WORLD TRADE  
ORGANIZATION  G/SCM/N/211/PAN 
24 June 2010 
 
 (10-3463) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
 
SUBSIDIES 
 
Continuation of Extension under SCM Article 27.4 of the Transition Period for the  
Elimination of Export Subsidies Pursuant to the Procedures Contained in the  
General Council Decision in Document WT/L/691  
 
PANAMA 
  
 The following communication, dated 10 June 2010,  is being circulated at the request of the 
delegation of Panama.  
_______________ 
 
 
 The Republic of Panama hereby submits the following notification pursuant to 
subparagraph 1(d) and paragraphs 3 and 4 of the Pr ocedures for extensions under Article 27.4 of the 
SCM Agreement for certain developing country Members (G/SCM/39), subparagraph 1(c) and 
paragraphs 2 and 3 of the Decision adopting proc edures for the continuation of such extensions 
(WT/L/691), and the Decisions of 22 November 2002 on Export Processing Zones (G/SCM/85) and 
on the Official Industry Register (G/SCM/84). 
  In accordance with its rights and obligati ons under the procedures for extending programmes 
that comprise subsidies classified as prohibited unde r Article 3.1 of the Agreement on Subsidies and 
Countervailing Measures (SCM) of the World Trade Or ganization (WTO), the Republic of Panama is 
submitting the following notification for the Comm ittee's consideration in order to meet its 
obligations in respect of the extension of the tr ansition period for programmes subject to renewal. 
  Panama confirms that its programmes subject  to extension comply with the standstill, 
favourability and transparency requirements under the procedures for extensions (G/SCM/39) and the 
General Council Decision (WT/L/691) in that neither pr ogramme has been modified  so as to make it 
more favourable than it was at 1 September 2001. G/SCM/N/211/PAN 
Page 2  
 
  - Programmes 
 
I. EXPORT PROCESSING ZONES 
1. Description of the Programme 
  See paragraph II.1 of document G/SCM/N/95/PAN. 
 
2. Period of notification 
 
 2009 
 
3. Objective of the programme 
 
 See paragraph II.3 of document G/SCM/N/95/PAN. 
 4. Background and authority 
 
 See paragraph B.4 of document G/SCM/N/71/PAN. 
 
5. Form of the subsidy 
  See paragraph II.5 of document G/SCM/N/95/PAN. 
 
6. Beneficiaries and mechanism 
 
 See paragraph II.6 of document G/SCM/N/ 95/PAN and paragraph I.6 of document 
G/SCM/N/160/PAN. 
 
7. Estimated amount of the subsidy 
 
 No estimate available.  However, paragr aph I.9 provides updated information, which 
represents an attempt to establish an or der of magnitude under the EPZ programme. 
 
8. Duration of the subsidy 
 
 Not specified in Law No. 25 of 1992. 
  G/SCM/N/211/PAN 
 Page 3 
 
 
  9. Statistical data permitting an assessment of the trade effects of the subsidy 
 
Table No. 1.  PANAMA:  VALUE OF  EXPORTS FROM PROCESSING ZONES 
2001-2010 
Year No. of enterprises f.o.b. value (US$ million) 
2001 57 51.9 
2002 68 52.4 
2003 74 67.2 2004 45 69.2 2005 56 77.8 2006 61 88.2 2007 77 88.5 2008 88 99.9 2009 84 84.2 2010 82 34.1 (January-May) 
Source : Auditor-General of the Republic and Vice-Ministry of Foreign Trade of the Ministry of Trade and Industry. 
Table No. 2. PANAMA:  EXISTING PROCESSING ZONES AND 
NUMBER OF ENTERPR ISES REGISTERED 
AS AT APRIL 2010 
No. Processing Zone No. of enterprises registered 
1 Panaexport, Ojo de Agua 23 
2 Proinexport 2 
3 Marpesca, S.A. 21 4 Rail Road Export Processing Zone 1 5 Zona Procesadora de Davis 9 6 Colón Maritime Investor 4 7 Eurofusión 1 8 Isla Margarita Development 8 9 Espanam Iberoamérica 0 
10 Zona Procesadora de Albrook 12 11 Zona Procesadora de Chilibre 0 12 Proexport 0 13 Export Pacific Panamá, S.A. 0 14 Hewlett Packard Global Services Panama 
Most of the enterprises located in Processing 
Zones are engaged in international trade 
service activities. 1 
 
