Although its canal is one of the most important pieces of infrastructure in the world, Panama has a strong FDI draw in several other areas. (Photo by Luis Acosta/AFP via Getty Images)

Home of the Panama Canal and the Colón Free Zone, the world’s second-largest free trade zone, Panama is a popular location for foreign direct investment (FDI). The country’s main selling points are its geographical location, modern infrastructure, dollarised economy and the incentivises offered to foreign investors.

The country’s location and trade agreements were some of the advantages when it comes to attracting foreign investors that were highlighted by Carmen Gisela Vergara, executive director of Propanama, the country’s investment promotion agency, during the Horasis Extraordinary Meeting on the United States of America in mid-March.

“[Panama’s location] gives us a unique position to help companies in their recovery process that are looking to sell to markets in Latin America and the Caribbean. We complement that with market access through 21 free-trade agreements,” said Vergara, who added that these agreements give foreign investors in Panama access to 55 countries and 1.3 billion consumers.

However, FDI in Panama also has its downsides. A report on Panama’s investment climate by the US Department of State cites “corruption, judicial capacity, a poorly educated workforce and labour issues” as the main deterrents for foreign investors, along with a population of just over four million, making its domestic market size small.

Panama does offer a relatively easy process when it comes to investing in the country and, as the US Department of State report states, “with few exceptions, the government of Panama makes no distinction between domestic and foreign companies for investment purposes”, making the country an attractive location.

Draws such as this continue to make Panama a popular location for foreign investors, and attracting FDI remains a priority for the country’s government, supported by Propanama.

Panama is not resting in its laurels, however, when it comes to the ease of doing business in the country. Vergara said: “[Investors] are looking for clear rules of the game, and this is what we are looking to do now in Panama, so they can make their investment decisions with political and economic stability, a predictable legal framework and a good regulatory environment.”