IT Geographics
Overview
Panamá has nine provinces: Bocas del Toro, Chiriqui, Coclé, Colon, Darién, Herrera, Los Santos, Panamá, Veraguas, and the territory of San Blas. IT related activities are mostly concentrated in two main areas: Colón and Panamá. Panamá City, the capital, is where most business activities, in general, take place. The second is Colón city, where the Colón Free Trade Zone is located. Finally, there is currently a special economic area, a second free trade zone, located in the former Howard military base. This special area has been formally named the Panamá-Pacific Special Economic Area, also located in the province of Panamá.
Province of Panamá
This province is the center of most economic activities. Panamá city, and the surrounding areas, is where most of the activities are concentrated. These activities include the banking sector, insurance sector, international companies, and large national businesses. IT related activities are also concentrated in here.
Colón Free Trade Zone (ZLC-Zonal Libre de Colón)
The Colón Free Trade Zone is a special economic area that has been in operation for more than fifty years, and provides tax incentives and other benefits for import and export companies. The ZLC mostly concentrates on B2B activities. It currently employs about 21,000 individuals, and re-exports more than $100 million worth of goods per month. The area specializes in the import and export of products, without adding value to them. The required tariff for "re-exports" is of zero percent, in this free trade zone. (29) The area is a very important economic sector in the country.
Panamá-Pacific Special Economic Area (also known as Howard)
This area is located in the former Howard Military base. As of December 10, 2003, this area has not been formally established as a second free trade zone. Debates are underway in the government, and the area is expected to be formally established by the end of the year. This has been created in order to attract IT related businesses and FDI to the country. It is especially significant because the government is also pursuing an expansion of the services it provides to online portals. The area is expected to attract investments of $600 million in the next 20 years, and its is expected to house approximately 240 international companies.(30) The Howard area will specialize in activities in high IT sectors, communications, maintenance and reconstruction of aircrafts, and high tech manufacturing. The area will concentrate both on B2C and B2B activities.
The main reason why the area has not been formally established is because the Colón Free Trade Zone interest group (ZLC-Zona Libre de Colón) disagrees with a special law that would give special benefits and tax breaks to companies located in Howard. The government has stated that the Howard area would not directly compete with the ZLC because the ZLC specializes in import/export and the Howard area would specialize in high technology areas. For example, if companies were to engage in the same type of import/export activities that companies in the ZLC engaged in, the company located in Howard would have to pay taxes of 30%, as opposed to 0% in Colón. As a result of the disagreements, the ZLC has proposed that instead of creating a new law governing the activities at Howard, the government should create one law that regulates all free trade zones in the country thereby ensuring that no specific area has more benefits than another. Finally, a decision regarding Howard is expected by the end of the year. If the new law is not passed by the end of the year, it is likely that negotiations will remain underway until the ZLC is satisfied, or no law may be passed and no government incentives nor benefits will be given to companies located in Howard.