TOTAL  82 
Source : Vice-Ministry of Foreign Trade, Ministry of Trade and Industry. 
10. Adoption of internal measures 
 
A. Panama has taken the following steps with a view to eliminating the export subsidies under 
the programme:  1. On 15 January 2008, the Ministry of Trade and Industry set up an Institutional Technical 
Commission in order to identify the goods-rela ted export subsidies inconsistent with the 
WTO General Council Decision (WT/L/691). G/SCM/N/211/PAN 
Page 4  
 
   
2. On 25 January 2008, the National Export Promotion Directorate of the Ministry of Trade and 
Industry e-mailed Export Processing Zone develope rs with information from the WTO stating 
that the Committee on Subsidies and Coun tervailing Measures (SCM Committee) had 
decided to grant extensions of the transiti on period until the end of 2013, with a phase-out 
period of two (2) years, ending no later than 31 December 2015. 
 3. On 9 March 2009, the National Export Prom otion Directorate e-mailed Export Processing 
Zone developers with the information th at the SCM Committee had extended Processing 
Zone export subsidies until 31 December 2015, after which no further extension requests 
would be considered. 
 4. Since March 2009, the Ministry of Trade and Industry has included the following in the text 
of the new operating licences issued to Export Pr ocessing Zone developers and to enterprises 
establishing themselves in such Zones: 
 
"The benefits under Law No. 25 of 30 November 1992 shall remain 
in force until 31 December 2015 pursuant to the commitments 
assumed by Panama before the World Trade Organization (WTO)." 
5. Between 6 and 17 July 2009, by means of Note N-306/09 of 6 July 2009, the National Export 
Promotion Directorate of the Ministry of Trade and Industry personally notified all 
Processing Zone enterprises (developers and enterprises located in the Zones) that: 
 
"No further export subsidies within the meaning of 
SCM Article 3.1(a)" would be granted to them,  "nor will existing 
subsidies be maintained beyond the end of the calendar year 2015, 
with no requests to the WTO for extension corresponding to this programme" , and that  "in the light of the importance of the Export 
Processing Zone programme to the development of Panama's export 
sector ... the required analyses, assessments and reviews are already under way, with a view to securing viable alternatives for this sector which are in keeping with Panama's WTO commitments." 
B. Action plan to bring goods-related export subsidies into line with WTO requirements: 
 1. Preparation of preliminary draft Law
:  The Institutional Technical Commission of the 
Ministry of Trade and Industry is preparing a preliminary draft Law that will bring Export Processing Zone legislation, in particular goods-related export subsidies, into line with the requirements of the 
WTO SCM Agreement. 
  This phase involves the following activities:  
• Revision of Panama's legislation regarding Free Zones; 
• revision of the comparative legislation of Central American and Caribbean countries; 
• analysis of relevant documents prepared by WTO experts; 
• consultations with the public sector; 
• consultations with developers and with  enterprises located in Export Processing 
Zones:  G/SCM/N/211/PAN 
 Page 5 
 
