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Panama is a preferred destination for Spanish investment in Central America

by | Apr 28, 2023

Spanish investment in Central America favors Panama. The country is the EU’s leading investor in the Central American nation.

After a short period of stagnation, coinciding with the pandemic and the post-pandemic period, Panama again stands out as the nation with the most Spanish investment in Central America. Furthermore, the former country has consolidated its position as one of the leading destinations for FDI in Latin America and the Caribbean, after the sizable markets of South America and Mexico.

Panama will be one of the nine in Latin America countries where Spanish investment will increase in 2023. This is according to the latest report from IE University, ‘Panorama of Spanish investment in Latin America.’

Spanish investors prefer Panama

The report highlights Panama as the country with the best economic performance, not only because of its ability to react to the Covid-19 crisis but also because it belongs to the list of preferred ‘offshore’ destinations for Spain. The country leads growth projections in Latin America, according to Spanish businessmen. Panama is preferred ahead of other countries in the region, such as Uruguay, the Dominican Republic, Mexico, and Colombia. Spanish companies especially value the security and air connectivity of this market, and, in addition, Panama City ranks as the second preferred regional metropolis to reside in for businessmen seeking to augment Spanish investment in Central America.

Spanish firms also highlight the importance of legal certainty in Panama, its favorable regulatory framework for investment, and the boost the country’s government gives to public-private partnerships. In addition, numerous conventions and agreements between Spain and Panama reinforce a clear framework for investment. These include the Double Taxation Agreement, signed in 2010, and the Agreement for the Promotion and Reciprocal Protection of Investments, which has been in force since 1998.

Panama is, by far, the Central American country with the most significant presence of Spanish companies and investment projects. Spain is the third global investor and the first European in this Central American market. More than 400 companies are present there, notably in the infrastructure sector, but also in renewables and, increasingly, in tourism.

Spanish investment in Panama is significant

Spanish companies in Panama include OHLA, Acciona, Grupo Puentes, ACS, Naturgy, Indra, Mapfre, Meliá, Barceló, NH, Riu, Evenia, Ayesa, Iberia, Abanca, Air Europa, Duro Felguera, San José, Copisa, Ortiz, Iberdrola, Elecnor, Ecoener, Sur de Renovables, Cox Energy, Inelsa and Avanzalia. In addition, Telefónica sold its subsidiary in the country in 2019. In recent months, Grupo Puentes won a contract for 250 million dollars to expand a section of the Pan-American Highway to six lanes. In addition, Naturgy has announced that it will inject 450 million in electricity distribution through the Panamanian Empresa de Distribución Eléctrica Metro-Oeste (Edemet) and Empresa de Distribución Eléctrica Chiriquí (Edechi), controlled by the Spanish company.

According to the latest World Bank projections, Panama will lead the growth in Central America and the Caribbean, together with the Dominican Republic, with a positive rate of expansion of 5%, with mining production and tourism as significant engines of growth. ECLAC forecasts a lower increase, of 4.2%, after 7.4% last year, when Panama recovered from the strong impact suffered in 2020 by the restrictions imposed on mobility and economic activity by Covid. In 2022 there was a reactivation of trade, construction, and tourism activity in the Colon Free Zone, improvement of operations in the Panama Canal, mining, and sectors of agricultural activity, according to Panamanian government data. As a result, Panama has grown at an average rate of 6.3% during the last twenty years. This is the highest growth rate in Latin America. GDP expanded by 15.3% in 2021, driven by the Canal, after falling 17.9% in 2020.

Sectoral opportunities for Spanish investment in Central America

Spain is also one of Panama’s most important trade partners. The latter is a country that offers, according to ProPanama, “advantageous investment opportunities for Spanish businessmen, from the traditional sectors of tourism and agriculture to the digital sector or through the Energy Transition Strategy. It also holds a prominent position as a logistics hub ‘ and its infrastructure places the country as the ideal place for ‘nearshoring.’” Among the opportunities at a more concrete level is the Canal’s plan to invest 1.8 billion dollars in its new water management system. Additionally, the Ministry of Economy plans to promote eight projects with a public-private partnership, including rehabilitating the Pan-American highway from Las Garzas to Yaviza.

Last February 2023, the Panamanian government identified eight areas for developing investment opportunities through a map prepared with the UN Development Program (UNDP) and aligned with the Sustainable Development Goals. The Minister of Trade and Industry, Alfaro Boyd, explained that the initiative seeks to identify business opportunities and models that have significant potential to promote the SDGs with substantial financial returns for investors. In addition, he pointed out that public-private partnerships are essential for sustainable development. Areas identified for investment include renewables, agri-food, health, and infrastructure.

Contact LATAM FDI to discuss your foreign direct investment plans in Latin America.

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