Colombian investment in Panama has experienced a significant surge, mainly driven by political and economic uncertainty in Colombia itself. As businesses and investors seek more stable environments to safeguard their assets, Panama has become a key destination for Colombian capital. This trend is evident in the investment data for the first half of 2024, which shows a record-breaking outflow of Colombian investment abroad.
During this period, Colombian businesses and investors directed $2.142 billion overseas. More than a quarter of that, $556 million, flowed into neighboring Panama, according to the Balance of Payments report compiled by the Central Bank of Colombia. Portfolio, a leading Colombian newspaper specializing in economic and financial matters, referenced this report.
Panama: Breaking Records in Colombian Investment
In an article by journalist Holman Rodríguez Martínez, it was highlighted that the $556 million invested in Panama during the first six months of 2024 marked a historic high. This investment figure greatly exceeded the amounts directed toward other international destinations that traditionally attract Colombian capital, such as Spain and the United States.
Spain, for instance, received $371 million in Colombian investment during this same period, while the United States attracted $188 million. While both figures were substantial, Panama’s growing appeal as a destination for Colombian investors significantly outpaced them.
Other Top Destinations for Colombian Capital
While Panama secured the most significant portion of Colombian investment abroad, other destinations continued to attract substantial inflows. Mexico received $175 million, the British Virgin Islands $153 million, and England $146 million. These countries are well-established hubs for international investments due to their stable economies and favorable tax policies.
Peru, another key economic partner in the region, attracted $135 million in Colombian investment during the first half of 2024. The geographic and cultural proximity between Colombia and Peru and strong trade relations have made Peru an essential destination for Colombian investors seeking growth opportunities in South America.
Meanwhile, Guatemala and Argentina attracted $69 million and $66 million in Colombian investment, respectively. These countries offer a range of opportunities for Colombian businesses, particularly in sectors like agriculture, manufacturing, and services.
Panama’s Longstanding Appeal to Colombian Entrepreneurs
According to Eduardo Nayib Cristo Suárez, Executive President of the Colombian-Panamanian Chamber of Commerce and Industry, Panama has long been an attractive destination for Colombian entrepreneurs and individuals. Over the years, many Colombian businesses have found success in Panama, and the country continues to offer a range of advantages that appeal to investors seeking stability and growth.
More than 350 Colombian companies operate in Panama, covering nearly every sector of the economy. These companies have established themselves in finance, logistics, real estate, and retail. Some of these businesses have been active in Panama for decades, benefitting from the country’s favorable tax policies, such as a lower % corporate income tax rate of 25%, compared to higher rates in other parts of the region.
“Colombian investment in Panama has surged due to political and economic uncertainty in Colombia, and as a Chamber of Commerce, we see businesses seeking political, economic, and legal stability,” Cristo Suárez explained. His comments underscore that many Colombian businesses seek more predictable environments amid ongoing challenges at home.
Advantages of Panama’s Free Trade Zones
In addition to its favorable tax policies, Panama’s free trade zones have played a crucial role in attracting foreign investment, including capital from Colombia. The Colón Free Zone, for example, offers significant tax incentives for businesses engaged in international trade and manufacturing. This zone, one of the largest free trade areas in the world, provides a platform for companies to import, re-export, and store goods with minimal customs and tax burdens.
The appeal of Panama’s free trade zones is further bolstered by the country’s strategic location at the crossroads of global trade routes. With the Panama Canal serving as a vital artery for international shipping, businesses operating in Panama have access to major markets in North America, South America, Europe, and Asia. This connectivity makes Panama an ideal base for companies seeking to expand their reach in the global market.
A Climate of Stability Under the New Government
Another factor contributing to the recent surge in Colombian investment is the political climate in Panama. The newly installed government of President José Raúl Mulino has implemented policies aimed at enhancing security and stability, which have been well-received by the business community. According to Cristo Suárez, this new sense of security has created an even more favorable environment for foreign investors, who now feel more confident about committing capital to Panama.
This security climate is especially attractive for Colombian businesses, given the political and economic uncertainty currently facing their home country. Panama’s stable political environment, advantageous tax policies, and strategic location have made it a top choice for Colombian investors seeking to diversify their portfolios and protect their assets.
Panama’s Role in Foreign Direct Investment (FDI) to Colombia
In addition to being a significant destination for Colombian investment, Panama is also a key source of foreign direct investment (FDI) into Colombia. According to the Balance of Payments report from the Central Bank of Colombia, FDI into Colombia during the first half of 2024 totaled $6.719 billion.
The United States was the largest source of FDI, contributing $2.801 billion, followed by Spain with $1.054 billion. Panama ranked third, with $935 million in FDI flowing into Colombia. This reciprocal investment relationship underscores the close economic ties between the two countries.
Other notable sources of FDI into Colombia included Anguilla, a British Caribbean territory, which invested $884 million, and England, which contributed $325 million. Switzerland and Mexico were also among the top investors in Colombia, with $139 million and $136 million in FDI, respectively.
A Symbiotic Economic Relationship
The strong flow of investment between Colombia and Panama highlights the symbiotic relationship between these neighboring countries. Thanks to its stability and tax advantages, Colombian businesses have found Panama a reliable destination for their capital. At the same time, Panama continues to play a significant role in supporting Colombia’s economic growth through foreign direct investment.
Panama will likely remain a key destination for Colombian investors seeking new opportunities as Colombia’s political and economic conditions evolve. With its strategic location, robust infrastructure, and investor-friendly policies, Panama is well-positioned to continue attracting capital from its neighbor to the south.
In the years to come, the deepening economic ties between Colombia and Panama are expected to foster even greater collaboration and mutual growth, benefiting businesses and investors on both sides of the border.