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IV. TRADE POLICY BY SECTOR 
(1) OVERVIEW  
1. The sectoral structure of Panama's economy shows marked duality: whereas productivity in 
the services sector is relatively high, in the agricu ltural and manufacturing sectors it is low.  As a 
result, international services (the Canal, the Colon Free Zone, international banks, maritime transport 
and tourism) are competitive at the global level and constitute the main foundation of Panama's 
economy.  Producing goods, on the other hand, has required the implementation of protection 
measures and assistance which, in most instances, ha ve become a burden on taxpayers and consumers. 
2. The agricultural and fisheries sectors' share of  GDP is relatively modest (6.8 per cent), but 
they are a major source of jobs (19.6 per cent) an d export of goods (43 per cent).  Average tariff 
protection (10.8 per cent) in the agricultural sector  (ISIC classification) is above the overall mean;  
tariffs on some dairy products, products of an imal origin and sugar cane range from 144 to 
260 per cent.  Panama administered tariff quotas for all the products in its schedule of market access 
commitments and in most cases around 100 per cent of  the quotas were utilized.  Panama notified the 
WTO that it granted both domestic support and subsidi es for investment and the export of agricultural 
products. 
3. The manufacturing sector is relatively small and focuses on a few activities, mainly related to 
the processing of agricultural products.  The sector  was the beneficiary of the only special trade 
measure adopted by Panama, in the form of a safe guard (see chapter III(2)(vii)).  Moreover, the sector 
has been given certain fiscal incentives, some of which have been notified to the WTO as subsidies 
(see chapter III(3)(iv)).  Panama liberalized and part ly privatized the electricity sector in 1998-1999, 
but the State still kept its monopoly of energy transmission as well as a large holding in the major 
generating and distribution companies. 
4. As already mentioned, the services sector is of the utmost importance to Panama's economy 
and in 2006 it accounted for around 81 per cent of the GDP.  Panama adopted substantial specific 
commitments on market access and national treatment in 11 of the 12 specific sectors in the GATS, with the exception of the "other services" sector.  During services negotiations under the Doha Round, 
Panama submitted an initial offer in April 2003, but by May 2007 had not yet submitted a revised 
offer. 
5. In 1997, the telecommunications sector was privatized and in 2003 it was opened up to 
competition.  Since then, rates have fallen and the quality of services has improved.  There are no 
restrictions on private foreign investment, which receives national treatment.  The traditional operator is still a dominant presence in local fixed tele phony and there is a duopol y in mobile telephony 
services, even though a large number of licen ces have been granted in all branches of 
telecommunications.  In its specific commitments  within the WTO, Panama only undertook to 
liberalize the value-added services segment.  It has not accepted the Reference Paper on Telecommunications. 
6. There are no restrictions on foreign entities b ecoming established in the banking sector and 
they receive national treatment.  Banks may be established in the form of subsidiaries or branches 
given licences to operate in Panama, licences sole ly for transactions abroad or agency licences.  
International banks are highly active and in 2006 37  banks were operating.  Panama was one of the 
35 jurisdictions identified in June 2000 by the OECD  as meeting the technical criteria for constituting 
a tax haven.  Panama did not, however, appear on the list of non-cooperative countries as it undertook 
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7. Insurance to cover risks in Panama can only be taken out through companies established in 
Panama.  Foreign insurance companies may only provide services in the areas in which they are 
engaged in their countries of origin.  Special legisl ation applies to captive in surance companies, which 
are offices set up in Panama to insure or reinsure foreign risks. 
8. In the air transport sector, cabotage traffic is in  principle restricted to companies in which a 
minimum of 60 per cent of the shares are owned by Panamanian nationals.  There are no restrictions 
on foreign capital holdings in companies engaged in in ternational traffic.  By law, Panama's public 
airports, including the country's largest internationa l airport, must be State-owned and managed, even 
though the private sector may be given concessions for auxiliary services. 
9. Panama's ship register is the largest in the world.  Registration gives tax benefits such as 
exemption from profits tax.  There are no nationality restrictions for registration, including registration for the purpose of providing cabotage services.  By law, the ports must be owned by the State but private companies may be given concessions  for their management.  In practice, the major 
ports are privately operated. 
10. The Canal is the cornerstone of Panama's ec onomy because of its unique role as the nerve 
centre for global transport.  The Canal was handed b ack to Panama in 1999.  It is managed by the 
Autoridad del Canal de Panamá – ACP (Panama Canal Authority), an  autonomous legal person under 
public law.  In 2006, a public referendum approved the enlargement of the Canal by building a third 
set of locks at an estimated cost of US$5,250 milli on;  the new locks are expected to start operating 
in 2015. 
11. Panama does not have any legislation contai ning general regulations on the supply of 
professional services.  The various professions are governed by specific laws and the principal ones are organized in their respective professional associa tions.  Access to Panama's market by foreign 
professionals is restricted:  it is necessary to be a Panamanian national in order to engage in the majority of professions, including those of lawyer  and certified public accountant.  Panama's two 
leading State universities have agreements on mutual recognition of university degrees with 
universities in ten other countries.  Panama made  limited commitments on professional services under 
the GATS. 
(2) A
GRICULTURE AND FISHING  
(i) Features 
12. The agricultural and fishing sectors (excluding food processing) account for a fairly modest 
share of Panama's GDP, but their contribution to employ ment and, above all, to exports is substantial.  
In 2006, the GDP shares of agriculture (including livestock and forestry) and fishing were 4.4 per cent 
and 2.4 per cent, respectively.1  According to data from the August 2006 household survey, the 
agricultural sector employed 17.2 per cent of th e labour force (of which one third were under-
employed) and the fishing sector 1.1 per cent.  In 2006, the leading agricultural products according to 
production value were the following:  bovine animal s and goats (16.5 per cent);  poultry (16.2 per 
cent);  various types of fruit (14.2 per cent);  bananas (11.7 per cent);  swine (5.7 per cent) and sugar cane (5.6 per cent).
2 
                                                      
1 According to the ISIC classification (chapters 01 and 02 for agriculture and chapter 05 for fishing). 
2 Statistics and Census Department (National Accounts and Household Survey).  Consulted at 
http://www.contraloria.gob.pa/dec/. Panama WT/TPR/S/186 
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13. The agricultural sector grew slowly from 2001 to 2006, at an annual average rate of 
1.7 per cent.  From 2002 to 2006, however, the pr oduction of various types of fruit and poultry was 
extremely dynamic, growing at annual average rate s of 34.0 and 6.2 per cent, respectively.  The 
fishing sector also expanded considerably at an annua l average rate of 10.6 per cent during the period 
2001-2006.3 
14. During the period 2000-2005, the value of agricultural exports was on average 26.0 per cent 
of Panama's total exports (see Table AIV.1).  Over the same period, in terms of value, exports of 
melons, watermelons and fresh papayas replaced bananas as Panama's major export products.  
According to data provided by the authorities, in 2005, the major agricultural exports were:  melons, 
watermelons and fresh papayas (41.0 per cent of agri cultural exports);  bananas (33.6 per cent);  and 
bovine cattle (7.4 per cent).  During the period 2 000-2005, agricultural imports accounted on average 
for 3.2 per cent of Panama's total imports.  In 2005, the largest agricultural imports were maize 
(33.3 per cent), wheat (19.9 per cent) and rice (12.1 per cent). 
15. In 2005, close to 90 per cent of fisheries production was exported.  During the period 
2000-2005, the value of fisheries exports was on aver age 9.7 per cent of Panama's total exports (see 
Table AVI.1). 
(ii) Agriculture 
(a) Policy objectives 
16. The Ministry of Agricultural Development (MIDA) is responsible for formulating and 
implementing agricultural policy, as well as for co ordinating some of the procedures relating to 
sanitary and phytosanitary measu res (see chapter III(2)(ix)).  Th e main bodies belonging to or 
cooperating with the MIDA and assisting it to implement the policy are the Banco de Desarrollo 
Agropecuario – BDA (Agricultural Development Bank), the Instituto de Seguro Agropecuario – ISA 
(Agricultural Insura nce Institute), the Instituto de Investigación Agropecuario – IDIAP (Agricultural 
Research Institute) and the Instituto de Mercadeo Agropecuario – IMA (Agricultural Marketing 
Institute). 
17. According to the authorities, during the period 1994-1999, the Framework Guidance for 
Sectoral Policy was used as a reference to move  ahead with the negotiations on accession to the 
WTO, mainly for the selection of sensitive products .  Already during the period 2000-2004, the Rural 
Panama Plan proposed, inter alia, to speed up the process of agricultural technological development, 
to expand agricultural trade and to develop new ma rkets.  In 2004, the Government defined new 
strategic guidelines for agricultural development.  The new strategy's objectives include increasing 
production and enhancing competitiveness, prom oting demand-focused and export-oriented 
agricultural conversion, improving plant protection an d animal health, and raising the living standards 
of the rural population.4 
(b) Policy instruments 
Border measures 
18. In 2007, the agricultural sector (according to the ISIC classification) benefited from average 
tariff protection of 10.6 per cent (see Table AIV.1).  The groups of agricultural products (according to 
                                                      
3 Statistics and Census Department.  Cons ulted at http://www.contraloria.gob.pa/dec/. 
4 2004-2009 Strategic Plan for Agriculture .  Information on line.  Consulted at: 
http://www/mida.gob.pa/. WT/TPR/S/186 Trade Policy Review 
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the WTO classification) given high average tariff protection include dairy products (41.8 per cent), 
animals and products of animal origin (24.3 per cent) and cereals (23.7 per cent). 
19. For sanitary and phytosanitary reasons, prior authorization is required before importing 
agricultural products (see chapter III(2)(ix)). 
20. Agricultural products are not subject to the sales tax (the ITBMS) (see chapter III(2)(v)).  
Imports of capital goods and inputs to be used excl usively in the agricultural sector are exempt from 
import tariffs.5 
21. Panama has notified the WTO that, during the period 1997-2004, it did not make use of the 
special safeguard provisions reserved in its schedul e, which include six tariff lines in the milk and 
cream chapter (HS 0402).6 
22. Mexico requested consultations with the Govern ment of Panama following the publication of 
Cabinet Decree No. 20 of 17 July 2002 under which Panama abolished the tariff item for modified 
milk (at a bound tariff of 5 per cent)  and subsequently replaced it by two new tariff items (at tariffs of 
0 and 65 per cent, respectively).7  The Parties reached a mutually agreed solution with the reduction of 
the 65 per cent tariff to 5 per cent following publication of Cabinet Decree No. 18 of 3 August 2005.8 
23. Panama undertook to administer tariff quotas for a list of products in the context of the 
commitment on market access opportunities cont ained in the WTO Agreement on Agriculture.9  
Panama has submitted five notifications to the WTO on the administration of tariff quotas for the 
period 1997-2004.10 
24. During the period 2004-2006, Panama administer ed tariff quotas for all the products on its 
schedule of market access commitments (Table IV.1),  covering a total of 60 tariff lines.  For all these 
products, the in-quota bound tariff rate is 15 per cent while the out-of-quota rate ranges from 30 to 
260 per cent.  For some products, the in-quota tariff applied can be one of two figures (3 or 
15 per cent), whereas for the others it is only one figure (15 per cent).  The authorities have indicated that in those cases where the in-quota tariff applied is 3 or 15 per cent, approximately 95 per cent of the volume of the announced quota is intended for buye rs holding an industrial licence (granted by the 
MICI);  this is done through an auction called a "raw  material" auction at a tariff of 3 per cent.  The 
remaining 5 per cent of the quota goes to any registered buyer through an auction called a "finished product" auction at a tariff of 15 per cent.  In the case of the other products, for which the tariff 
applied only has one rate (15 per cent), the quota goes to any registered buyer through a regular 
auction. 
25. Close to 100 per cent of quotas are used in mo st cases, with the exception of dairy products 
and poultry meat (Table IV.1).  In the latter ca se, Panama has been self-sufficient and has not 
imported either in-quota or out-of-quota.  According to the authorities, a quota for poultry meat has 
been opened but no offers have been received. 
                                                     