 
  • consultations with the Panamanian Chamber of Commerce and other private-sector 
organizations and unions; 
• sharing of experiences in this regard with  the Free Zones of the Americas Committee; 
• request for two (2) lots of technical assistance from the WTO Secretariat for the 
revision and discussion of the draft amendm ents to domestic legislation;  and 
• coordination with international experts w ith a view to presenting seminars on this 
topic aimed at government officials, developers, and enterprises located in Export Processing Zones. 
 This phase is expected to be completed by 31 December 2011. 
 2. Approval by Vice-Ministers
:  Once the Institutional Technical Commission has finished 
preparing the preliminary draft Law, it will be submitted to the Vice-Ministers of Foreign Trade and International Trade Negotiations of th e Ministry of Trade and Industry for revision 
and approval. 
 3. Endorsement by the Minister for Trade and Industry
:  Once approved by the respective 
Vice-Ministers, the preliminary draft Law will be submitted for consideration and 
endorsement by the Minister for Trade and Indus try.  At this stage, the following activities 
will take place: 
 
• Presentation of the reasons for the preliminary draft Law;  and 
• drafting of the Cabinet Resolution authorizing the Minister for Trade and Industry to 
submit the preliminary draft Law to the National Assembly of Deputies. 
4. Referral to the Cabinet Council :  With the consent of the Ministry of Trade and Industry, 
the documentation referred to in point 3 above will be sent to the Cabinet Council, which is 
responsible for approving the Cabinet Resoluti on that authorizes the Minister to submit the 
preliminary draft Law to the National Assembly of Deputies. 
 5. Submission to the National Assembly of Deputies
:  Once the preliminary draft Law has 
been submitted to the National Assembly of De puties, it must be passed by the Assembly in 
three debates, on different days, and approved by the Executive. 
 
6. Approval by the Executive :  Once the draft Law has been passed by the National Assembly 
of Deputies, it will be forwarded to the Execu tive for approval.  The Executive will then send 
it for publication in the Official Journal ( Gaceta Oficial ), whereby it will enter into effect. 
  The actions described in points 2 to 6 above w ill be completed by 30 June 2012 at the latest. 
 
II. OFFICIAL INDUSTRY REGISTER 
1. Description of the subsidy 
 
 See paragraph III.1 of document G/SCM/N/95/PAN. 
 
2. Period of notification 
 
 2009 G/SCM/N/211/PAN 
Page 6  
 
   
3. Objective of the programme 
 
 See paragraph III.3 of document G/SCM/N/95/PAN.  4. Background and authority 
 
 See paragraph C.4 of document G/SCM/N/71/PAN.  See also Resolution No. 32 of 31 December 2002 of the Ministry of Trade a nd Industry, notified in Annex 1 to document 
G/SCM/N/95/PAN and Law No. 11 of 4 January 2008. 
 
5. Form of the subsidy 
 
 See paragraph III.5 of document G/SCM/N/95/PAN.  6. Beneficiaries and mechanism 
 
 See paragraph III.6 of document G/SCM/N/95/ PAN.  In addition, the following table 
indicates the number of beneficiary enterprises in the Official Industry Register, according to type of 
activity.  
Table No. 3.  OFFICIAL INDUSTRY REGISTER:  NUMBER  OF ENTERPRISES 
ACCORDING TO TYPE OF ACTIVITY/PRODUCT 
AS AT APRIL 2010 
NO. ACTIVITY/PRODUCT NO. OF ENTERPRISES 
 TOTAL  132 
1 Animal feed 2 
2 Sugar cane 5 
3 Manufacture of clothing 6 
4 Poultry breeding 3 5 Milk by-products 3 
6 Detergents and other chemical products 7 
7 Manufacture of footwear 5 8 Brewing of beer 2 
9 Manufacture of mattresses 1 
10 Manufacture of brooms and mops 0 11 Manufacture of furniture 2 
12 Wood and wood articles 1 
13 Articles of aluminium and other metals 11 14 Cement articles 1 
15 Paper and paperboard and articles thereof 14 
16 Coffee processing 4 17 Processing of hides and skins 2 
18 Food products 25 
19 Marine products 13 20 Pharmaceuticals 2 21 Plastic products 10 
22 Printing 2 
23 Other products 11 
Note : Only covers enterprises listed in th e Official Industry Register as exporting all or part of their production. 
Source : Directorate-General of Industry of the Ministry of Trade and Industry.  G/SCM/N/211/PAN 
 Page 7 
 
