There are numerous advantages available to companies that are doing business in Panama.  They include:

Security and Stability

Panama is widely considered a “safe haven” due to its political and socioeconomic stability. It benefits from special treaties with the United States, ensuring protection during conflict. The security of Panama is affected by its economic prosperity. Panama has experienced consistent economic growth in recent years due to its strategic location, the Panama Canal, and a well-developed service sector. The country’s relative economic prosperity has helped reduce some social and economic inequalities that can contribute to crime rates. As the safest country in Central America, it attracts a diverse expat community from around the world that enjoys the security and stability of doing business in Panama.

Ease of commercial configuration

Doing business in Panama by establishing a corporation is a simple process. Forming a corporation in Panama takes just a few business days. Additionally, a business operations permit can be obtained online with a small setup fee or tax. Establishing a sole proprietorship with a business operations permit that costs only $15 is also possible. Municipal taxes are generally low and vary depending on the nature of the business and the municipality.

A stable currency

Since its creation as a nation in 1903, Panama has adopted the US dollar along with its currency, the balboa. The balboa is linked to the US dollar, and both currencies circulate within the country.

Local bank transactions are generally quoted in balboas when doing business in Panama, while international transactions are quoted in US dollars.

Favorable tax structure

When doing business in Panama, the country offers a relatively simple tax structure for businesses. Panama imposes a low value-added tax (VAT), or sales tax, of just 7%, compared to 17-21% rates in neighboring Central American countries. Corporate income tax stands at a modest 25% on net income after expenses, and taxes on dividends range from 5-10%. Panama follows a territorial tax system, which means that the government only taxes income generated within the territory of Panama. Non-Panamanian income remains tax-free for Panamanian businesses, residents, and citizens. However, it is essential to note that US persons residing in Panama are subject to worldwide income taxes by the US.

Political and Economic Stability

Doing business in Panama benefits from the fact that it has maintained a stable democratic government since 1989 without significant political unrest. Additionally, Panama has experienced consistent annual GDP growth since 2005, along with low inflation rates. Much like the United States, the government of Panama is structured as a presidential democratic republic. Some of the key institutions that make up the government of Panama include:

The government of Panama is structured as a presidential representative democratic republic. The key institutions that make up the government of Panama include the following:

• Executive Branch: The executive branch is headed by the President of Panama, who is both the head of state and the head of government. The President is elected by popular vote for a five-year term and exercises executive power. The President appoints ministers and officials to oversee government departments and agencies.
• Legislative Branch: The legislative branch comprises the National Assembly (Asamblea Nacional). It is a unicameral body composed of 71 deputies elected by popular vote for five-year terms. The National Assembly is responsible for enacting laws, approving the national budget, and overseeing the executive branch’s actions.
• Judicial Branch: The judicial branch interprets and applies the law in Panama. The Supreme Court of Justice (Corte Suprema de Justicia) is the highest judicial authority in the country. It comprises nine justices appointed by the President and confirmed by the National Assembly. The judicial system also includes lower courts, specialized courts, and tribunals.

Robust Banking System

One of the most prominent reasons there is ease of doing business in Panama is that the country’s banking system is known for its soundness and conservative lending practices, which contributes to its overall stability. The regulatory body governing banks in Panama is the Superintendency of Banks of Panama (Superintendencia de Bancos de Panamá). It is an autonomous government agency responsible for overseeing and regulating the banking sector in Panama. It works closely with other regulatory bodies, such as the Ministry of Economy and Finance, to ensure the stability and integrity of the financial system in Panama.

Advanced infrastructure and communication

High-speed Internet connections throughout the country and modern telephone equipment for international communication make doing business in Panama easy. Additionally, the nation’s roadways are in good condition. They include 4-lane highways that connect the capital with the main provincial capitals and Costa Rica. The Panama Canal allows for the efficient transportation of goods, while domestic airports facilitate fast domestic air travel.

Few natural disasters

Unlike many other regions, Panama is relatively free from natural disasters such as hurricanes, tornadoes, and tidal waves. While minor earthquakes occasionally occur, they are infrequent and pose little threat.

Bilingual environment

While Spanish is the primary language, English is widely spoken in Panama due to the significant English-speaking expat community. The involvement of the United States in constructing and maintaining the Panama Canal until 1999, when it was turned over to the Panamanian government, further contributed to the prevalence of English in the country. English is widely spoken and understood in Panama, particularly in urban areas and sectors such as tourism, hospitality, finance, and international business. The country’s education system emphasizes English language education, and many schools offer English as a mandatory subject from an early age. Panama’s universities and language institutes also provide English language programs and courses. The availability of English speakers facilitates doing business in Panama.