 
5 Pursuant to Law No. 28 of 20 June 1995. 
6 WTO document G/AG/NG/S/9/Rev.1 of 19 February 2002. 
7 WTO document G/AG/GEN/69 of 21 March 2005. 
8 WTO document G/AG/GEN/69/Add.1 of 6 October 2005. 
9 Section I-B of Schedule CXLI of Panama's Protocol of Accession to the WTO.  Available in WTO 
document WT/ACC/PAN/19/Add.1 of 20 September 1996. 
10 WTO documents G/AG/N/PAN/2 and 3 of 19 October 1998;  G/AG/N/PAN/6 of 12 June 2002;  
G/AG/N/PAN/8 of 12 March 2004;  and G/AG/N/PAN/10 of 18 July 2005. Panama WT/TPR/S/186 
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Table IV.1 
Agricultural products subject to tariff quotas, 2004-2006 
Tariff applied Product group Number of tariff 
lines Average quotas 
announced (metric 
tonnes) Average fill rate 
(%) In-quota Out-of-quota 
Pig meat 20 840.0 89.3 3 - 15 60 - 70a 
Poultry meat 2 708.0 0 15 260 
Dairy products 25 11,918.5 60.8 3 - 15 30 -155a 
Potatoes 1 590.4 89.2 15 81 
Tomato concentrateb 3 1,709.4b 84.7 3 - 15 81 
Beans 1 608.3 100 15 15 
Maize 3 321,988.2b 96.5 3 - 15a 40 
Riceb 4 60,595.5b 100 3 - 15 90 
Onionsc 1 907.0c 100 15 72 
a The tariff applied varies within this ra nge depending on the specific tariff line. 
b For these products, quotas additional to those agreed at  the WTO were approved because of lack of supply. 
c Onions do not appear in Panama's schedul e of market access commitments, but in 200 6 a quota was approved because of lack of 
supply.  
Source : WTO Secretariat, based on information provided by the MIDA . 
26. Resolution No. 5-98 of 18 November 1998 cont ained the implementing regulations for 
Law No. 23 of 15 July 1997 as far as the award of ta riff quotas is concerned.  Under this Resolution, 
the Comisión de Licencias de Contingentes Arancelarios (Tariff Quota Licensing Commission) is 
responsible for preparing the invitation to te nder for the quota and for sending it to the Bolsa Nacional 
de Productos S.A. – BAISA (National Products Exchange).  In early 2007, the BAISA was the only 
private exchange for products and was licensed by the Comisión Nacional de Bolsas de Productos 
(National Product Exchange Commission) to negotia te agricultural quotas in Panama.  The Licensing 
Commission must publish the opening of quotas widely at least 21 calendar days prior to making 
them available to the public. 
27. In order to allow both importers (buyers) and fo reign exporters (sellers) to participate in the 
negotiating round, a registration form must be s ubmitted and a broker's office duly accredited to the 
BAISA must be appointed.11  Once the period for receiving the forms has expired, the volumes 
requested individually by each importer are allocated,  free-of-charge, provided that their total does not 
exceed the total amount of the quota.  If the to tal volume does exceed the quota, the Technical 
Secretariat of the Licensing Comm ission and the MICI's Directorate General of Industry determine 
the percentage and amount of each applicant's share based on their previous import record.12  T h e  
importers must then negotiate sales contracts for the goods with foreign exporters by means of an 
auction mechanism within the BAISA.  Immediat ely after the auction has been held, the BAISA 
issues a provisional import certificate, which must be  replaced by the definitive import licence granted 
by the Licensing Commission within one or two days.13 
28. The allocation of quotas to supplier countries is on a global scale, with the exception of the 
quota for pig meat for which a special quota of 130 tonnes for Costa Rica (approximately 17 per cent of the total quota) was negotiated wh en Panama acceded to the WTO. 
                                                     
 
11 Pursuant to Law No.23 of 15 July 1997, brokers' offices are legal persons given a concession by the 
BAISA in order to conduct market trading activities. 
12 Resolution No.5-98 of 18 November 1998. 
13 Information provided by the authorities. WT/TPR/S/186 Trade Policy Review 
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29. Non-automatic import licences issued following the auction of quotas are not transferable.  
Imports under the licences must also comply with the sanitary measures, technical regulations and 
other requirements in effect in Panama. 
30. The Licensing Commission decides on the number of lots and the intervals at which tariff 
quotas are made available to the public, depending on each product's specifications.  There is no pre-
established maximum period within which the produ cts must actually be imported and the Licensing 
Commission determines the maximum period on a case-by-case basis.14 
31. Panama applies autonomous tariff quotas for th e supply of products declared by the Cabinet 
Council of the President's Office to be sensitive items .  In early 2007, onions, coffee, sugar cane, and 
all the products on the market access commitmen t schedule, were deemed to be sensitive.15  During 
the period 2004-2006, autonomous quotas applied to the import of onions and the existing quotas for 
tomato concentrate, maize and rice were increased .  The procedures for allocating these quotas are 
virtually the same as those applicable to ordinary quotas.16 
32. Panama applies additional quotas under trade agreements with other Central American 
countries.17  The products covered and the volume of the quotas depends on the agreement with the 
country concerned. 
Internal measures 
33. Panama does not apply any form of price c ontrol to agricultural or food products.  The 
Government does, however, monitor prices, wh ich are made public through the IMA and the 
Autoridad de Protección al Consumid or y Defensa de la Competencia (Consumer Protection and 
Competition Authority) (see chapter III(4(ii)).  
34. Panama notified to the WTO domestic support granted for information and training services, 
pest and disease control, extension and advisory services, marketing and promotion services, natural 
disaster relief and the programme in support of agri cultural conversion, which are considered to be 
"green box" measures.  These measures amount ed to around US$347 million during the period 
1997-2002.  Panama has not made any notificati ons on domestic support for the years after 2002.  
35. The programme in support of agricultural conversi on is intended to facilitate the transition to 
different crops and new technologies.  Panama also notified subsidies for inv estment in agriculture 
(loans to small producers), for an annual av erage amount of US$21.5 million during the period 
1997-2002.  It likewise notified the WTO of direct payments for the production of maize and swine made solely during the period 1999-2002.  This pr ogramme ended in 2002, but some payments to 
producers were pending and were disbursed in 2003 and 2004.  The calculation of the aggregate 
measurement of support for these special products was lower than the de minimis level throughout the 
years during which it applied.
18 
36. Panama notified subsidies for the export of non-traditional agricultural products under the 
Certificados de Abono Tributario – CAT (Tax Credit Certificates) general programme, whose term 
                                                      
14 Resolution No. 5-98 of 18 November 1998. 
15 Section I-B of Schedule CXLI of Panama's Protocol of Accession to the WTO.  (WTO document 
WT/ACC/PAN/19/Add.1 of 20 September 1996). 
16  Resolution No. 02-05 of 10 July 2005 and Law No. 26 of 4 June 2001. 
17 El Salvador, Costa Rica, Guat emala, Honduras and Nicaragua. 
18 WTO document G/AG/N/PAN/11 of 19 July 2005. Panama WT/TPR/S/186 
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was extended until June 2007 (see chapter III(3)(iv)).19  Different products were classified as non-
traditional each year and received the benefit of the programme.  
37. The Government has agricultural loan progr ammes through special credit lines from the 
BDA.  The latter grants loans both for traditional items  such as rice, maize, beans, livestock, and for 
non-traditional crops and agro-industry.  The credit terms are favourable as regards interest rates, 
security and duration.  In general, in 2006, the inte rest rates offered was 6 per cent on loans of up to 
B 25,000 and 7.5 per cent on other loans, which is be low the market interest rates for commercial and 
industrial loans (8.1 and 8.3 per cent, respectively).20  The BDA requires security for its loans, which 
may be in the form of mortgages, liens, bonds, future  crops or a combination thereof.  The terms and 
amortization schedule are drawn up taking into account various aspects of the project to be financed, 
for example, the investment plan and the marketing calendar.21 
38. During the first eight months of 2006, the BDA granted 592 new loans for a total of 
B 17.9 million, giving a cumulative total of outstanding loans of B 93.8 million.22  The authorities 
have indicated that, between 2001 and 2005, th e BDA utilized 86 per cent of the B 172 million 
available to it to finance agricultural and agro-industry projects.  
39. Law No. 2 of 20 March 1986 on Agricultural Exports, amended by Law No. 28 of 1995, 
provides measures and incentives to encourage ag ricultural production and exports in order to 
promote agro-industrial development.  These include the following:  (a) a preferential rate for the 
installation and consumption of electricity used fo r agricultural activities, up to 30 per cent less than 
the regular rate;  (b) tax exemption of up to 30 per cent for the sums invested in agricultural, livestock, 
fisheries, aquaculture and agro-industrial activities, although the amount may not exceed 40 per cent 
of income tax.  This exemption entails the obligati on to maintain the investment in the production of 
goods or the introduction of technology for over three years.  According to the authorities, there are 
no special official programmes for agricultural export credits.  
(iii) Fishing  
40. Most fishing takes place on the Pacific coast.  It  is divided into two major sectors:  industrial 
fishing using vessels of over ten gross registered tonnes (mainly for anchovies, herring and tuna);  and 
small-scale fishing (for various species).  Fish farming is another important component, mainly 
producing shrimps.23  
41. The Autoridad de Recursos Acuáticos de Panamá – ARAP (Panamanian Aquatic Resources 
Authority) is responsible for managing, conservi ng and exploiting marine and coastal resources.  
Pursuant to Decree No. 10 of 1985 and Executive Decree No. 41 of 7 October 1977, industrial fishing 
requires authorization from the ARAP, as well as an  industrial licence granted by the MICI.  These 
licences are given to Panamanian nationals and foreigners without restriction.  Commercial shrimp fishing is restricted to vessels built in Panama.  Fo reigners are not allowed to engage in small-scale 
fishing.
24  A series of other legal instruments lays down  requirements applicable without distinction to 
Panamanian nationals and foreigners in order to limit the exploitation of fisheries resources, for 
example, requirements relating to mesh size and restrictions on the power of vessels' engines.  
                                                      
