New Legislation to Promote Foreign Direct Investment Related to Manufacturing and Logistics Makes Panama an E-Commerce Hub

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Are you a manufacturer and/or brand owner seeking solutions for near-term revenue growth? We advise our clients that a viable solution for small and mid-sized companies in the ASEAN, China, the EU, and the USA is accessing new customers in Latin America and the Caribbean. Also, we advise our clients not to repeat the same age-old mistake of entering the LAC region by the traditional method of appointing an independent local distributor.

  • The seminal study performed on the relationship between the local international distributor and foreign manufacturers/brand owners by Harvard Business School Professor David Arnold concluded that these relationships are almost always doomed to fail because of the fundamental misalignment of goals between the parties.
  • However, there is hope for the small and mid-sized corporation that endeavors to enter Latin America and the Caribbean but is deterred by risky joint ventures and distribution agreements with local partners.
  • The coronavirus pandemic, for all of its negative effects, has reshaped consumer habits in Latin America and the Caribbean in favor of online shopping and, consequently, the LAC region is experiencing a significant acceleration in the growth of e-commerce penetration of retail sales.
  • Also, the readiness of the logistics sector in the LAC region to serve e-commerce is at an all-time high, especially in the Republic of Panama which has served as the logistics hub for the Americas for decades. In August 2020, the Panamanian Government passed legislation for a new investment regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing (“EMMA”). Foreign companies operating in Panama with an EMMA license enjoy significant tax, labor, and immigration incentives, including a reduced income tax rate Value Added Tax (ITBMS); a fixed capital gains tax at 2%; an exemption from import tax on all types of merchandise and immigration benefits.

For more insight regarding the opportunities that Panama presents companies based in the USA, Europe, and Asia seeking a regional distribution strategy in Latin America and the Caribbean, see YK Law’s exclusive interview with Jeannette Diaz Granados, Director of the office of Multinational Corporation Headquarters at the Ministry of Commerce & Industry for the Republic of Panamá. The replay of the live video recording can be seen here and the transcript of the video can be found here. Also, the text of the video recording is provided below. Contact YK Law regarding how your company can boost profit and hedge domestic risk through cross-border distribution in Latin America with a Panama EMMA License.

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