 
  7. Estimated amount of the subsidy 
 
Table No. 4.  VALUE OF TAX INCENTIVES GRANTED UNDER 
THE OFFICIAL INDUSTRY REGISTER 
2007-2009 
(US$ million) 
YEAR TYPE OF BENEFIT 
2007 2008 2009 
Import tax exemption or rebate 22.7 31.0 23.2 
Income tax exemption or rebate for reinvestment 4.8 11.2 16.1 
Other incentives* 2.7 5.3 10.8 
Total 30.2 47.5 50.1 
* Exemption from income tax only. 
Source : Fiscal Studies Department, Dire ctorate-General of Revenue, Mini stry of the Economy and Finance . 
8. Duration of the subsidy 
  See paragraph III.8 of document G/SCM/N/95/PAN. 
 
9. Statistical data permitting an assessment of the trade effects of the subsidy 
 
 No statistical information is available to assess the trade effects of the programme. 
 
10. Adoption of internal measures 
 
 The following steps have been taken with a vi ew to eliminating the export subsidies under the 
programme: 
 
 Adoption of Law No. 11 of 4 January 2008:  
(a) Law No. 3 of 1986, which regulated the programme and granted the tax benefits 
deemed to constitute export subsidies, was repealed pursuant to Law No. 28 of 1995.  
The benefits granted under the former Law w ill continue to exist only for the rest of 
the period during which the registration or c ontract, as applicable, is effective.  
Programme benefits have been extended a nd remain in effect under the extension 
granted by the WTO. 
(b) Enterprises which benefited under the progr amme may only continue to benefit upon 
request.  The request must be submitted prior to the expiry of the respective 
registration and the extension may onl y be granted up to, but not beyond, 
31 December 2015. 
(c) The Republic of Panama enacted La w No. 76 of 2009 on the promotion and 
development of industry, regulated by Executive Decree of 15 January 2010, with a view to encouraging the growth and sustai nable development of Panamanian industry 
through the granting of benefits aimed at  promoting investment and improving the 
competitiveness of domestic production. 
  The same Law promotes investment in ac tivities such as human resource training, 
while encouraging research and development in respect of new products or processes 
and promoting the implementation of qualit y systems, the generation of employment, G/SCM/N/211/PAN 
Page 8  
 
  the improvement of management system s, quality assurance, and environmental 
conservation. 
   It also provides for a system of incen tives, through the issuing of an industrial 
promotion certificate (CFI) which is non-t ransferable and valid for eight years. 
 
  When applying for a CFI, an enterprise must provide copies of its payroll to prove 
that new jobs have been generated.  En terprises established following the entry into 
force of the present Law may apply for a CFI two years after the start of their operations.  Enterprises benefiting from the Official Industry Register programme 
may not avail themselves of the present Law until their registration or the respective 
extension expires. 
 
_______________ 
  G/SCM/N/211/PAN 
 Page 9 
 
 
  Action Plan for eliminating the export subsidies provided for in Law No. 25 of 
30 November 1992, in accordance with the requirements set forth in 
paragraph 1(f) of the Procedures for Continuation of Extensions 
Pursuant to Article 27.4 of the SCM Agreement of the 
Transition Period under Article 27.2(b) of the 
SCM Agreement for Certain Developing 
Country Members 
 
 
(I) DESCRIPTION OF THE PROGRAMME 
 
1. Panama's Law on Export Processing Zones (L aw No. 25 of 30 November 1992) grants 
various subsidies to natural or legal pers ons engaged in the production of goods or the 
provision of services which establish themselve s in an Export Processing Zone with due 
authorization from the Ministry of Trade and Industry. 
 