19 WTO documents G/AG/N/PAN/9 of 19 April 2005 and G/SCM/100 of 18 December 2002. 
20 Data from the Banking Supervisory Authority provided by the Ministry of the Economy and Finance. 
21 Consulted at:  http://www.bda.gob.pa/principal_bda.html. 
22 Consulted at:  http://www.bda.gob.pa/estadisticas.html. 
23 Panamanian Maritime Authority (2005). 
24 Executive Decree No. 124 of 8 November 1990. WT/TPR/S/186 Trade Policy Review 
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(3) MANUFACTURING  
42. The manufacturing sector (including preparation of foodstuffs) is relatively small and focuses 
on just a few activities, mainly those related to th e processing of agricultural products.  The sector has 
seen its share of GDP fall slightly, from 8.9 per cent in 2001 to 7.0 per cent in 2006.25  Nevertheless, 
between 2002 and 2004, the branches manufacturing be verages and metal products for use in building 
grew at annual average rates of 18.9 per cent and 14.6 per cent, respectively.  According to data in the 
August 2006 household survey, the manufacturing sector  employed 8.9 per cent of the labour force.  
The major manufactures, according to their production value in 2004, were the following:  preparation and conservation of meat, fish, fruit and other ite ms (17.6 per cent);  preparation of beverages 
(13.8 per cent);  preparation of other foodstuffs (9.4 per cent);  publishing and reproduction of 
recordings (7.7 per cent);  and manufacture of me tal products for use in building (7.5 per cent).
26 
43. During the period 2000-2005, the value of exports of manufactures represented on average 
64 per cent of Panama's total exports (see Table AIV. 1).  In 2005, the leading exports of manufactures 
were:  other semi-manufactures (4.0 per cent of total exports);  chemicals (2.6 per cent);  and clothing 
and accessories (1.1 per cent).  The major manufact ures imported by Panama in 2005 were:  
chemicals (12.8 per cent of total imports);  autom obile industry products (10.1 per cent);  and office 
and telecommunications equipment (8.9 per cent).  
44. In 2007, the average MFN tariff applied by  Panama to manufactures (non-agricultural 
products according to the WTO classification) was 7.3 per cent (see Table III.2);  there are virtually no significant tariff peaks for manufactures.  
45. As far as contingency measures are concerned, the only measure adopted by Panama was the 
initiation of a safeguards investigation in 2006 into a manufactured product (printed film in rolls for 
the manufacture of flexible pack aging) (see chapter III(2)(vii)).  
46. Manufactures in general are given various incentives under several programmes implemented 
by Panama (see chapter III(4)(iv)).  
(4) E
LECTRICITY  
(a) Features of the sector 
47. In 2006, Panama's electricity generating capac ity was divided between hydroelectric power 
stations, accounting for 55.3 per cent of installed cap acity, with other power st ations (which mainly 
use Bunker C fuel) accounting for the remaining 44.7 pe r cent.  Total installed capacity for generating 
electricity was 1,541 MW in 2006, including self-powered plants connected to the Sistema 
Interconectado Nacional – SIN (National Interconnected Grid ) (11.7 per cent) and independent 
systems (0.8 per cent).  Total net generation of el ectricity in Panama was 5,817 GWh in 2006 while 
total sales amounted to 4,935 GWh. 
48. Between 1998 and 2002 during par tial privatization of the electricity sector, substantial 
investments were made in Panama's generating cap acity, mostly in thermal power stations.  This 
allowed the growth in total capacity to remain  above the increase in maximum demand on the SIN,
                                                      
25 According to the ISIC classification (chapters 15-36). 
26 Statistics and Census Department (National Accounts and Household Survey).  Consulted at 
http://www.contraloria.gob.pa/dec/. Panama WT/TPR/S/186 
 Page 85 
 
 
with aggregate rates of growth of 42.9 and 18. 1 per cent, respectively, between 1998 and 2002.27  The 
rise in oil prices from 2001 onwards, however, discouraged investment in thermal power stations and between 2003 and 2006 the SIN's margin of  reserve fell from 79 to 59 per cent.
28  The authorities have 
pointed out that this level of reserve margin nonetheless suffices to ensure  that the SIN remains 
reliable. 
49. During the period 1998-1999, the State electricity  company (IRHE) was partly privatized and 
its generating, transmission and distribution subsidia ries were separated into different companies.  
The Government sold 49 and 51 per cent of the shares of the hydroelectric and thermoelectric 
generating companies, respectively, to private inv estors.  The State also owns the company EGESA, 
recently set up for the purpose of investing in thermoelectricity generation.  Following the 
privatization and the new concessions granted by the State, Panama's electricity generating market now has five large generating companies (includi ng the self-powered Panama Canal Authority) and 
some small generating companies.  The State owns  all the shares in ETESA, which has a de facto  
monopoly of electricity transmission;  ETESA's con cession contract gives it exclusive rights in the 
areas covered by the concession.  The Government  sold 51 per cent of the shares in the three 
companies which share Panama's distribution market on a geographical basis.  There is foreign 
investment in generation and distribution.
29 
50. Panama is interconnected with the Central Amer ican electricity schemes through Costa Rica.  
Following the sector's privatization, Panama went from being a net importer of electricity to a net 
exporter.  In July 2006, the Sistema de Interconexión Eléctrica Centroamericano – SIEPAC (Central 
America Electrical Interconnection System) started to be expanded in order to create a wholesale 
electricity market to bring down the cost of en ergy and enhance the reliability of the Central 
American electricity grid.30  In early 2007, a project for electricity interconnection between Colombia 
and Panama was under consideration. 
51. Electricity rates depend on the level of consum ption and the voltage.  High voltage consumers 
(voltage exceeding 115 kV) with monthly consum ption exceeding 15 kW, supplied by a distributor, 
pay a rate (kWh) that is approximately one third of  that paid by low voltage consumers (voltage not 
exceeding 600 V) consuming less than 15 kW monthly.31  In 2006, the average rate to the final 
consumer was B 0.15 kWh, one of th e highest rates in Latin America32;  57 per cent of this amount is 
attributable to generation, 8 per cent to transmi ssion and 35 per cent to distribution.  The authorities 
have indicated that the increase of around 50 per cen t in electricity rates during the period 1999-2006 
reflected the rise in international oil prices over the same period.33 
                                                      
27 Annual statistics on the electricity sector.  Consulted at: http:/www.ersp.gob.pa/electric/ 
estadisticas_elec.asp. 
28 The SIN's margin of reserve is defined as th e difference between tota l installed capacity for 
generation and maximum demand on the SIN, expressed as a percentage of this maximum demand.  The margin does not reflect the generating potential actually available, adjusted, for example, to the water level in 
hydroelectric power stations' dams. 
29 Information provided by the Panamanian authorities. 
30 Consulted at:  http://www.planpuebla-pa nama.org/main-pages/avances_EjelPC.htm. 
31 High voltage consumers are usually industries while low voltage consumers are households. 
32 The rate applies to the final consumer, whether a household or a business. 
33 Consulted at:  http://ersp/gob.pa/electric/default.asp. WT/TPR/S/186 Trade Policy Review 
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(b) Legal framework 
52. The legal framework for the electricity sector is composed of Law No. 6 of 3 February 1997, 
as amended by Decree Law No. 10 of 26 February 1998 and regulated by Executive Decree No. 22 of 
19 June 1998.  Law No. 26 of 29 January 1996, as amended by Decree Law No. 10 of 
22 February 2006, reorganized the structure a nd responsibilities of the regulatory body, the Autoridad 
Nacional de los Servicios Públicos  – ASEP (National Public Service Authority).  The rules governing 
the wholesale electricity market are laid down in  Resolution No. JD-605 of 24 April 1998.  In 
addition, Law No. 45 of 4 August 2004 establishes an  incentives scheme to promote the generation of 
hydroelectricity and electricity from other renewable, clean sources of energy. 
53. The building and operation of hydroelectric and ge othermal power stations, like distribution, 
are subject to a concessions regime.  The buildin g and operation of genera ting plants using other 
technologies, on the other hand, are subject to a licensing regime.  To obtain a concession or licence, the application must meet the technical requirements specified in the legislation, consisting mainly of 
approval of the environmental impact study by the Autoridad Nacional de Ambiente (National 
Environmental Authority).  Concessions and licen ces are given for a renewable period of 50 and 
40 years, respectively.  The ASEP is responsible  for granting such concessions and licences and for 
guaranteeing national treatment of foreign investors.
34 
54. Electricity generating companies providing a public service may not participate either directly 
or indirectly in the control of companies distri buting electricity.  Likewise, distribution companies 
may only participate directly or indirectly in the control of generating plants when total aggregate 
generating capacity exceeds 15 per cent of expected  demand in their concession area.  Generating 
companies subject to concessions (hydroelectricity ) and distribution companies may not apply for 
new concessions resulting in participation of over 25  per cent and 50 per cent, respectively, in their 
corresponding domestic markets.  The ASEP is empo wered to raise these percentages when it deems 
necessary for the expansion of the electricity system.35  Under Cabinet Resolution No. 76 of 
19 October 2005, the 25 per cent participation appl icable to hydroelectricity generating companies 
was temporarily increased to 40 per cent (until 2012). 
55. Law No. 6 of 1997 guarantees all operators in  the electricity market non-discriminatory 
access to transmission networks.  Transmission companies may not participate in generation, distribution or sales to large clients. 
56. Producers (generators and self-powered) and consumers (distribution companies and large 
clients) buy and sell energy and power in the wholes ale electricity market.  In the contracts market, 
participants conclude medium-t erm and long-term contracts with guarantee of supply through free 
competition.  Distribution companies must contract a sufficient volume to guarantee supply to their end customers for 12 months, but they do not incur any purchasing risk because the legislation guarantees that the costs of their contracts will be covered by the rates charged to end customers.
36  In 
the contingency market, participants  conclude short-term contracts to dispose of surpluses or obtain 
supplies not envisaged in the long-term contracts. 
57. Based on the formulas and ceilings established by the ASEP every four years, transmission 
and distribution companies must submit the proposed  rates for the regulated services within their 
                                                      
