Beyond The Canal
The second most competitive economy in Latin America, Venetia van Kuffeler meets Panama’s Foreign Minister, His Excellency Roberto C Henríquez
When I met with Panama’s Foreign Minister of Commerce and Industry, Roberto C Henríquez, in London in mid-May, he had just completed a round of discussions with the British Foreign Minister, William Hague, and the FCO Minister for Latin American Affairs, Jeremy Browne; tomorrow he is due to fly to New York for a meeting with the UN Secretary-General. He describes his official priorities in boxing terms: ‘Panama is a lightweight who is already fighting in the middleweight category and who intends to become a heavyweight.’ With respect to his time in the UK, he continues: ‘Our foreign policy runs parallel to our commercial and economic interests. As Foreign Minister, I am here basically to invite people to invest in Panama and to showcase all that the country has to offer today. Panama has become an interesting place for Great Britain because of our role as a logistical platform – the Panama Canal expansion and the impact that this will have, especially connecting Asia with Europe or Latin America with Europe. Furthermore, Panama shares the same values as the UK – free enterprise, open market, democracy, freedom of expression and the UN Charter – so these issues were also part of our discussions.’
A businessman by background, Mr Henríquez is the co-owner of the holding group Compañía Atlas, which has interests in the commercial, industrial and real estate sectors. Throughout his career he has been president and board member of major Panamanian business associations including the Panamanian Chamber of Commerce, Industries and Agriculture, the Panamanian Association of Executives and the National Council for Private Enterprise. He is also Vice President of the ruling political party, Cambio Democrático. Previously he was the vice presidential candidate in Ricardo Martinelli’s 2004 presidential campaign. (Mr Martinelli was eventually elected to office in 2009.) Mr Henríquez also served as Vice Minister of Foreign Trade from September 1999 to August 2000, and was Minister for Commerce and Industry from 2009 to September 2011, when he became Minister of Foreign Affairs.
Following his meeting with Mr Henríquez, Mr Hague stated: ‘Panama is an important partner for the UK, reflecting its growing status as a regional hub and an important player in both economic and political spheres.’ It is a sentiment that Mr Henríquez re-iterates today: ‘The UK is probably the biggest European investor in Panama. We are working on a shared view and on how we can support each other.’
During his visit Mr Henríquez gave a lecture, entitled ‘The Political and Economic Aspects of a Growing Economy’, at Canning House in front of an audience drawn from the British business sector. He spoke of Panama’s great efforts to convey to the world that it is acting transparently and in compliance with international law. Given the current trend of ‘repatriation’ in Central and South America, I ask him what assurances can Panama give foreign investors that their money is safe there? ‘When we establish diplomatic relations with any country, one of the first things we do is sign a protection of investment agreement,’ he replies. ‘But more than anything our behaviour speaks for itself: we have never had an instance of Panama nationalising or taking any investor’s property. To my knowledge we are the only Latin American country to have spoken publicly against this. We have stated our disenchantment with what has happened in Argentina – we felt like we had to make it clear that we totally disapproved of these kinds of actions.’
Furthermore, Mr Henríquez explains that he has started to negotiate a tax information exchange agreement with the UK. (So far, Panama has initiated 18 tax exchange agreements, 14 of them by now signed, around the world.) He is also hoping that this month the EU will sign a Central American Association Agreement: ‘We are part of that and very soon this will be sorted with all countries of the EU. We will keep negotiating with other countries and regions – that is the direction Panama’s foreign policy is heading.’
To further attract foreign investment, Panama’s government has established an institution, Proinvex, aimed at giving investors all the help they need. ‘If a company installs itself in Panama to act regionally, they will not pay taxes for whatever income they make,’ promises Mr Henríquez. Law 41, a system of tax incentives for foreign companies, has so far prompted 77 multinationals to situate their regional headquarters in Panama. ‘We also have very attractive immigration and labour advantages, and that’s the common element of all these different laws to attract investment,’ the Minister continues. These facts have caused Panama to be recognised by the World Business Forum as the top country in Central America for direct private investment. According to the World Economic Forum, Panama is the second most competitive economy in Latin America – it and Chile are the only two Latin countries to rate among the 50 most competitive economies in the world.
Panama’s key investment areas are, in descending order, logistics and infrastructure, tourism, agriculture and the financial sector. The latter is already strongly developed – as Mr Henríquez proudly states, there has not been a single bankruptcy in Panama among any of its approximately 100 banks as a result of the 2008 financial crisis.
But of course, shipping is the sector for which Panama is best-known. In October 2006 Panamanians approved an ambitious plan, with an estimated budget of US$5.3 billion, to expand the Panama Canal. Begun in 2007, it is expected to be completed in 2014-15. Mr Henríquez explains that in addition to the canal expansion itself, the US is making a similar investment in its east coast ports – as are Colombia and Brazil – to prepare for an explosion in traffic. The canal currently provides direct revenue to the government around US$800 million a year. ‘We expect that that figure will increase to US$5 billion in the 10 years following the opening of the expansion, and that is a figure that will continue to grow,’ says Mr Henríquez. ‘However, I must stress that while the canal has been the motor by which Panama has developed in the area of logistics and maritime, it is not only the canal that is causing this growth – it’s the international airport that keeps growing, it’s the banking sector and services and logistics.’
Mr Henríquez believes that Panama’s greatest diplomatic challenge is ‘to make the world recognise and take advantage of our development strategies which will make Panama become a first-world country.’ Based on the facts and insights he provides at our meeting, the latter seems an entirely realistic objective.
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