Proximity and Connectivity

Panama City’s Tocumen International Airport offers direct flight connections to more than 100 cities worldwide. Several international airlines serve Panama, ensuring convenient travel options for citizens of Canada, the United States, Latin America, and Europe. Tocumen International Airport is the busiest airport in Central America and is a major hub for air travel in the region.

These factors make Panama an attractive destination to live and do business, offering a safe environment, favorable tax policies, stable infrastructure, and a prosperous international community.

For more information on doing business in Panama, contact LATAM FDI.

The EU-Mercosur agreement will usher in the creation of one of the largest free trade regions in the world, with a population of eight hundred million people.

An agreement twenty years in the making

A pending issue has existed between the European Union (EU) and the Common Market of the South (Mercosur) for over 20 years. For two decades, the Europeans and South Americans have been unable to resolve their differences and ratify an association treaty that turns their relationship into a broad strategic and economic alliance. In 2019, both blocs reached a hopeful agreement in principle, but since then, the final texts of an EU-Mercosur agreement have yet to be signed or ratified. This year, however, according to Andrés Allamand, the Ibero-American Secretary General, “the stars have aligned” to relaunch the effort to concretize Euro-Latin American ties.

This cosmic alignment is occurring on both sides of the Atlantic. In Europe, there is a widespread conviction that the signing of an EU-Mercosur agreement will be the cornerstone of strengthening the trading bloc’s alliance with Latin America. This commitment is led by Spain, which has a stock of direct investment of more than 66,000 million euros in the Mercosur region, and Brussels, where Josep Borrell, High Representative of the Union for Foreign Affairs and Security Policy, has prioritized the agreement that qualifies as one of the “most important in the history of the European Union.”

This determined European commitment to Mercosur is now more receptive after the ascendence of Lula da Silva to the office of the presidency in Brazil. Lula’s agenda (he is committed to multilateralism, strategic autonomy, and sustainable development with the defense of the Amazon as the axis of his environmental policy) goes hand in hand with the EU’s. Proof of this change in trend is the words of two Spanish ministers, the Minister of Foreign Affairs, José Manuel Albares, and the Minister of Industry, Trade, and Tourism, Reyes Maroto, who consider that the ratification of the EU-Mercosur Agreement is closer with Da Silva in Brazil’s presidential palace.

EU-Mercosur agreement countries must convince their citizens

Converting the pending issue of the EU-Mercosur agreement into approval requires two preconditions: a lot of persuasion and efficient public policies to protect the sectors that lose out after the signing of the long-awaited accord. In the first place, persuasion is needed to convince countries that do not welcome the treaty signing or are not confident that the commitment to Ibero-America will strengthen the EU by providing it with new allies.

In Europe, some countries, such as Spain, Portugal, and Germany, are leading the drive to finalize the EU-Mercosur agreement. On the other hand, some nations, such as France, Poland, Ireland, and the Netherlands, have blocked the pact due to protectionist sentiments presented under the guise of environmental issues. This pedagogy is necessary to make reticent countries see that, for the EU, the agreement with Mercosur proves its role as a global leader in environmental policies. The deal would be a compelling message for the rest of the region at a time (after the invasion of Ukraine) in which the European Union seeks to rebuild its alliances, project itself internationally and find dependable suppliers, especially those with raw materials and energy resources.

Strengthened ties between the European Union and Latin America

The ratification of an EU-Mercosur agreement would also be an unmistakable sign of the Union’s renewed will to strengthen ties and elevate its relationship with Latin America to form a new strategic alliance. This is something that the Government of Spain has strongly endorsed and has made a priority of the current presidency of the Union that Spain will occupy in the second half of 2023.

In addition, there is an economic incentive: a report by the London School of Economics calculates that the EU-Mercosur agreement would increase the GDP of the EU by 0.1% per year until 2032 and by 0.3% for the Mercosur countries. It would be one of the political and economic-commercial alliances with the most significant global geopolitical weight that would give birth to one of the largest free trade zones in the world. The treaty will create a joint market of eight hundred million people (Mercosur is the fifth largest trade area in the world) and account for almost a quarter of the world’s GDP and more than US $1 billion in trade.