34 Section 3 of Chapter V of Law No. 6 of 3 February 1997;  Resolution No JD-3460 of 
19 August 2002;  Resolution No. 203 of 7 August 2006;  and Resolution No. JD-110 of 14 October 1997. 
35 Decree Law No. 10 of 26 February 1998. 
36 Consulted at:  http://enteregulador.gob.pa/electric/Anexos/M1-2005.pdf. Panama WT/TPR/S/186 
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concession area for ASEP approval.  In the case of distributors, the rates to end customers are 
regulated with the exception of large customers,  which buy electricity from the wholesale market.37 
58. There are no restrictions on the import of electricity.  Executive Decree No. 22 of 
19 June 1998 provides that supplying the domestic ma rket takes precedence over export of electricity.  
For example, a market operator may export energy and power if they are not subject to any 
commitment to other agents in the domestic market.  The authorities have indicated that some of these 
rules may change in the future when the Regi onal Electricity Market under the SIEPAC framework 
comes into effect. 
(5) SERVICES  
(i) Main features 
59. The services sector is of the utmost impor tance to Panama's ec onomy and in 2006 it 
accounted for 81 per cent of the GDP (Table I.1) .  Imports of commercial services fell to 
US$1,694 million in 2006 while exports rose to US$3, 904 million (Table I.5).  Panama's international 
trade in services has been extremely dynamic with im ports growing at an average rate of 6.9 per cent 
while exports rose by 11.8 per cent on average between 2000 and 2006. 
60. Panama's schedule of specific commitments under the GATS, negotiated in connection with 
its accession to the WTO in 1997, includes both hori zontal commitments affecting all sectors and 
commitments on specific sectors.38  The horizontal commitments concerning market access apply to 
the presence of natural persons working temporarily in  Panama in the following categories:  sellers of 
services, managers, administrators and specialists.  Commitments affecting national treatment were 
not bound. 
61. Panama adopted important specific commitments with regard both to market access and to 
national treatment in the 12 specific sectors in the GATS, with the exception of the "other services" 
sector (Table AIV.2).  The commitments made in the telecommunications and transportation services sector, however, only include value-added telecommunica tions and the repair of aircraft, respectively. 
62. Panama did not take part in the Extended Negotiations on Telecommunications within the 
GATS framework or the Extended Negotiations on Fi nancial Services and has not accepted the Fourth 
and Fifth Protocols annexed to the GATS.  Nevert heless, it has made broad commitments on financial 
services (section (iii) below). 
63. In the context of the services negotiations under the Doha Round, Panama submitted an initial 
offer in April 2003. 
(ii) Telecommunications 
(a) Features of the market  
64. The telecommunications sector's contribution to GDP increased from 2.7 per cent in 1997 to 
5.7 per cent in 2006.  The sector had a total of 6,562 employees in 2005.
39  The total number of fixed 
                                                      
37 Decree Law No. 10 of 26 February 1998 and Public Service Tariff Regime for the Distribution and 
Marketing of Electricity effective from July 20 06 to June 2010. Consulted at:  http://www.ersp. 
gob.pa/electric/Anexos/Anexo_JD-5863_A.pdf. 
38 WTO document GATS/SC/124 of 1 October 1997. 
39 Data from the Department of Statistics and Census. WT/TPR/S/186 Trade Policy Review 
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telephone lines in operation has remained vi rtually constant since the Panamanian 
telecommunications sector was privatized in 1997, but teledensity fell from 16.4 in 1999 to 14.5 in 
2005.40  In 1998, the network became 100 per cent dig ital.  The number of mobile lines increased at 
an annual average of 29 per cent during the period 2000-2006, reaching a level of mobile teledensity 
of 54 per cent in 2006.  In 2005, there were 11.6 Internet connections per 100 households, of which 
2.5 per cent were broadband connections and 9.1 per cent dial-up connections.41 
65. Following the sector's privatization in 1997 and the opening up to competition in 2003, rates 
have fallen and the quality of services has improve d.  Basic telephone rates fell sharply after the 
market was opened up.  Average national and interna tional long-distance rates in particular fell by 
66 and 94 per cent, respectively, between 2002 and 2006.  Mobile telephone rates do not appear to 
differ significantly from the international average.  In  general, there has been an improvement in the 
quality of services.  According to the authoriti es, the number of annual breakdowns per 100 fixed 
lines fell from 70 per cent in 1998 to 12 per cent in 2005.  In mid-2007, the ASEP was developing a project to draw up quality indicators for mobile telephone services. 
66. In 1997, by means of a public invitation to te nder, the Government sold 49 per cent of its 
holding in the State-owned company INTEL, which had a monopoly of local basic and long-distance 
telephony.  This privatization le d to the foreign company Cable & Wireless taking over administrative 
control of the new company and 49 per cent of its sh ares;  the remaining shares are held by the State 
(49 per cent) and by employees of the new company, Cable & Wireless Panamá S.A. (2 per cent).  This company had exclusive rights in local and long-distance telephony until the market was opened 
up in 2003, when competition was introduced by granting new concessions. 
67. In early 2007, there were, inter alia, 34 local telephony concessionaires in Panama (nine of 
which were operating in mid-2007), 33 holders of  national long-distance concessions (15 in 
operation), 59 international long-distance con cessionaires (16 operating), 20 public telephone 
concessionaires (four operating), 13 voice circuit leasing concessionaires (13 operating), 94 public 
Internet concessionaires (19 operating) and two mobile telephony concessionaires (two operating).  
Many of these concessionaires are companies with foreign capital which provide telephone services in 
more than one branch.
42 
68. The companies Cable & Wireless Panamá S.A. and Telefónica Móvil Panamá S.A. share the 
mobile telephony market.  The authorities have i ndicated, however, that in 2007 the Government 
plans to begin the process of inviting tenders for two new concessions for the supply of mobile 
telephony services in 2008.  In early 2007, 91 per cen t of subscribers had chosen the prepayment 
model. 
(b) Legal framework 
69. As part of its specific commitments in the WT O, Panama undertook to liberalize value-added 
telecommunications services in two stages.  Firstly, one year after Panama's accession to the WTO (in 
September 1997), foreign companies would be allowe d to provide such services in a joint venture 
with the dominant company.  In the second stage,  five years after accession, foreign companies would 
                                                      
40 Teledensity is defined as the total number of telephone lines per 100 inhabitants. 
41 WTO Secretariat calculations based on data consulted at: http://www.ersp.gob.pa/telecom/ 
estadisticas.asp. 
42 Consulted at:  http://ersp.gob.pa/telecom/concessiones/default.asp. Panama WT/TPR/S/186 
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be allowed to provide the services directly.  Panama has no other commitment on telecommunications 
services under the GATS framework.43 
70. Responsibility for formulating and implementi ng policies in the telecommunications sector 
lies with the Executive, through the Cabinet Counc il.  The ASEP, an autonomous State body (see 
section (4) above) is responsible for overseeing companies in the sector, granting concessions and 
licences for the supply of services, ensuring comp liance with quality criteria, and assisting the 
Consumer Protection and Competition Authorit y to foster competition in this sector. 
71. Law No. 31 of 8 February 1996, as amended by  Law No. 24 of 30 June 1999, lays down the 
general rules governing the telecommunications sector  and its implementing re gulations are contained 
in Executive Decree No. 73 of 9 April 1997.  Reso lution No. JD-2802 of 11 June 2001 prescribes the 
specific rules for the supply of basic telephony ser vices.  Law No. 17 of 9 July 1991 defines the 
frequency bands for the supply of mobile tele phony services and Executive Decree No. 21 of 
12 January 1996 regulates operation of this servi ce.  Resolution No. JD-107 of 30 September 1997 
approved the National Frequency Allocation Plan. 
72. Law No. 31 of 1996, underpinned by the Constitu tion, gives the management and control of 
the electromagnetic spectrum to the State through the ASEP.44 
73. As an exception to the general provision in Ar ticle 280 of the Constitution (see chapter II(3)), 
Law No. 31 of 1996 authorizes majority foreign private holdings in the capital of companies providing public telecommunications services in Pana ma.  Foreign companies controlled by the State 
or with a majority State holding may not, however, obtain direct or indirect majority holdings in 
Panamanian telecommunications companies.  Foreign companies must set up subsidiaries with a local 
presence in order to operate in Panama. 
74. Call-back in international long-distance traffic is not allowed, with the exception of services 
involving agreements between a Panamanian concessi onaire authorized to provide telephony services 
and a foreign operator of a public international netw ork involving or allowing the intervention of an 
operator in order to complete the call.
45 
75. All concessions for telecommunications service s are granted by the ASEP for a period of 
20 years, renewable for a further 20 years.  Conc essions are granted free-of-charge and without a 
public invitation to tender to any company interest ed in providing basic telephony services, private 
networks, resale services, Internet for public u se, data transmission and satellite transmission, inter 
alia, which meets the respective technical criteria.  If use of the radio spectrum is not required, the 
ASEP must grant the concession within 30 working da ys.  If this is not the case, concessions for the 
radio spectrum are scheduled to be granted three times a year.46 
76. Unlike other concessions, those for the supply of mobile telephony services are granted 
through a public invitation to tende r and according to a regime that restricts the number of operators 
in the market;  the Cabinet Council is responsible  for granting new concessions, which depend on the 
economic studies conducted by the ASEP, whose criteria are not defined.47  Resale services require a 
                                                      
43 WTO document S/DCS/W/PAN of 24 January 2003. 
44 Article  10 of Law No. 31 of 1996, Decree Law No. 10 of 22 February 2006 and Article 258 of the 
Panamanian Constitution. 
45 Article 66 of Executive Decree No. 73 of 9 April 1997. 
46 Executive Decree No. 73 of 9 April 1997. 
47 Law No. 17 of 9 July 1991. WT/TPR/S/186 Trade Policy Review 
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concession.  The ASEP only grants a concession if the applicant has signed a resale authorization 
agreement with the concessionaire of the primary service. 
77. The provisions on interconnection are to be found in Title V of Executive Decree No. 73 of 
1997.  The law obliges concessionaires to interconnect  their telecommunications networks with those 
of other concessionaires that so request.  Resolu tion No. JD-3264 of 27 March 2002 sets out a model 
interconnection agreement to be used as guidance by  the concessionaires.  Interconnection agreements 
signed freely between concessionaires do not require a pproval by the ASEP.  Nevertheless, they must 
be registered with the ASEP, which in turn must make them available to other concessionaires and the 
public in general.  If no agreement is reached  within 120 calendar days of receipt of the 
interconnection request, either of the parties ma y ask the ASEP to mediate;  mediation has a 
maximum term of three calendar days.  If there is  still disagreement, the ASEP must, within 90 days, 
issue a mandatory interconnection decision with  retroactive effect;  between 1999 and 2006, 
42 per cent of the fixed telephony interconnection ag reements were determined through a decision by 
the ASEP.48 
78. Operators in a dominant position must gi ve access to their infrastructure at non-
discriminatory prices and terms.  In 2006, the ASEP decided that the concessionaire of the local basic 
telecommunications service (operator in a dominan t position) must include in its network the 
necessary technical means to provide subscriber loop  rental to all concessionaires requesting it.  The 
criteria to be taken into account by the ASEP when  determining whether an operator has a dominant 
position in the market are contained in Resolution No. JD-1334 of 12 April 1999.  In Resolution 
AN No. 566-Telco of 16 January 2007, the ASEP id entified those concessionaires in a dominant 
position for each of the 16 public telecommunications services (according to the ASEP's classification);  Cable & Wireless Panamá S.A. wa s identified as the operator in a dominant position 
for nine of these services.  If it is suspected that  telephony companies are adopting predatory or anti-
competitive practices, the ASEP must request the Competition Authority to investigate them and 
impose sanctions. 
79. Concessionaires of local basic telephony services must give clients that so request digital 
portability;  in early 2007, the ASEP was examin ing how to apply digital portability to mobile 
telephony services.
49 
80. The charges for telecommunications servic es supplied in a competitive situation are 
determined by the concessionaires.  Although the co mpetition regime is limited, rates for mobile 
telephony services are freely set by the two existing concessionaires.50  In special cases, for example if 
there are practices restricting competition,  the ASEP may impose a tariff regime on the 
concessionaire, but in practice this has not occurred.   If prices rise, concessionaires must publish them 
30 days before they come into effect.  The law does not allow cross-subsidies among different 
services and requires the publication of separate acc ounts for each individual service provided by a 
concessionaire.51  Cable & Wireless Panamá S.A. is free to  fix the rates for its services, with the 
exception of prices deemed to be high, for which it  must request authorization from the ASEP.  In 
mid-2007, the scheme for controlling prices by means of a ceiling was not in effect. 
81. In mid 2007, a draft law drawn up by the ASEP in order to regulate the supply of the 
universal telecommunications service was being discussed by the Ministry of the Economy and Finance, the governing authority responsible fo r putting it before the Legislative Assembly. 
                                                     
