Caribbean & Central America - December 2024

At the end of October Panama’s President José Raúl Mulino energetically rejected the Netherlands’ continued inclusion of Panama on its blacklist of tax havens. Mulino’s ire follows recent efforts by his government to lobby for the European Union to remove Panama from what it dubs “discriminatory financial lists” – a key priority for the Mulino administration which took office in July. Efforts to improve Panama’s image have assumed increased importance following the loss of investment grade earlier this year due to the 2023 closure of the massive Cobre Panamá cooper mine in response to major unrest over the approval of a new contract, since struck down by the supreme court (CSJ) [EB-24-08].

President Mulino made his comments regarding the Netherlands’ continued inclusion of Panama on its list on 30 October, when he also announced that Dutch companies would be excluded from participating in public tenders or “public acts”. Indicative of efforts to remove Panama from such lists, Mulino paid a trip to France earlier that month. There, he met his French counterpart Emmanuel Macron on 21 October whom he lobbied to pledge support for Panama’s removal from the blacklist drawn up by the European Union of “jurisdictions which are deemed non-cooperative” in terms of compliance with international standards of tax transparency and fair taxation.

On 8 October this year the European Union opted to leave Panama on its list of non-compliant countries regarding the treatment of tax havens. This, despite the fact that in October 2023 – in what was hailed by the previous Laurentino Cortizo administration (2019-2024) as a major achievement – the Paris-based Financial Action Task Force (FATF) of the Organisation for Economic Co-operation and Development (OECD) removed Panama from its ‘grey’ list of countries with strategic deficiencies in their anti-money laundering (AML) and counter-terrorist financing (CFT) frameworks.

In a statement released in response to the FATF’s decision in October 2023, the Cortizo administration boasted that the FATF had determined that Panama had “strengthened its anti-money laundering and counter-terrorist financing prevention system and implemented substantial regulations and actions that have allowed the country to take an important step forward in international transparency.” The US State Department’s most recent (July 2024) investment climate statement also highlights various steps taken by Panama to address concerns regarding tax transparency. These include the fact that in 2015 Panama strengthened its legal framework, amended its criminal code, harmonised legislation with international standards, and passed a law on AML/CFT, among other things.

Other legislation

The US State Department’s investment climate statement notes that Panama approved Law 18 (2015), which severely restricts the use of bearer shares; companies still using them must appoint a custodian and maintain strict controls over their use. It highlights that in 2019 Panama passed a law criminalising tax evasion, defining it as a money laundering predicate offense as well as noting that in 2021 Panama passed Law 254, which modifies six distinct laws in order to give the non-financial regulator more authority and strengthen know-your-customer (KYC) requirements.

Firming up ties with China

Amid concerns regarding Panama’s image as an investment and trading partner (foreign direct investment to the country was down 22% in 2023 compared to 2022, according to an August report by the United Nations Economic Commission for Latin America & the Caribbean [Eclac] [EB-24-09]), Mulino recently met with China’s ambassador, Xu Xueyuan, to discuss interest by Chinese companies within the isthmus and promote Panamanian exports.

There are currently around 40 Chinese firms operating in Panama in sectors such as finance, telecoms and logistics, many in the Colón free zone (ZLC). A presidential press release dated 8 November highlights that China’s investment interests centre on logistics and infrastructure, renewable energy & green technology, tourism, property development, telecommunications, and agriculture. It cites Chinese companies’ interest in expanding in ports and logistical zones of the Caribbean and Pacific.