For Mercosur, where resistance is linked to protectionist interests, the educational effort is focused on showing the agreement as a critical lever to modernize the regional productive matrix, accelerate the green transition, facilitate technology transfer, and promote sustainable value chains through European cooperation. Likewise, the EU-Mercosur agreement can end Mercosur’s stagnation thanks to what would be its first free trade agreement with another sizeable regional bloc.

Additionally, the agreement must design a set of public policies that protect the sectors that will be negatively impacted by the agreement on one side and the other of the Atlantic. In Mercosur, there are still significant trade barriers. For example, the region’s automotive industry is protected. In Europe, rural sectors, such as the influential French and Eastern European farmers, fear being harmed by the agreement, which could become a breeding ground for an increase in social unrest. It is, therefore, essential to improve the economic situation and well-being of those negatively impacted by the accord to increase the legitimacy of the trade agreement within the EU and Mercosur and transform a perennially elusive subject into a reality.

The most attractive economic sectors for investing in Bolivia are jewelry, agribusiness, energy, finance, manufacturing, telecommunications, transportation, and tourism. The text below contains general information on each of these sectors.

Jewelry

Bolivia, a mining country by tradition, has enormous resources of raw materials for the jewelry industry. It has large mining deposits that allow the supply of gold, silver, copper, tin, and others, and significant deposits of precious and unique stones. These resources offer extensive investment opportunities yet to be exploited.

There are companies (domestic and foreign) in the departments of La Paz and Santa Cruz dedicated to producing jewelry and costume jewelry for export.

Cooperatives from the highland departments (La Paz, Oruro, and Potosí) provide gold and silver to goldsmiths and industrial jewelers, who combine state-of-the-art technology and an innate skill to produce jewelry of high quality to be marketed abroad.

Agribusiness

Agricultural and livestock production and its derivative products vary and are subject to particular characteristics and determining conditions. Climate and rainfall are two conditions that play an essential role in growing crops and raising livestock. Three large regions have different climatic characteristics when investing in Bolivia in the agroindustrial sector.

They are:

• The Altiplano is a region with an average altitude of 12,464 feet above sea level and an average rainfall of 17 inches.
• Los Valles is at an average altitude of 9,153 feet above sea level and an average rainfall of 20 inches.
• Los Llanos has an average altitude of 2,670 feet above sea level and an average rainfall of 52 inches.

Within these large regions are 14 sub-regions with particular characteristics and a defined production pattern.

In the northern highlands, maize, quinoa, and tubers are produced, and sheep and camelids are raised. In the valleys, large plots of vegetables and fruits are cultivated; Likewise, dairy cattle are raised. Cotton, sugar cane, soybeans, and similar products are grown on the Santa Cruz plains. This area has large grazing areas for raising cattle.

Agroindustrial development has entered a considerable market expansion based fundamentally on high-quality Bolivian raw materials, abundant and qualified labor, and acceptable competitive conditions through transportation rates and preferential trade agreements.

The agroindustrial sector in eastern Bolivia has a modern dynamic. It uses capital-intensive production techniques that result in internationally competitive levels of productivity. It is one of the sectors that has contributed the most to the country’s non-traditional export growth.

The agroindustrial products produced in Bolivia include sugar, soybean seed (soybean), soybean oil, and white rice.

Agricultural Subsector

Agriculture in Bolivia is developed through two systems, a traditional one practiced in the highlands and part of the valleys, and a modern one found in the plains area (also called the eastern area).

The traditional system tills the land by animal traction, and no supplementary irrigation is used. Under this system are farmers of potatoes, barley, and similar products. In recent years, some peasant groups have begun to grow crops using solar tents and fairly sophisticated irrigation systems, allowing them to increase their products’ variety, quantity, and quality.

Modern agriculture investing in Bolivia is characterized by specialized machinery, fertilizers, and supplementary irrigation, practiced in part of the country’s valleys and the eastern region.

Among the immense variety of agricultural products produced in Bolivia, we can include:

• Cereals include corn, rice, wheat, barley, quinoa, and oats.
• Tubers include cassava, sweet potato, and a wide variety of potatoes.
• Vegetables and greens such as peas, broad beans, garlic, onion, beans, tomato, carrot, squash, chard, and other similar products.
• Stimulants like cocoa, coffee, cocoa, and tea.
• Fruits include banana, pineapple, orange, tangerine, grapefruit, strawberry, grape, apple, custard apple, avocado, peach, pear, and other exotic varieties.

Livestock subsector

Investing in Bolivia in the livestock-producing regions is subject to the type of natural grassland in the territory and the aforementioned agricultural areas.