 
48 Information provided by the authorities. 
49 Information provided by the Panamanian authorities. 
50 Consulted at:  http://www.enteregulador.gob.pa/telecom/tarifas.asp. 
51 Executive Decree No. 73 of 9 April 1997. Panama WT/TPR/S/186 
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82. There are no taxes on local fixed telephony services or residential Internet access.52  A l l  
international long-distance calls originating and/or invoiced in Panama are, however, subject to an 
ad valorem  levy of 12 per cent of their cost.53  Mobile telephony services, except for prepaid services, 
are subject to the ITBMS and the ISC, each at  a rate of 5 per cent (see chapter III(2)(v)). 
(iii) Financial services 
(a) Features 
83. Panama's financial services sector comprises the financial system (banks, finance companies 
and loan banks), insurance companie s and stock market traders.  The sector accounted for 7.5 per cent 
of the GDP in 2006. 
84. Panama's specific commitments on financia l services are contained in WTO document 
GATS/SC/124 of 1 October 1997.  As it acceded to the WTO in 1997, Panama did not take part in the 
extended negotiations on these services within th e GATS framework.  It bound without limitations 
cross-border supply (mode 1), consumption abroad (mode 2) and commercial presence (mode 3) for 
loans and acceptance of all types of bank depos its;  financial leasing with option to purchase 
(exclusively movable goods);  banking guarantees  and commitments;  all payment and money 
transmission services (excluding local transmission services);  trading for own account or for account 
of customers;  money market instruments and fore ign exchange;  derivative products;  transferable 
securities;  participation in issues of all kinds of securities (not including agents);  money broking;  asset management;  and advisory services, inter alia .
54  For insurance, on the other hand, the 
concessions are more limited. 
85. For reinsurance and retrocession services, Pana ma bound modes of supply 1, 2 and 3 without 
limitations on national treatment, together with modes 2 and 3 for market access, including in its schedule of specific commitments a limitation on fire  insurance, for which insurance companies may 
not cede premiums for reinsurance abroad in an amount exceeding 50 per cent of the total premiums 
for risks covered in Panama (Table AIV.2).  Pana ma did not bind cross-border supply, consumption 
abroad or the presence of natural persons for lif e, accident and health insurance or for non-life 
insurance, while commercial presence was bound w ithout restrictions.  In the special case of 
transportation insurance, there are no restricti ons on cross-border supply with respect to goods 
exported from Panama from the moment th ey are outside Panamanian territory. 
86. The Government is currently in the final st ages of implementing the programme to enhance 
the transparency and integrity of Panama's fina ncial system, with support from the Inter-American 
Development Bank (IDB), designed to strengthen th e institutions responsible for supervision and 
control in order to prevent and investigate money la undering and the financing of terrorism.  In this 
context, the Government took a number of measures that led to Panama being removed from the list 
of non-cooperative countries and territories in the co mbat against money laundering by the Financial 
Action Task Force (FATF).
55  A report on the achievements in this area is published annually.56  In 
2002, Panama became a reporting country at th e Bank for International Settlements (BIS). 
                                                      
52 Law No. 6 of 2 February 2005. 
53 Law No. 6 of 21 January 2004. 
54 WTO document GATS/SC/124 of 1 October 1994. 
55 Banking Supervisory Authority (2006a). 
56 Consulted at:  http://www.superbancos. gob.pa/aspec_prevencion/transplog.asp. WT/TPR/S/186 Trade Policy Review 
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(b) Banks and other financial intermediation institutions 
Features 
87. In April 2007, Panama's banking system comp rised 40 banks with general licences, of which 
15 had Panamanian capital and 25 foreign capital;  37 banks with international licences, of which two 
had Panamanian capital and 35 foreign capital;  eigh t offices licensed as agencies;  and two official 
banks (the National Bank of Pa nama and the Savings Bank).57  The banking sector had some 14,800 
employees on that date.  In June 2006, the banking sector's consolidated activities represented a total 
of B 47,660 million.  The banking sector's share of GDP in 2006 was 6 per cent. 
88. In recent years, credit levels have risen sharpl y;  for example, domestic loans in the private 
sector increased by 14.4 per cent in 2006.  Local  banks (whose capital is mainly Panamanian) 
accounted for 72 per cent of loans in 2006;  forei gn banks (those whose headquarters are abroad) for 
28 per cent.  As for deposits, local banks held 75 per cent in 2006.  The solvency and profitability 
indicators for Panamanian banks are high, as are the liquidity indicators.  The wealth/assets ratio was 
12.16 per cent in December 2006;  the ratio of liqui d assets to total deposits was 27.04 per cent.  The 
non-performing loans ratio (loans in arrears as a percentage of total gross loans) is low, around 
1.48 per cent in December 2006 and provisions fo r loans as a percentage of net loans was 
1.90 per cent. 
89. Interest margins are fairly low:  the margin between the average lending rate applicable to 
businesses in December 2006 (8.66 per cent) and the borrowing rate for a legal person at the same 
date (5.05 per cent) was 3.61 per cent.58 
Regulatory framework 
90. The Banking Supervisory Authority is responsible  for oversight of all the banks established in 
Panama.  Foreign banks holding a general licence are supervised join tly with the relevant foreign 
supervisory body, without prejudice to compliance w ith the provisions of Panama's banking law;  
branches or subsidiaries of foreign banks holding international licences are overseen by the Authority 
and must respect the technical criteria laid down in the legislation and by the foreign regulatory 
authority. 
91. The regulatory framework for Panama's banking sector is mainly to be found in Decree 
Law No. 9 of 26 February 1998 (Banking Law).59  A licence issued by the Supervisory Authority is 
required to engage in banking activities within or fr om Panama.  The Law provides for three types of 
licence:  (a) general licences, which allow banking in  any part of Panama and transactions that are 
completed, conducted or have effect abroad, as well as any other activities allowed by the Authority;  
these licences may be granted to both Panamanian a nd foreign banks, the latter being established as 
branches or subsidiaries;  (b) international licenc es, which allow transactions  completed, conducted or 
having effect abroad to be managed from an office set up in Panama and also to carry out any other 
activities allowed by the Authority;  and (c) agency licences, which on ly allow one or more agencies 
to be set up in Panama, as well as the conduct of  any other activities allowed by the Authority.  
Foreign banks must obtain prior authorization from th eir foreign supervisory body in order to carry 
out banking activities within or from Panama or to become established as agencies.  The minimum 
capital required for a general licence is B 10 million a nd for an international licence it is B 3 million.  
There is no minimum capital requirement for an agency licence. 
                                                      
57 See:  http://www.superbancos.gob.pa/aspec_igee/bgenerales.asp. 
58 Banking Supervisory Authority (2006b). 
59 Consulted at:  http://www.superbancos.gob.pa/aspec_leyes/normas.asp. Panama WT/TPR/S/186 
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92. In addition to meeting the minimum capital requi rement, the granting of a licence requires the 
submission of a business plan showing the bank's viab ility and its contribution to Panama's economy.  
The Supervisory Authority must evaluate the appli cation and approve or rej ect it within 90 calendar 
days following submission of the requisite docum ents.  Detailed procedures for the granting of 
licences are contained in Banking Supervisory Authority Agreement No. 3-2001 of 
5 September 2001.  No licence is required to open br anches or establishments in Panama, but prior 
notification must be given to the Authority.  The opening of establishments abroad must receive prior 
approval from the Authority. 
93. Banks with general licences must maintain capita l funds equivalent to at least 8 per cent of 
their total assets and off-balance-sheet transactions, weighted according to their risks.  These banks 
must keep a minimum balance of liquid assets equivalent  to the percentage of the gross total of their 
deposits in Panama or abroad fixed periodically by the Supervisory Authority.  This percentage must 
not exceed 35 per cent.  All banks must keep assets in Panama equivalent to a percentage of their 
local deposits determined by the Authority according to the national economic or  financial situation.  
This equivalent amount is the same for all banks and may not exceed 100 per cent of the said deposits.  
In April 2007, the percentage was 85 per cent. 
94. Banks may not acquire or own shares or holdi ngs in any other non-banking-related companies 
in an amount exceeding 25 per cent of the bank's capita l.  Banks are also prohibited from directly or 
indirectly giving a loan to a single natural or lega l person or undertaking any other commitment with 
such a person if the total exceeds 25 per cent of the bank's capital.  Banks with international licences 
are not subject to these restrictions. 
95. Foreign banks are given national treatment in a ccordance with the type of licence they have 
been granted.  There are no nationality requirement s applicable to board members and directors of a 
bank.  Branches of foreign banks, however, must a ppoint at least two general agents, both natural 
persons resident in Panama, at least one of whom must be a Panamanian national. 
96. The Banking Supervisory Authority has adopted  the basic rules on capital adequacy laid 
down by the Basel Committee on Banking Supervisi on and requires a minimum total capital-to-risk-
weighted assets ratio of 8 per cent.  The Authorit y requires banks to submit information on their asset 
situation and on compliance with technical and opera ting rules, together with information of an 
institutional nature. 
97. Panama has no deposit insurance as such.  Neve rtheless, preference is given to depositors 
with up to US$5,000 when a financ ial intermediary is dissolved.60 
98. A tax on banking transactions applies above a certain amount.  Article 128 of Law No. 22 of 
27 June 2006 provides that the interest rate on local personal and business loans exceeding B 5,000 
granted by banks and financial entities as of the entry into force of the Law shall include and retain an 
amount equivalent to 1 per cent annually of the amount  used as a basis to calcu late the interest.  Of 
this amount, 50 per cent goes to the Agricultural Development Bank and the remaining 50 per cent to 
the Fondo Especial de Compensación de Intereses – FECI (Special Interest Compensation Fund). 
99. The FECI was created by Law No. 4 of 17 May 1994 and its implemen ting regulations are 
contained in Executive Decree No. 29 of 8 Augus t 1996.  It establishes a scheme for loans on 
preferential terms for the agricultural sector by me ans of a mechanism that consists in the Fund's 
financing a discounted interest rate agreed with  the lending bank or financial institution.  The 
maximum amount is B 200,000 and the maximum durati on is one year.  Each year, 75 per cent of the 
                                                      
