Panamá as a destination for nearshoring

• Author: Alemán, Cordero, Galindo & Lee (Alcogal)
• Published date: 25 January 2024
• Law Firm: Blogs Alemán, Cordero, Galindo & Lee

Panamá as a destination

for nearshoring

Nearshoring is when a company transfers p art of its operations

and production to locations in near by countries but dierent from

where it conducts its main operatio ns to, among other reasons, re-

duce costs and expenses. In this sense, the regimes of Headq uarters

of Multinational Companies (SEM) a nd Multinational Companies

for the Provision of Services Related to Manufacturing (E MMA) give

Panama an advantage for becoming the destinatio n of choice for

this transfer of services and operatio ns.

Panama has become an attrac tive destination for nearshoring due

to its strategic location, favorable commercial environment, and

skilled labor. The country is located at the crossroads of Nor th and

South America, facilitating access to both regions’ main markets.

Further, Panama has a stable, dollar-based economy and a b usi-

ness-friendly regulatory environment that encourages foreign in-

vestmen t.

For companies in Asia or Europe with op erations in Latin Ameri-

ca, outsourcing business processes or ser vices to a nearby country

such as Panama oers several benefits, includ ing lower costs, faster

response times, and bet ter communication due to its geographical

proximity.

Currently, there is no legislation in Panama that specifically regula-

tes nearshoring activity. However, special regimes for establishing

and operating headquar ters of SEM and EMMA companies, among

others, provide several benefits and incentives, including immigra-

tion and tax incentives, among others.

For example, the SEM regime allows multinational compan ies to

carry out operations from Pa nama aimed at oering services to its

parent company, subsidiaries, aliates, or associated companies o r

to set up its parent company in Panama. The S EM regime encoura-

ges multinational companies to establish thei r administrative func-

tions in Panama to be oered to companies of the same econo mic

group. Among other services contemplated in Law No. 41 of August

24, 2007, these include:

1. The direction and/or administration for operati ons in a specific

or global geographic area of a company of an economic group;

2. The logistics and/or storage of components or parts, requi red

for the manufacture or assem bly of manufacturing products;

3. Technical, financial and/or administrative assistance, as well as

other support ser vices, excluding activities that require a license

issued by the Superintendency of Banks, Superintendency

of Capital Markets, the Superintend ency of Insurances and

Reinsurances, and other regulating authorities;

4. The accounting of the economic group;

5. The elaboration of plans that are par t of designs and/or

constructions, or par t of them, that constitute part of the

typical course of business of the parent com pany or any of its

subsidiaries;

6. The electronic processing of any activity;

7. Advice, coordination and monitoring of marketing and

advertising guidelines for goods or ser vices produced by the

economic group;

8. The support of operations and research and d evelopment of

products and services of the econo mic group.

Likewise, the EMMA regime establishes the regulator y framework for

those domestic or foreign companies to carry o ut operations aimed

at oering services, from Panama, to its parent compa ny, subsidia-

ries, aliates, or companies associated with such entit ies of the same

group of companies, from Panama. T he EMMA regime encourages

Panama to be chosen as a country for multinatio nal companies to

provide manufacturing-related services to companie s of the same

group. Among other services contemplated in Law No. 159 of August

31, 2020, these include:

1. Services related to the manufacture, assem bly, maintenance and

repair, conditioning of products, machinery, equipment;Servicios

de desarrollo de productos, investigación o innovación de

productos o procesos existentes;

2. Services of analysis, laboratories, exams, and oth ers related to

the service providing related to manufacture; and

3. Services of logistics, such as storage, deployment, and center

distribution of components or pa rts, required for the service

providing related to manufacture.

It is essential to highlight that the provision of services, under

both regimes, must always be directed to companies of the same

economic group and not to end customers.

Additionally, Panama has a series of geographical areas that provide

additional benefits for companies i n the areas mentioned above,

such as the Colon Free Zone and the Panama Pacific Econo mic

Area, including immigration and tax incentives.

Alemán, Cordero, Galindo & Lee (Alcogal)