2. Natural or legal persons wishing to establis h themselves in an Export Processing Zone must 
be engaged in the following types of activity: 
 
• Manufacturing enterprises :  Enterprises that manufacture goods for export by 
processing raw materials and semi-finished products, including those of agricultural, livestock, forestry and marine origin. 
• Assembly enterprises
:  Enterprises that manufacture finished or semi-finished 
products for export by putting together inputs and semi-finished parts. 
• Enterprises processing finished or semi-finished products :  Enterprises that 
receive finished or semi-finished pro ducts, spare parts, components, accessories 
and/or parts in liquid or solid form for the purpose of tropicalization treatment or processes, alteration, repair, cleaning, qualit y testing, calibration, approval, analysis, 
purification, painting, application of anti-corrosives, wrapping, packaging, grinding, 
recycling and/or any type of manual or mechanical physical or chemical process 
needed to permit the export of a specific good. 
• Enterprises exporting services
:  Enterprises that provide services to outside users, 
in other Processing Zones or within the same Zone provided that their direct or indirect purpose is to support or complement an export activity or the services themselves are an export activity. 
 Services provided to outside users include  all international services commonly known 
as "offshore" transactions such as trading and international marketing, insurance, 
re-insurance, banking, finance, auditing,  management, brokerage, consulting and 
similar activities.  It also includes al l services related to telecommunications and 
computers for the entry, processing, storage and transmission of data, organization, management and operation of databases and b asic and applied scientific technological 
research. 
  Services to users in other Processing Z ones or within the same Zone include all 
technical support services, maintenance and repair of equipment, machinery, furnishings, buildings, installations, tran sport, handling and storage of freight, 
security, administrative, accounting, consulti ng and other internal services needed to 
streamline and the export of goods and services and make it efficient. G/SCM/N/211/PAN 
Page 10  
 
   
• General services enterprises
:  enterprises that provide personal services to workers 
and visitors such as restaurants, laundr ies, pharmacies, beauty salons, gymnasiums 
and other such services. 
3. The goods-related export subsidies, provided for in Law No. 25 of 30 November 1992, which 
need to be brought into line with the Genera l Council Decision of 27 July 2007 (WT/L/691) 
are the following: 
 
• Income tax :  Enterprises located in Export Pro cessing Zones are fully exempt from 
direct taxes such as income tax.  
• Property tax :  Enterprises located in Export Process ing Zones are fully exempt from 
direct taxes such as property tax. 
• Tax on dividends or equity participation :  Income received in the form of 
dividends or interest on shares, bonds and other titles and securities issued by 
enterprises established in Export Pro cessing Zones and placed on local or 
international markets is exempt from direct taxes such as tax on dividends.  
(II) DESCRIPTION OF ACTIONS TAKEN TO BRING GOODS-RELATED EXPORT 
SUBSIDIES INTO LINE WITH WTO REQUIREMENTS 
 1. On 15 January 2008
, the Ministry of Trade and Industry set up an Institutional Technical 
Commission in order to identify the goods-rela ted export subsidies inconsistent with the 
WTO General Council Decision (WT/L/691).  
 2. On 25 January 2008
, the National Export Promotion Directorate of the Ministry of Trade 
and Industry e-mailed Export Processing Zone developers with information from the WTO 
stating that the SCM Committee had decided to gr ant extensions of the transition period until 
the end of 2013, with a phase-out period of  two (2) years, ending no later than 
31 December 2015. 
 3. On 9 March 2009
, the National Export Promotion Directorate e-mailed Export Processing 
Zone developers with the information th at the SCM Committee had extended Processing 
Zone export subsidies until 31 December 2015, after which no further extension requests 
would be considered. 
 4. Since March 2009
, the Ministry of Trade and Industry has included the following in the text 
of the new operating licences issued to Export Pr ocessing Zone developers and to enterprises 
establishing themselves in such Zones: 
 
