document accompanied by the commercial invoice and Bill of Lading before arrival of the goods in order for the Administration to permit entrance of the merchandise to the Free Trade Zone.
Exit of Goods Declaration: presented accompanied by the commerical sales invoice issued by the business established in the Zone and later signed at Commercial Movement.
Transfer of Goods Declaration: required when a Free Trade Zone business sells or transfers inventory to another company. This document should always be accompanied by a commerical invoice.
Tax Settlement Declaration: prepared by a Customs Duty Specialist and must be approved by a certified Customs Liquidator; required when a sale is made to a business or individiual established in Panamanian territory.
How to Establish companies in the Colon Free Trade Zone?
1. A company may build its own store, warehouse, or industrial plant on land rented from the Colon Free Trade Zone Administration (Administracion de la Zona Libre). A minimum of 60% of the merchandise must be exported.
2. The Rental Agreements of Lots are for a period of 20 years and the Agreements for Commerical premises are for one year, renewable.
3. A Representative, who may have any number of client companies, may build a warehouse under the same terms and conditions as apply to an individual business.
4. A company may come to a private agreement with a Representative established in the Free Trade Zone in which the Representative will receive, warehouse, and distribute the merchandise or products of the client company according to the instructions of the company. The company's Property Deed remains with the owner of the merchandise. 60% must also be exported.
5. Companies or Individuals may rent space in the public storage of the Colon Free Trade Zone at a rate of 0.5% monthly above the F.O.B. (Free on Board) of the stored merchandise.