Investing in livestock production in Bolivia is classified as follows:

Bovine cattle is comprised of the raising of this cattle throughout the Bolivian national territory, constituting the east as the most crucial breeding area due to the ease with which the animals adapt to the natural conditions of the plains and the important levels of export made from that region to Brazil and Peru.

Breeders in that region of Bolivia pay particular attention to breed improvement techniques, such as artificial insemination.

Cattle is intended for reproduction, general consumption, and milk production. In this sense, the central valley of Cochabamba and the joint area of Santa Cruz, La Paz, the valleys of Tarija, and Chuquisaca have the most significant number of dairy cattle.

Sheep are generally raised in the highlands and valleys.

Swine cultivation is destined mainly to produce meat for mass consumption and the industrial production of sausages. The main breeds cultivated are the Duroc Jersey, Poland Chine, Landrace, and Hampshire. The Creole pig is an additional alternative to raising this type of animal.

Camelids have their center of origin in the Andean Cordillera, the highlands, and part of the valleys, with many llamas, alpacas, vicuñas, and guanacos. The vicuña is an animal with very fine wool, but hunting it is prohibited. Despite its meekness, it is an animal that cannot bear life in captivity. The llama and alpaca wool fiber are valued for making garments. Llamas and alpacas are used as pack animals.

Goat farming is mainly centered in the southern part of the country, in the valleys of Tarija and Potosí.

Equine animals are found in the eastern plains and are used as mules to care for livestock.

Rabbit farming is one of the most developed activities in recent years, especially in the departments of Tarija, Cochabamba, Oruro, and La Paz. The raising of these animals is intended mainly for the manufacture of clothing.

Poultry resources in Bolivia are vital, with several modern and well-equipped farms supplying meat and eggs. The departments of Santa Cruz, Cochabamba, and La Paz are at the forefront of poultry production.

Investing in Bolivia: The Energy Sector

Bolivia’s energy potential is enormous. Added to this is the fact that Brazil – the most important economy on the sub-continent – represents a market with almost unlimited demand for electricity and derivatives. Hence, the possibilities for private investment in this sector are significant.

Bolivia has the potential to generate 39,500 MW of hydroelectricity. This figure has been certified by the Latin American Energy Organization. This means that 176,000 GWh could be generated annually. Only 4% of this hydroelectric potential is being used to generate electricity. So the opportunities for more business in the power generation sector are plentiful.

The country also has significant potential to generate geothermal electricity in the Laguna Colorada area, located in the southwest of Bolivian territory. In January 1998, the Federal Electricity Commission of Mexico (FEC) certified that the potential of this area was approximately 120 MW for 25 years. After carrying out the respective studies, the FEC recommended the implementation of the project through the installation of two generating plants with an individual capacity of 60 MW.

The construction of the gas pipeline to Santa Cruz – São Paulo has also enabled the creation of alternative projects, including electrical and hydroelectric projects, all to supply the demand in the Brazilian market. Since the exploitation of gas in Bolivia possibly exceeds the volumes demanded by Brazil, the production surpluses may be used to generate electricity and, therefore, for greater possibilities for investing in Bolivia in this sector.

Financial Investing in Bolivia

The financial sector in Bolivia mainly comprises banking institutions, insurance companies, pension funds, private monetary funds, and stock brokerage agencies, which mobilize the resources of the financial system. Said institutions are regulated by the Central Bank of Bolivia, the Superintendence of Banks and Financial Entities, and the Superintendency of Pensions, Securities, and Insurance.

The financial policy adopted in Bolivia has as central objectives macroeconomic stability, strengthening of the financial system, a sustained increase in the levels of internal savings, and efficient administration of external savings (all part of macroeconomic stability ).

The Bolivian financial system has evolved rapidly in recent years and is catching up with those of the most important Latin American countries. It offers a wide range of services, including lines of credit, foreign exchange markets, trusts, leasing, safe deposit boxes, teleprocessing, credit cards, ATMs, brokerage services, etc.

The country has fourteen commercial banks and several other financial entities with unique characteristics. Among the commercial banks, four are branches of multinational financial institutions (Citibank, Banco Real, Banco de la Nación Argentina, and Banco de Crédito del Perú), and the rest (more than 50 % of their capital stock) are owned through foreign private participation.

Manufacturing

Manufacturing industrial activity has grown significantly in recent years as the country enters a stage of greater competitiveness and expansion of markets for manufactured products. In this sense, the following three subsectors can be highlighted:

Textiles and Clothing

Taking advantage of the variety of cotton, alpaca, angora, and llama fibers, Bolivia has been significantly increasing the production of fabrics and clothing, gradually achieving tangible quality improvements.