"The benefits under Law No. 25 of 30 November 1992 shall remain 
in force until 31 December 2015 pursuant to the commitments 
assumed by Panama before the World Trade Organization (WTO)." 
5. Between 6 and 17 July 2009 , by means of Note N-306/09 of 6 July 2009, the National 
Export Promotion Directorate of the Ministry of Trade and Industry personally notified all 
Processing Zone enterprises (developers and enterprises located in the Zones) that: 
 
"No further export subsidies within the meaning of SCM 
Article 3.1(a)" would be granted to them,  "nor will existing subsidies 
be maintained beyond the end of the calendar year 2015, with no  G/SCM/N/211/PAN 
 Page 11 
 
 
  requests to the WTO for ext ension corresponding to this 
programme" , and that "in the light of the importance of the Export 
Processing Zone programme to the development of Panama's export 
sector ... the required analyses, assessments and reviews are already under way, with a view to securing viable alternatives for this sector 
which are in keeping with Panama's WTO commitments." 
(III) DESCRIPTION OF THE DOMESTIC PROCEDURES NECESSARY TO BRING 
GOODS-RELATED EXPORT SUBSIDIES INTO LINE WITH WTO REQUIREMENTS 
 1. Preparation of preliminary draft Law
:  The Institutional Technical Commission of the 
Ministry of Trade and Industry is preparing a preliminary draft Law that will bring Export 
Processing Zone legislation, in particular goods -related export subsidies, into line with the 
requirements of the WTO SCM Agreement. 
 
 This phase involves the following activities: 
 
• Revision of Panama's legislation regarding Free Zones; 
• revision of the comparative legislation of Central American and Caribbean countries; 
• analysis of relevant documents prepared by WTO experts; 
• consultations with the public sector; 
• consultations with developers and with  enterprises located in Export Processing 
Zones: 
• consultations with the Panamanian Chamber of Commerce and other private-sector 
organizations and unions; 
• sharing of experiences in this regard with  the Free Zones of the Americas Committee; 
• request for two (2) lots of technical assistance from the WTO Secretariat for the 
revision and discussion of the draft amendm ents to domestic legislation;  and 
• coordination with international experts w ith a view to presenting seminars on this 
topic aimed at government officials, de velopers, and enterprises located in 
Export Processing Zones. 
 This phase is expected to be completed by 31 December 2011 . 
 2. Approval by Vice-Ministers
:  Once the Institutional Technical Commission has finished 
preparing the preliminary draft Law, it will be submitted to the Vice-Ministers of Foreign 
Trade and International Trade Negotiations of th e Ministry of Trade and Industry for revision 
and approval. 
 3. Endorsement by the Minister for Trade and Industry
:  Once approved by the respective 
Vice-Ministers, the preliminary draft Law will be submitted for consideration and 
endorsement by the Minister for Trade and Indus try.  At this stage, the following activities 
will take place: G/SCM/N/211/PAN 
Page 12  
 
   
• Presentation of the reasons for the preliminary draft Law;  and 
• drafting of the Cabinet Resolution authorizing the Minister for Trade and Industry to 
submit the preliminary draft Law to the National Assembly of Deputies. 
4. Referral to the Cabinet Council
:  With the consent of the Ministry of Trade and Industry, 
the documentation referred to in point 3 above will be sent to the Cabinet Council, which is 
responsible for approving the Cabinet Resoluti on that authorizes the Minister to submit the 
preliminary draft Law to the National Assembly of Deputies. 
 5. Submission to the National Assembly of Deputies
:  Once the preliminary draft Law has 
been submitted to the National Assembly of De puties, it must be passed by the Assembly in 
three debates, on different days, and approved by the Executive. 
 
6. Approval by the Executive :  Once the draft Law has been passed by the National Assembly 
of Deputies, it will be forwarded to the Execu tive for approval.  The Executive will then send 
it for publication in the Official Journal ( Gaceta Oficial ), whereby it will enter into effect. 
  The actions described in points 2 to 6 ab ove will be completed by 30 June 2012 
at the latest . 
 
__________