60 Pérez, Oscar Armando, President, Depos it Guarantee Institute (El Salvador) (2006). WT/TPR/S/186 Trade Policy Review 
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surplus in the FECI's operations goes to the Ag ricultural Development Bank and 25 per cent to 
agricultural credit cooperative associations at an annua l interest rate of 1 per cent.  The authorities 
have indicated that, in 2006, the FECI received funds amounting to US$20 million. 
(c) Insurance 
Features 
100. At 31 March 2007, 20 insurance companies we re operating in the Panamanian insurance 
market, of which ten held reinsurance licences, five were reinsurers, four were captive insurers, four 
reinsurance brokers, one insurance brokers' portf olio manager, and four managers of captive 
insurers.61  In addition, 275 insurance brokers' licences ha d been granted to lega l persons and 1,792 to 
natural persons.  It is estimated that, at the same date, insurance activities provided 1,773 direct jobs.  
The market comprises both companies set up in Panama (with Panamanian or foreign capital) and branches of foreign companies. 
101. During the 12 months up to December 2005, prem iums in the insurance market amounted to 
B 430 million.  Insurance against loss or damage and against non-material loss accounted for 40 per cent of total insurance, 36 per cent corres ponded to life insurance, 15 per cent to health 
insurance, 4 per cent to transportation insurance an d 2 per cent to personal accident insurance.  In 
2005, the insurance branch's share of GDP was 2.8 per cent and insurance companies' assets 
amounted to B 765.2 million in 2004 (the last year fo r which figures are available).  Insurance showed 
net profits of B 21.4 million, equivalent to 7.6 per cent of the companies' net wealth in 2004.
62 
Regulatory framework 
102. The Panamanian Insurance and Reinsurance Supe rvisory Authority is a decentralized public 
body of the MICI and is the insurance regulatory and supervisory authority.  It has a National 
Reinsurance Commission which  regulates reinsurance. 
103. The legal framework for insura nce in Panama is provided in the Insurance Law No. 59 of 
29 July 1996, the Reinsurance Law No. 63 of  19 September 1996 and the Law on Captive 
Insurance No. 60 of 29 July 1996.  The Insurance Law regulates insurance companies, managers of 
companies and insurance brokers or adjusters, as well as the profession of broker or provider of 
insurance throughout Panama.  Insurers may be estab lished in the form of public limited companies or 
branches or agencies of foreign companies.  In the case of a branch of a foreign company, a certificate 
from the competent supervisory authority in the country of origin is required showing that the parent company has been duly established in that country an d that it has been totally  solvent according to its 
legislation for a minimum of five years.  Authoriza tion to operate a branch in the Republic of Panama 
is restricted to those areas in which the company is  engaged in its country of origin.  The authorities 
have indicated that the preliminary draft of a ne w insurance law is under consideration (June 2007). 
104. Companies seeking authorization to operate as an insurance company, whether Panamanian 
or foreign, must constitute and pay up minimum capital in cash of B 2 million.  Moreover, they must 
set aside in their liabilities reserves for their activiti es in Panama according to the type of risk.  
Insurance companies must also keep  a contingency reserve for statistical deviations of between 1 and 
2.5 per cent, as well as a reserve for disaster risks, also between 1 and 2.5 per cent for all areas.  In 
                                                     
 
61 Panamanian Insurance and Reinsurance Supervisory Authority. Consulted at: 
http://www/mici.gob.pa/seguros.php. 
62 Panamanian Insurance and Reinsurance Supervis ory Authority, MCI, statistical information.  
Consulted at: http://www/mici.gob.pa/sector_seguros/I nformacion%20financiera/pasivos_y_patrimonio.htm. Panama WT/TPR/S/186 
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addition to these reserves, all insurance companies must establish and maintain a reserve fund with 
20 per cent of their net profits until it reaches B 2 million and thereafter with 10 per cent.  There is 
also a requirement on investing the reserves bu ilt up in accordance with the Insurance Law in 
Panama:  75 per cent must be invested in Panama in  State bonds and securities or real estate registered 
in Panama.  The remaining 25 per cent may be invest ed outside Panama in assets with an adequate 
investment rating given by a reputed risk assessor. 
105. Insurance companies are subject to a tax of 2 per cent on the premiums net of cancellations 
collected under policies issued in Panama covering risks situated in Panama , except in the case of 
bonds, whose invoicing is not considered to be an insurance premium.  Insurance premiums are also 
subject to a consumption tax of 5 per cent, excep t for personal and collective life insurance.  The 
consumption tax on premiums for fire insurance is  exclusively for the Republic of Panama's fire 
brigade. 
106. Under the Insurance Law, insurance to cover goods and persons in Pana ma may only be taken 
out with insurance companies authorized to operate in  Panama.  If this is not possible, the Supervisory 
Authority is empowered to authorize the insurance to  be taken out abroad.  Such authorization must 
be registered with the Authority.  Insurance a nd reinsurance companies established in Panama may 
place or accept reinsurance with other insurers or reinsurers domiciled in Panama or abroad. 
107. The Supervisory Authority's Technical Council is responsible for granting licences to 
insurance companies.  Insurers must have a licence for each area in which they wish to operate and 
also to open up or close down branches in Panama or branches or agencies abroad.  There are three 
areas each with its corresponding type of licence:   life insurance, general insurance and bond 
insurance.  The model policies must receive prior au thorization from the Authority before they can be 
sold to the public.  Insurers may freely fix prem iums and commission.  The Council also grants 
authorizations for engaging in the activity of insu rance broker and insurance manager.  An insurance 
broker's licence requires the holder to be a Panamani an national domiciled in Panama or abroad and 
already exercising the activity when  the Insurance Law was enacted. 
108. Reinsurance is supervised by the Insurance and Reinsurance Supervisory Authority.  The 
Commission is responsible for approving or rejec ting applications made to the Authority for the 
purpose of operating as a reinsurance company in Pana ma or for any type of licence whose purpose is 
to carry out reinsurance transacti ons.  Reinsurance premiums covering risks situated abroad are not 
subject to tax.  The minimum capital required is B 1 million;  technical reserves must not be less than 
35 per cent of the net premiums determined up.  Law No. 63 of 19 September 1996 provides that 
companies authorized to conduct reinsurance activiti es must appoint at least two general agents, both 
of whom must be resident in Panama and one  of whom must be a Panamanian national. 
109. Law No. 60 of 29 July 1996 is intended to en courage the creation of captive insurers, which 
are offices established in Panama to insure or rein sure individual or specific risks abroad.  Captive 
insurers must receive prior authorization in the fo rm of a licence granted by the Insurance Supervisory 
Authority.63  The Law provides that captive insurers must keep an actual office in Panama.  They may 
also obtain licences for long-term risks and for general insurance for Panamanian and foreign 
companies.  In the case of general insurance, the regi stered capital must not be less than B 150,000;  if 
the company is involved in long-term risk or both ar eas, the paid-up registered capital must not be less 
than B 250,000.  Premiums derived from captive insu rers' activities are not subject to tax in Panama. 
                                                      
63 Panamanian Association of Attorney s (http://www.apadea.com/legales.html). WT/TPR/S/186 Trade Policy Review 
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110. The agricultural sector may take out insurance through the Instituto de Seguros 
Agropecuarios – ISA (Agricultural Insurance Institute), which is the autonomous State body created 
by Law No. 34 of 29 April 1996 to act as an agricultural insurance finance company to support investment in the primary production sector.
64 
(d) Securities market 
111. Panama's securities market is mainly composed of the Bolsa de Valores de Panamá - BVP 
(Panamanian Stock Exchange), 34 securities compan ies, ten investment advisers, 13 investment 
company managers, two pension fund and comple mentary private pension fund managers and one 
securities exchange.  All the foregoi ng must receive a licence from the Comisión de Valores – CNV 
(National Securities Commission) before they can operate and are subject to its supervision and 
control.  They are also five risk assessors, which also require prior registration.  Banking institutions, 
funds (investment companies) and companies with private capital issue secu rities on the Panamanian 
market.  The amount traded in the Panamanian Stock Exchange during 2006 was US$2,243 million.  
The market's total capitalization at the same date was US$9,935 million, equivalent to 64 per cent of 
the GDP, of which US$7,127 million corresponded to capitalization of the shares market. 
112. Decree Law No. 1 of 8 July 1999 and the agr eements issued by the CNV in order to 
implement it regulate the securities market as a whol e.  The Law provides that prior authorization by 
the CNV is required before securities issued by priv ate companies and joint ve ntures can be offered to 
the public.  Other laws regulating the securities market include Law No. 10 of 16 April 1993, 
establishing incentives for setting up funds for retiremen t, pensioners, pensions  and other benefits, 
and Law No. 42 of 2 October 2000 establishing measur es to prevent money laundering.  All securities 
listed on the Panamanian Stock Exchange, public offe ring of securities by an issuer and shares of 
issuers domiciled in Panama with 50 or more shar eholders that are the actual owners of at least 
10 per cent of the issuer's paid-up capital must be registered with the CNV. 
113. The CNV is the controlling body for Panama's se curities market.  It grants licences and keeps 
the register of securities brokers, principal directors, analysts, advisers and investment managers.  It is 
also the regulatory and supervisory body for private pension and retirement schemes.65  The CNV has 
signed memorandums of understandi ng on cooperation and regulation with ten regulatory bodies and 
one self-regulating entity.66  It recognizes the validity of regi stration of securities in jurisdictions 
recognized by Panama and has declared exempt from registration securities issued by States or jurisdictions declared to be recognized jurisdictions.
67 
(e) Finance companies 
114. The law defines finance companies as natural or le gal persons that offer to the public loans or 
financing facilities in cash.  At December 2005, 136 finance companies were operating, governed by 
Law No. 42 of 23 July 2001 and Law No. 33 of 26 J une 2002.  At the same date, these companies' 
total assets were B 599 million, of which some th ree-quarters were personal loans.  Since 2006, 
activities by finance companies have been open to fo reign investors pursuant to Resolution No. 18 of 
15 February 2006. 
                                                      
64 See:  http://www.isa.gob.pa/portada2.htm. 
65 See:  http://www.conaval.gob.pa/principal.asp?id=inf&sb=hac/. 
66 Argentina, Chile, Costa Rica, the Dominican Repub lic, El Salvador, Honduras, Mexico, Puerto Rico 
and Spain. 
67 The following jurisdictions are recognized by the CNV:  Australia, Costa Rica, El Salvador, France, 
Hong Kong, China, Italy, Japan, Mexico, the Netherla nds, Provinces of Quebec an d Ontario (Canada), Spain, 
Switzerland, the United Kingdom (not including its dependencies) and the United States of America. Panama WT/TPR/S/186 
 Page 97 
 