Bolivia is very competitive in clothing due to the low labor cost and high quality of raw materials. Taking advantage of national genres, some foreign companies are producing and acquiring the following types of garments:

• Knitted fabrics in different gauges.
• Hand-woven garments.
• Garments are made with special alpaca, angora, sheep, and

The leather processed in Bolivia has optimal characteristics of thickness, color, texture, and finish so that it can be used to manufacture products destined for the international market.

Most of the leather processed in the country comes from the eastern zone, and approximately 50% is used for manufacturing footwear, 30% for manufacturing clothing, and the remaining 20% for producing leather goods.

In short, investing in Bolivia has evidenced that industrial manufacturing is experiencing sustained growth and offers exciting investment opportunities.

Telecommunications

With the capitalization of the state company ENTEL, Bolivia has taken a significant step toward modernizing telecommunications services throughout the country. Among other things, the transfer of the administration of this company to Italian control has led to levels of investment in state-of-the-art technology, training of human resources, and infrastructure never before experienced in the sector.

The capitalized ENTEL has linked most of the national territory with fiber optics, making the country a South American ” Hub ” for telecommunication services. The objective of the present administration is to make the conversion of the country into the “distributor and liaison center” of services in the sector a reality. The new ENTEL investment has given this objective strength and realism.

Finally, telephone service cooperatives throughout the country will pass into the hands of the private sector. This situation will only reinforce the many changes that have already taken place in the industry and will improve the country’s ability to attract private capital, not only to the sector but also to others that depend on an agile and efficient telecommunications service with a wide range of products designed to meet the demanding demands of the business sector. Among the new services that will be provided in the country soon, there is Fixed Cellular Telephony. This is a service subject to international bidding in the immediate future.

Transportation

Bolivia is investing considerable financial resources in road infrastructure. Bolivia will be connected by first-rate road infrastructure with all neighboring countries, so its goal of becoming the link and transit point of the subcontinent can become a reality.

The General Law of Concessions of Public Transport Works is a legal instrument allowing private interests to participate in the construction, rehabilitation, and administration of public works (roads, bridges, airports, etc.) throughout the country. It is expected that private participation in the sector will increase considerably.

Through this Law, the State will allow the private investor to recover their investment in public works through the collection of tolls, administration of supplementary hotel services, administration of gas station services, and others. Private activities in the sector will enable efficient administration of the road infrastructure and facilitate further development of the sector and other industries in the national economy.

The Integration Corridors (five in total) will integrate the country with its neighbors and facilitate the transportation of products, particularly for the export of national goods. The Corridors require more than 5,000 miles of roads to link Bolivia with neighboring countries. More than 70% of this total has been built. Completing the corridors will increase trade with the subcontinent countries and generate more significant business opportunities and activities within the country.

Bolivia has road connections to neighboring countries and access to ports on both the Pacific Ocean and the Atlantic Ocean.

Tourism

Located in the heart of South America, Bolivia is a land of contrasts, with regions of high mountains, prodigious valleys, and vast Amazonian plains. Therefore, its tourist attraction is based on its great variety of natural, archaeological, architectural, artistic, and folkloric resources and the multiculturalism expressed in its people.

The city of Potosí was designated a World Heritage Site by UNESCO due to its invaluable contribution to the history and culture of the New World and Spain. It was the most important city in the Americas in the 16th century. Its silver production during the colonial era was of such magnitude that, to date, it has not been possible to quantify accurately. On the other hand, the city of Oruro is considered the capital of Bolivian folklore for its incomparable carnival. On the other hand, Sucre is the city that preserves the most beautiful colonial style. It is a reflection of the dawn of the Republic.

La Paz is a city where the Aymara influence and the reality of a modern town come together. It is surrounded by majestic snow-capped peaks, among which the Illimani stands out clearly, standing over the city like a motionless sentinel. Approximately 45 minutes from the city is Lake Titicaca, the highest in the world and cradle of great cultures, whose archaeological legacies are shown in the important ruins and offer an idea of the high degree of civilization reached by the inhabitants of this region.

Santa Cruz, Beni, and Pando, cities with tropical characteristics, are considered future cities. The enormous business activity in Santa Cruz confirms this prediction and suggests a promising future for the inhabitants of these beautiful lands.