 
115. The MICI's Finance Companies Department is the body that governs, controls and regulates 
finance companies.  The latter must have minimum paid up registered capital of B 500,000.  They 
may freely determine the amount of the nominal inter est rate for their transactions and the effective 
interest rate charged, but must indicate in their advertising, quotations and loan agreements the 
effective interest rate charged, calculated accord ing to the method provided in the Law on Finance 
Companies.  Finance companies granting loans exceeding B 5,000 are subject to a deduction of 1 per cent for the FECI. 
(iv) Air transport and airports 
(a) Features of the market 
116. Panama has a total of 68 airports, of which 38 are private and 29 public;  five of the public 
airports are international, with proper immigration control and customs facilities.  The major airport is 
the Tocumen International Airport in Panama City .  In 2006, this airport handled 82,000 tonnes of 
freight and is an important exit point for exports of  fruit and shellfish, as well as being the largest 
centre for express freight operators in Central America.  It was also used by almost 
3.2 million passengers, 1.1 million of whom were in transit.
68 
117. At the end of 2006, ten international passenge r airlines were operating regularly at Tocumen 
International Airport.  Copa Airlines, a company incorporated in Panama and quoted on the New York Stock Exchange, whose major investor and stra tegic partner is the foreign airline Continental 
Airlines
69, is the leading company in the Panamanian market with approximately 66 per cent of 
passenger traffic.  There are also four domestic freight carriers and 15 freight carriers with foreign 
capital operating in Panama.70  The market for domestic passenger transport is mainly shared by two 
companies the majority of whose capital is Panamanian-owned. 
(b) Legal framework 
118. As far Panama's commitments within the GATS framework are concerned, it bound full 
commitments for aircraft maintenance and repair services for all modes of supply with the exception 
of the presence of natural persons.71 
119. The Executive, through the Ministry of the Interior and Justice, determines government policy 
in the air transport sector.  Law No. 22 of 29 Janua ry 2003 reorganized the regulatory authority by 
creating the Autoridad Aeronáutica Civil – AAC (Civil Aviation Authority), an autonomous State 
body.  It is the AAC's responsibility to direct and regulate air transport services, determine the 
operating criteria for airports and the services provided there and to grant certificates and licences for 
the operation of aircraft and airlines.  Law No. 21 of 29 January 2003 regulates the civil air transport 
sector and replaces Decree Law No. 19 of 1963.  Air fares must be submitted to the AAC for registration or approval, according to the tariff clau se laid down in the air transport agreement with 
the foreign country concerned.  The authorities have indicated, however, that in practice fares are automatically approved. 
                                                     
 
68 Detailed information can be found on the Internet sites of the Autoridad Aeronáutica Civil ( Civil 
Aviation Authority) and the Tocumen International Airport.  Consulted, respectively, at:  
http://www.aeronautica.gob.pa/ and http://www.tocumenpa nama.aero/index.php?id=cccpageqp0qpestadisticas. 
69 Consulted at:  http://files.shareholder.com/ downloads/CPA/101880921x0x46038/CEB6F36E-2A12-
4BD5-BF14-FFAD868B817A/2005AR.pdf. 
70 Consulted at:  http://www.aeronautica.gob.pa/ and http://www.tocumenpanama.aero/index.php?id= 
cccpageqp0qpindex. 
71 WTO document S/DCS/W/PAN of 24 January 2003. WT/TPR/S/186 Trade Policy Review 
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120. Law No. 23 of 29 January 2003 provides that Pa nama's public airports, including Tocumen 
International Airport, shall be 100 per cent State- owned and that their management may be entrusted 
to public limited companies that are also 100 per cent State-owned.  These companies have some 
degree of financial independence and may grant co ncessions for the commercial operation of certain 
areas inside the airport, as well as for the supply of auxiliary services such as baggage handling and 
the sale of fuel.  Law No. 21 of 2003 guarantees national treatment to suppliers of aircraft 
maintenance and repair services.  The airport management must submit decisions concerning the allocation of slots to the AAC for approval in order to ensure that applications are dealt with rapidly 
without any discrimination;  there are, however, no regulations in this respect. 
121. The authorities have indicated that airlines ha ve the right to provide sales and marketing 
services in Panama either directly or through agen ts, including the right to set up offices even if the 
transporter does not offer scheduled services in Panama .  This condition is contained in the various air 
transport agreements between Panama and other countries. 
122. Cabotage traffic is in principle restricted to companies 60 per cent of whose shares are in the 
name of Panamanians.
72  Nevertheless, the AAC may liberalize some cabotage with other countries.  
By early 2007, Panama had not signed any cabotage agreement. 
123. The AAC grants permits to foreign compani es to operate international air traffic under 
various freedoms in accordance with bilateral agreemen ts or where there is due reciprocity on the part 
of the other government.73 
124. Panama has 32 bilateral air transport agreements , of which some are considered to be open 
skies agreements by the Panamanian authorities.74  In the most liberal of the agreements, the other 
party has been given as much as the seventh freedom  for freight transport;  routes and the capacity 
offered can be freely determined;  the rates are fi xed freely by the airlines and are registered or 
approved by the AAC.75 
(v) Maritime transport, including the Panama Canal 
(a) Features 
125. Panama made no commitments on ma ritime transport under the GATS. 
126. Maritime transport is a highly important sector for Panama:  in 2006, the contribution to the 
GDP by maritime transport and related activities was e quivalent to 1.8 per cent of the GDP, while that 
by the Panama Canal corresponded to 5 per cen t of the GDP.  Panama has 29 major ports, 
12 managed by the State through the Autoridad Marítima de Panamá – AMP (Panamanian Maritime 
Authority) and 17 by private operators.  The AM P-operated ports are most ly small ports serving 
international and cabotage transport.  The other seven ports, the country's largest, are managed and 
operated by private companies that conduct their activities under the AMP's supervision. 
                                                      
72 Article 79 of Law No. 21 of 29 January 2003. 
73 Information provided by the authorities, ba sed on Law No. 21 of  29 January 2003. 
74 Air transport agreements have been signed with the following: Argentina, Aruba, Belgium, Bolivia, 
Brazil, Canada, Chile, China, Colombia, Costa Rica, Cuba, the Dominican Republic, Ecuador, Germany, Guatemala, Haiti, Honduras, Jamaica, Korea, Mexico, the Netherlands, Nicaragua, Paraguay, Peru, Russia, 
Spain, Switzerland, Trinidad and Tobago, the United Arab Emirates, the United Kingdom, the United States of 
America, Uruguay and Venezuela. 
75 Law No. 48 of 7 December 2005. Panama WT/TPR/S/186 
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127. The port of Colon is the biggest in the country  and the second largest in Latin America in 
terms of cargo traffic.  It is on the Atlantic seaboa rd and handles 67 per cent of container traffic;  the 
next most important is Balboa, on the Paci fic, with 32 per cent of container traffic.76  Of the total 
cargo handled in Panama's ports in 2006, 97 per cent was import or export traffic and 3 per cent 
cabotage.  A new cargo terminal on the Pacific i nvolving investment of over B 600 million is being 
put out to tender. 
128. Panama has the largest number of ship registrati ons in the world, a total of 7,183 ships of over 
100 tonnes gross registered tonnage (GRT) register ed in December 2006, giving a total of close to 
155 million GRT, over twice that of the second largest register.77  If ships of lesser tonnage are 
included, the number of vessels registered in  Panama rises to 11,019, corresponding to 
178.2 million GRT.78 
129. The main policy guidelines for the maritime transport sector are to be found in the National 
Maritime Strategy, Cabinet Resolution No. 3 of 28 Ja nuary 2004.  The objectives of this Strategy are 
to make Panama a leader in trade, transport and l ogistics, industrial and maritime traffic services, and 
to strengthen and use to the full its maritime c onglomerate (maritime tran sport, related and port 
services) in a context that promotes free enterprise and the market.79 
(b) Maritime transport services 
130. The main laws relating to maritime tran sport are Law No. 8 of 12 August 1925 and 
amendments thereto.  The AMP, an autonomous St ate body, was established by Decree Law No. 7 of 
10 February 1998 and is responsible for maritime transport services in Panama.  It is entrusted with 
administering, promoting and implementing the st rategies and rules relating to the operation and 
development of the maritime transport sector and for administering Panama's ship register.  The AMP 
also proposes and coordinates development plans fo r the national port system, exploits and operates 
port services and oversees those which it does not operate directly.80 
131. Panama has the largest and oldest open regist er of ships in the world (national merchant 
navy).  There are no restrictions on nationality for registration, including cabotage services, and it is 
open to Panamanian nationals and foreigners without distinction.  Decree Law No. 8 of 
26 February 1998, however, provides that, to the ex tent possible, Panamanian nationals should be 
recruited for the crew of Panamanian-registered vessel s.  A ship-owner must have an attorney or legal 
representative in Panama in order to regi ster a vessel under the Panamanian flag. 
132. Law No. 4 of 24 February 1983 and amendments  thereto regulate the taxation regime to 
which Panamanian-registered ships are subject.  A ny Panamanian-registered ship to be used for 
service abroad must pay an annual tax of B 0.10 pe r registered tonne;  this does not apply to ships 
only engaged in cabotage.  They must also pay an annual consular fee determined pursuant to 
                                                      
76 Information provided by the authorities and the Republic of Panama, Panamanian Maritime 
Authority, Directorate of Planning and Maritime Sector Development (2006). 
77 The following are the major countries of domicile of the ships in Panama's open register: Japan 
(45 per cent of the total), Greece (11.5 per cent), Korea (8 per cent), China (5.7 per cent), Chinese Taipei 
(4.9 per cent), Hong Kong, China (4.8 per cent), Switzerland (3.5 per cent) and the United States of America 
(1.1 per cent). 
78 Panamanian Maritime Authority, Directorate of Planning and Maritime Sector Development (2006). 
79 Cabinet Council, Cabinet Resolution No. 3 of 28 January 2004, "Approval of the final document of 
the National Maritime Strategy". 
80 See http://www.amp.gob.pa/newsite/spanish/home.html. WT/TPR/S/186 Trade Policy Review 
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Law No. 44 of 9 October 1979 and amendments thereto81 depending on the type of vessel and rising 
in proportion to the tonnage;  it ranges from B 850 to B 3,000.  In addition, there is an annual inspection tax, which ranges from B 500 to B 1,800, a nd an annual tax for acci dent investigation and 
participation by the administration in internati onal conferences and treaties, which ranges from B 300 
to B 850. 
133. Registration confers fiscal benefits such as exemption from tax on profits earned from the 
activity carried out.  Law No. 25 of 3 June 2002 allows  an additional rebate of up to 25 per cent on the 
annual tax per tonne and 50 per cent on the annual consular fee for a period of four years for 
registered entities that operate at least four newly-built vessels with a minimum of over 50,000 GRT 
up to 100,000 GRT;  for groups of four ship s exceeding 100,000 GRT, the additional annual tax 
rebate is up to 35 per cent.  In order to obtain th ese advantages, the owners must undertake to keep the 
vessels under Panamanian registration for a period of four years.  Law No. 36 of 6 July 1995 also 
allows reductions for the registration of groups of ship s (at least three) or for large vessels, which may 
be 20 or 50 per cent depending on the tonnage. 
134. Panama is a member of the International Maritime Organization (IMO) and is party to 
64 international maritime transport conventions.
82  It has agreements on recognizing the measurement 
of ships' tonnage with Russia, Ukraine and the Un ited States of America, and on trade and navigation 
with France, Italy and Spain. 
(c) Port services 
135. The AMP, through the Directorate General of Ports and Auxiliary Maritime Industries, is 
responsible for drawing up, implementing and monito ring policies relating to port services.  It is the 
Directorate's task to schedule and coordinate the development plans of the National Ports System and 
to manage State-owned ports.  It is also res ponsible for providing navi gation facilities and other 
services required by ships. 
136. There is no special law on ports in Panama.  In May 2007, a draft Law on Ports was put 
before the National Assembly.  Port activities are c overed by Law No. 7 of 26 February 1998.  The 
AMP is the authority responsible for granting concessions to provide port services, including auxiliary 
maritime industries.  If such services are to be s upplied within the Canal's jurisdictional waters, a 
compatibility permit from the ACP is also required. 
137. There is no special bidding system for port services, which come under Law No. 16 of 
14 July 1992 on privatization of State-owned comp anies and the Government Procurement Law.  
Nevertheless, there are regulations on concessions – Agreement No. 9-76 – for the building and 
operation of maritime and port facilities.  The author ities have indicated that there are many gaps in 
these regulations and that new regulations on con cessions had been prepared, although by mid-2007 
these still had to be submitted to the AMP and other State bodies.  There are no nationality restrictions 
for concessions.  Individuals may build, manage an d operate ports.  The fees for privately-managed 
ports are freely determined.  Fees in AMP-managed ports are set by the Authority. 
138. Pilotage, marshalling and towing services are compul sory for a certain size of ship and they 
require a permit issued in Panama.  Ships going through the Panama Canal are subject to special 
pilotage regulations and the services are provided by the ACP. 
                                                      