Cochabamba and Tarija, cities located in the Bolivian valleys, are calm and pleasant places with a pleasant climate, many tourist attractions, and the particular hospitality of the locals. Investing in Bolivia will encompass investment in the country’s tourism sector.

 

 

Researchers point out the need to diversify the productive base of the Tierra del Fuego Free Zone.

An investigation carried out by Argentina’s Fundar study center estimated that the tax exemption regime in the Tierra del Fuego Free Zone currently has a fiscal cost of just over US $1 billion per year. This figure equals 0.22% of the country’s Gross Domestic Product (GDP). Because of this, the organization proposes to reorganize the Free Zone following a productive diversification plan to be developed during the period 2024-2035.

The work on this issue was directed by Tomás Bril Mascarenhas, director of Productive Policy at Fundar, and Juan Carlos Hallak, a researcher at the University of Buenos Aires and Conicet, Argentina’s National Scientific and Technical Research Council. They affirm that if the initiative materializes, it will result in savings for Argentina totaling US $5.9 billion over 11 years and US $900 million annually in subsequent years. However, the proposal received criticism from the electronics sector in the Free Zone, which maintains that the change in the productive structure of the Free Zone “is already in underway.”

Fundar proposes to reorganize the Tierra del Fuego Free Zone

Specialists maintain that the geopolitical objective of Law 19,640, the regulations that established the Tierra del Fuego Free Zone in 1972, of promoting population growth “has been more than fulfilled.” The island went from 13,000 inhabitants that year to 190,000 in 2022. “The free trade regime encouraged the establishment of new productive establishments and the expansion of private employment for the growing population.

The research conducted by Fundar includes a diagnosis and a proposal to reformulate the system, which has as its central point “to stop rewarding the turnover of companies and to start encouraging the addition of local value and exports.”  The proposal refers to the series of tax and customs benefits established for the industry that is located in the Tierra del Fuego Free Zone. These include an exemption from payment of import duties, a tax credit for VAT on sales made, and the lowest rate of internal taxes for manufactured electronic products, among other incentives.

The work confirms that the industries located in the Tierra del Fuego Free Zone employ some 11,000 people. This number equals 30% of the total registered wage earners in Tierra del Fuego’s private sector. The electronics sector is the largest employer, generating some 8,500 jobs. Activities in the Tierra del Fuego Free Zone include printed circuit assembly, and the assembly and the final test of cell phones, televisions, and air conditioners. The Fundar study proposes the expansion of the productive base to promote new sectors such as tourism, the knowledge economy, energy, and petrochemicals, among others.

Long-term project for the Tierra del Fuego Free Zone

The proposed revision of the fiscal incentives program establishes a gradual implementation schedule between 2024 and 2035. These new rules stipulate removing all non-tariff restrictions and eliminating the internal tax gap between national and imported electronic products. It establishes a common rate of 6.55%, except for cell phones, for which it will be gradually reduced to 0%.

Then, between the second and the sixth year, the importation of inputs would gradually pay VAT, while between the seventh and eleventh year, it would pay the corresponding tariffs. According to the project, the value added in Argentina would continue without paying VAT and would also benefit from the effective protection provided by tariff escalation.

According to the estimates of the researchers, whose proposal they consider should go through the National Congress by 2035, the production of cell phones in the Tierra del Fuego Free Zone will have ceased entirely.

Regarding employment, they consider that 7,254 jobs would be lost during the 11 years of implementation. However, they would be compensated with a social protection and labor retraining program related to filling positions in the new production base. This initiative would have a fiscal cost to Argentina of between US $300 and US $500 million over the decade it will be implemented.

“The reorganization of the Tierra del Fuego Free Zone is projected to generate significant fiscal savings, both due to the gradual substitution of national production (which does not pay taxes) by imports (which do), as well as the taxes on imported inputs that the activity on the island would begin to pay.” This has been affirmed by Fundar. For this sum, “the accumulated tax savings would add up to approximately  US $5.8  billion in the 11 years, plus the additional US $881 million each year starting in 2034. “(This represents 82.4% of the current fiscal cost of the regime) . “

The vision of electronics in the Tierra del Fuego Free Zone

The Association of Argentine Terminal Electronics Factories ( Afarte ), which brings together the leading consumer electronics manufacturers in the Free Zone, was critical of Fundar’s project. “The document raises the need to review the free trade regime to carry out a change in the province’s productive structure, which already exists.” Representatives of Afarte explained that “it is precisely what was reflected in the last extension of the free trade zone regime that was carried out in 2021 and that provided for the creation of the Fund for the Expansion of Tierra del Fuego’s Productive Matrix.”

“It is a fund to which companies are already contributing a percentage of their income and which is administered by the State,” assured representatives of Afarte. Said contribution, which they estimate at a total of US $100 million per year, “has two objectives: to finance the improvement of the competitiveness of the current industry in the Tierra del Fuego Free Zone (through infrastructure, logistics,  and connectivity, etc.) and, on the other hand, the development of new productive ventures aimed at expanding the economy of Tierra del Fuego to include sectors such as the knowledge economy, tourism, energy, and others.”

 

2022 was a year of immense challenges. The war in Ukraine, inflation, and increases in interest rates, as well as Colombia’s electoral climate that brought uncertainty due to a change in government, negatively affected the influx of investments in the country. However, according to the estimates on the balance of Foreign Direct Investment for 2022 for the Bogotá Region, carried out by the world-class investment promotion and event attraction agency, Invest in Bogota, the capital remains the preferred destination for foreign direct investment in Colombia.

Said balance reveals that, in addition to being the recipient of 64.7% of the country’s new and expansion FDI projects, foreign direct investment in the Bogota region created 64.5% of the country’s new jobs last year.

Most foreign direct investment in Colombia landed in Bogotá

“In 2022, 143 projects for new and expanded foreign direct investment in Colombia were carried out in the Bogotá Region. In total, these were valued at approximately USD 1.5 billion. This economic activity generated 20,952 quality jobs,” says Isabella Muñoz, executive director of Invest in Bogota. More than 30 different countries invested in the city last year. The diversity of interested markets shows the potential and confidence of foreign companies to expand their operations in Bogotá and its metropolitan area.

The balance also shows that most of the investment projects that the city received come from countries such as the United States (30.8%), Spain (9.1%), Mexico (6.3%), and Argentina (6.3%). However, other Latin American countries such as Brazil (4.9%) and Chile (4.2%), European countries such as Germany (4.9%) and Switzerland (3.5%), and finally, Japan (3 5%), which was the leading Asian investor, surpassing China, contributed to foreign direct investment in Colombia and the country’s capital.

Regarding the sectors where FDI projects were carried out, software and IT services are positioned as the leader in attracting investment to the Bogotá Region. During the last five years, this industry represented 20.2% of the city’s new FDI projects.

With a participation of 16.8%, corporate services are positioned as the second sector with the highest number of completed projects for foreign direct investment in Colombia and its capital city. These figures show the vocation of Bogotá as a city of services. The availability, quality, and cost of labor, advances in bilingualism, and the strategic position of the metropolis have contributed to investors perceiving the region as an ideal destination for developing their services and programming activities.

Investment in the communications industry is also gaining relevance in the realm of foreign direct investment in Colombia. In 2022, this sector had the third-highest investment projects, representing 9.1%. The pandemic also increased the demand for digital services, which require more significant investment in data processing and hosting services such as data centers, ICT, and internet infrastructure.

Finally, other vital sectors in attracting FDI in the Bogotá Region in 2022 were financial services (7.7%), textiles (4.2%), automotive (3.5%), and consumer products (3.5%).

Foreign Direct Investment (FDI) Outlook for 2023

The prospects for world FDI in 2023 are down since the world’s leading economies may enter a recession or register low growth. Under this scenario, many companies contemplate strengthening their current operations instead of expanding into new markets.

Despite this projection, the outlook for Latin America would be different since FDI trends indicate that, during 2023, the relocation of operations by multinationals near their headquarters (nearshoring) will boost investment projects. Thirty percent of the companies that developed FDI projects in Latin America during the last two years indicated that proximity to markets and consumers was the main reason for expanding in the region.

In this sense, the prospects for investment in Colombia and its capital city during 2023 are also positive. According to a survey carried out by Invest in Bogota of 56 foreign companies, 75% of them have contemplated investment projects in the Bogotá Region for this year. This figure reflects a high level of optimism regarding the city’s business climate for this year, particularly in IT, BPO, and creative industries.

Macroeconomic and reform issues affect decision-making

However, at the national level, the fluctuation of the exchange rate and inflation could affect the flow of foreign direct investment in Colombia this year. Additionally, concerning the new government’s reforms, 64% of the companies surveyed stated that the tax and labor reforms would affect their investment decisions in the city.

Although 2023 is shaping up to be a year of significant challenges to attract relevant foreign direct investment in Colombia, there are also immense opportunities for expanding and reinvesting in already established foreign companies.

“In 2023, a moderate increase in the number of FDI projects arriving in Bogotá can be expected, which may be greater if good macroeconomic results occur at the country level,” says Muñoz. “Invest in Bogota has identified 73 investment opportunities, which would generate an estimated investment of USD 1.3 billion and approximately 20,500 jobs,” she concludes.

Now that Chile is a member of the Trans-Pacific Partnership Agreement, the treaty provides for tariff relief related to approximately 1,200 products.

As of February 2023, Chile is a member of the Trans-Pacific Partnership Agreement (CPTPP). The ambitious free trade network that connects 11 countries on both shores of the Pacific is also known as TPP11. After almost five years of negotiations, the Government of Gabriel Boric announced the entry into force of the controversial trade pact that his coalition, the Broad Front, rejected in Congress. With the promulgation of the treaty, around 1,200 products will be subject to tariff relief. “In some cases, it will benefit our exports to the countries that are members of the treaty, and in other cases, we will be able to import some products at a lower cost,” explained the Minister of Economy, Mario Marcel, when asked for comments.

The Trans-Pacific Partnership currently has ten members

Now that Chile is a member of the Trans-Pacific Partnership Agreement, it is the tenth economy to become a full member of the trade pact promoted in 2018 under the second government of Michelle Bachelet. The other countries that are part of the fourth-largest commercial integration treaty in the world are Australia, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and Brunei Darussalam. It only remains for the latter to ratify it. Together, the member countries represent 12.2% of the world economy. Other countries have shown interest in joining or have formally applied. The most advanced is the United Kingdom, which is working to become the first European member of the bloc to join this year and, as reported by the British Administration, “negotiations are progressing well.”

With the full entry into force of the CPTPP, there will be reductions in around 3,000 tariff lines: 1,228 subheadings or products, of which 48% belong to manufacturing, 33% to agriculture, and 15% to fishing and aquaculture. In 2022, 14% of Chilean exports went to the rest of the treaty’s member countries. The ten countries represent about 34% of the stock of foreign investment in Chile as of 2021 and 31% of Chilean investments abroad.

A meeting in February was the first time Chile participated as a full member in a virtual meeting of senior officials of the CPTPP, coordinated by New Zealand as the host country. This is according to the Chilean Foreign Ministry. During the meeting, the strategic aims of the treaty for the current year were discussed. These priority issues include the green economy, electronic commerce, and the integration of new members.

The Undersecretary of International Economic Relations, José Miguel Ahumada, contrary to certain aspects of the agreement, said Tuesday that the department he leads would evaluate the impact of the treaty on Chile’s export matrix, “emphasizing the analysis of products with greater technological content, environmental issues, gender and trade and the inclusion of small and medium-sized enterprises.”

Chile is a member of the Trans-Pacific Partnership Agreement that objects to its investor-state dispute-resolution mechanisms

Ahumada has insisted that the agreement produces “marginal” trade gains and has worked with the other member countries to exclude Chile from the investor-state dispute resolution mechanisms incorporated into the text. As a result, Chile and New Zealand signed a bilateral letter, or side letter, that annuls the mechanism this past February. Mexico and Malaysia have also committed to doing the same. “The Undersecretariat for International Economic Relations ( Subrei ) will continue to work together with its commercial partners within the CPTPP and in other bilateral and multilateral spaces to substantially reform the dispute resolution mechanisms between investors and States to protect the autonomy strategy of the State,” said the Subrei in a statement issued recently.

In 2019, the Chamber of Deputies approved Chile’s entry into the treaty with 77 votes in favor and 68 against. The right bloc and a few members of the Christian Democrats, the Radical Party, and the Socialist Party gave the bill the green light to continue advancing in the Senate. However, most left-wing parliamentarians, including then-deputy Gabriel Boric, rejected it, arguing possible adverse effects on Chilean interests in labor, environmental, and agricultural matters.

Chile expects that trade will expand as a result of its participation in the CPTPP

The Senate approved the entry in October last year with 27 votes in favor and ten against. “Many at that time questioned the government’s commitment to official ratification, the deposit of the instrument, and its entry into force,” said Minister Marcel, alluding to the criticism made for the slowness of ratification. “Shortly after the beginning of the year, we already have the entry into force of this treaty, which is very important. Many of that time’s fears, apprehensions, and mistrust are largely belied by the reality of what is happening,” he added. Now that Chile is a member the Trans-Pacific Partnership Agreement, the country’s trade officials anticipate that the overall value of commerce with the countries that are party to the pact will increase significantly.