81 Law No. 4 of 1983 and amendments thereto contained in Law No. 19 of 1992, Decree Law No. 7 of 
1998, Cabinet Decree No. 76 of 1990 and Decree No. 293-2003 DM and SC of 28 November 2003 of the 
Comptroller General of the Republic. 
82 The full list can be consulted at: http://www.amp.gob .pa/newsite/spanish/ami/convenios_int.pdf. Panama WT/TPR/S/186 
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(d) Panama Canal 
139. The Panama Canal was handed back to Pana manian administration on 31 December 1999. 
140. Title XIV of the Political Constitution of the Republic of Panama set up the ACP.  The 
Organizational Law on the Panama Canal (Organizat ional Law No. 19 of 11 June 1997, "Organization 
of the Panama Canal Authority") establishes the ACP as an autonomous lega l person under public law 
which has exclusive charge of the operation, functio ning, administration, preservation, maintenance, 
improvement and modernization of the Canal and for its related activities and services.  The Law 
does, however, allow the ACP to delegate to third part ies, in full or in part, the performance of certain 
works or services.  The Law provides that the Canal is the inalienable heritage of the Panamanian 
nation and may not be sold, assigned or mortgaged. 
141. Administration of the ACP is the responsibility of a Board of Directors whose Chairman is 
appointed directly by the President of the Republic and has the status of Minister of State for Canal 
Affairs.  The ACP receives income from the tolls, dut ies and taxes charged for using the Canal, for the 
services supplied and for the concessions granted.  It draws up its budget independently, but this is 
submitted to the Cabinet Council fo r approval and then to the National Assembly, which may only 
approve or reject it, but may not amend it. 
142. Law No. 19 of 1997 provides that, once the operating costs, investment and the costs of 
modernizing and enlarging the Canal have been me t and the required reserves stipulated in the Law 
and the regulations have been set aside, the surplu s is handed over to the National Treasury during the 
subsequent fiscal period.  The ACP also pays annua lly to the National Treasury fees per net tonne, or 
its equivalent, collected from ships subject to to lls for going through the Canal and for the services 
rendered.  These fees are set by the ACP.  The ACP' s resources may not be utilized to grant loans to 
public bodies or the Government and the Government  may not use the income received by the ACP or 
its assets to guarantee borrowing by the State. 
143. The ACP is empowered to engage the services of third parties, to lend them to the State under 
a contract and, subject to authorization by the Cabi net Council, to contract loans and any other type of 
credit commitment.  The Law provides that the maximum normal term of contracts for concessions or 
leases is 20 years, although contracts for a maximum period of 40 years may be concluded on an 
exceptional basis.  The ACP has its own pub lic procurement system (chapter III(4)(v)). 
144. During the 2006 fiscal year, 43.8 per cent of tra ffic through the Canal was trade between the 
eastern seaboard of the United States of America an d Asia;  trade between the United States and the 
west coast of South America comes in second place (10.3 per cent), and third place is occupied by trade between the west coast of South America and Europe (6.7 per cent).  In the same year, the 
container vessel component accounted for 113 million PC/UMS (Panama Canal Universal 
Measurement System) tonnes, 38 per cent of the total PC/UMS volume going through the Canal and 49 per cent of its revenue.  The same year also, the dry bulk component represented 59 million PC/UMS tonnes and 20 per cent of re venue, while vehicle carriers accounted for 
37 million PC/UMS tonnes and 13 per cent of revenue. 
145. Pursuant to the Constitution, in accordance w ith Law No. 19 of 1997 and its implementing 
regulations the ACP sets the tolls, taxes and fees for using the Canal and related services after a 
consultation and public hearing procedure in the case of tolls and subject to approval by the Cabinet 
Council.  The ACP sets and collects tolls and the f ees for transit and related services.  Rates are 
calculated on the basis of the cost of operating,  preserving, maintaining and modernizing the inter-
ocean waterway and the competitive advantage of th e maritime route through the Panama Canal.  The WT/TPR/S/186 Trade Policy Review 
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revenue earned from tolls is used to finance capita l investment and improvements to the Canal.  
During the period 2002-2003, the ACP embarked upon the first phase of changing its pricing policy and introduced a new structure that established a pric e difference according to size of the vessel.  In 
2005, the ACP changed the tonnage measurement sy stem applicable only to container vessels and 
those with container-carrying capacity on deck.  This change modified the measurement system 
utilized as a basis for charging these vessels, from PC/UMS tonnes to a 20-foot container, and 
established as the basis the total cargo capacity of the vessels, including on-deck containers.  This 
change was implemented over a period of three years, beginning on 1 May 2005 and ending on 
1 May 2007.  For other types of vessel with on-deck container-carrying capacity, the ACP continues 
to apply the PC/UMS tonnage to measure the encl osed and below deck spaces and charges a per TEU 
(20-foot equivalent unit) fee for containers carried on deck at the time of transit.
83  In 2007, the ACP 
modified the tolls and tonnage measurement rules.   For passenger vessels, the ACP imposes tolls on 
the basis of the maximum passenger capacity. 
146. Tolls have increased since 2002;  between 200 0 and early 2007, the aggregate increase in the 
average toll was 15 per cent.  In mid-2007, tolls increased by a further 10 per cent, with a new 
increase of 11.3 per cent planned for May 2008 a nd third of 7.4 per cent for May 2009 (average 
increase per tonne of cargo);  the increases appli cable to containers are 10 per cent in 2007, 
16.7 per cent in 2008, and 14.3 per cent in 2009, per container, respectively.  Maritime rates can be 
consulted on the ACP's Internet site.84 
147. The Panama Canal makes a vital contribution to Panama's economy.  In 2006, the ACP's 
contribution to Panama's balance-of-payments curre nt account was B 1,537.6 million, or 9 per cent of 
the current GDP.85  In 2005, the Canal's direct contributions to the National Treasury amounted to 
B 569.7 million or 3 per cent of GDP.  Total direct contributions transferred to the Treasury since Panama started to administer the Canal, in the 2000 fiscal year up to the 2006 fiscal year, amounted to B 2,390.8 million. 
148. During the 2006 fiscal year, total tolls amount ed to B 1,026.4 million and the ACP's total 
revenue was B 1,494.8 million.
86  In the same year, 14,194 vessels went through the Panama Canal.  
These ships represented a total of 296.3 million PC/UMS tonnes in terms of cargo capacity, equivalent to 86 per cent of the Canal's maximum sustainable capacity.
87  The latter is estimated to be 
340 million tonnes a year.  There are not sufficient vacant reservations for all those requesting one.  In 2005 and 2006, the Canal was unable to accept a pproximately 20 per cent of vessels seeking a 
reservation. 
149. In 2006, a public referendum approved the Cana l's enlargement through the building of a third 
set of locks.  Law No. 28 of 17 July 2006 approved the proposed construction of the new locks.  The 
Law provides that all the costs of the works and the corresponding financial commitments and obligations of any other nature caused  by the work of enlarging the Ca nal will be paid out of the funds 
generated by the Canal's operation and by increased tolls and that there will be no subsidies from the 
State.  The project's financing will be neit her be backed nor guaranteed by the State. 
                                                     
 
83 Prior to the entry into force of the new syst em, the ACP charged container vessels for a small 
proportion (8.78 per cent) of the car go on deck, and applied the PC/UMS tonne to enclosed and below deck 
spaces.  See: http://www.acp.gob .pa/esp/maritime/tolls.html. 
84 See:  http://pancanal.com/.  
85 See:  http://pancanal.com/common/ge neral/reports/informe-anual-2005.pdf. 
86 ACP (2006). 
87 One PC/UMS tonne is equivalent  to approximately 100 cubic feet  of cargo space and a container 
20-foot long is equivalent to approximately 13 PC/UMS tonnes (ACP, 2006b). Panama WT/TPR/S/186 
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150. The estimated cost of the project is B 5,250 million.  It is estimated that it will take a 
maximum of eight years to complete the project, between 2007 and 2014.  The third set of locks will start to operate in 2015.  The authorities forecast that traffic through the enlarged Canal will increase 
from the 280 million PC/UMS tonnes that went through the Canal during the 2005 fiscal year to 
around 510 million PC/UMS tonnes in the 2025 fiscal year.  It is estimated that the possibility to use 
ships of larger tonnage will lower the operating costs by between 7 to 17 per cent.  It is also hoped to 
increase the Panama Canal's market share, for exam ple, on the container route between North-East 
Asia and the eastern seaboard of the United States. 
151. Although it is hoped to obtain considerable bene fits from the Canal's enlargement, there are 
also some risks because of the po ssibility that the costs and time-limits for implementing the project 
may not be respected.  The ACP identified some of these risks and their possible causes:  for example, 
in the case of delays, which are considered to be th e principal risk, it is indicated that these could be 
caused by problems relating to the contractors or the labour force, as well as logistical problems.  The ACP also recruited the services of an internatio nal consultant to identify the risks and make 
recommendations on how to avoid or manage them.  In this connection, the company AON Enterprise  
Management identified as the major risk the organiza tional structure of the ACP, which might lead to 
inefficiency in enlarging the Canal;  the study r ecommended that the ACP be reorganized in order to 
avert this possibility and proposed possible solu tions to overcome the other risks identified.
88 
(vi) Professional services 
(a) Features 
152. Panama has no general law regulating the s upply of professional services.  The various 
professions have their own regulations and are organized in special technical or professional 
associations.  Formally speaking, under the law, fo r most of these  professions Panamanian nationality 
is a prerequisite. 
153. Panama has signed the Protocol to the Gene ral Treaty on Central American Integration 
(Guatemala Protocol) of 29 October 1993 under which the parties agreed to harmonize their 
legislation in order to allow the free exercise of  university-level professions in any country in the 
region.  By mid-2007, however, this Protocol ha d not been ratified by Panama's Legislative 
Assembly. 
154. Panamanian professionals possessing a qualifica tion or diploma from a foreign university 
must have it revalidated, depending on the course, by  the University of Panama or the Technological 
Institute.  All documents required for the revalid ation procedure must be authenticated by the 
Panamanian diplomatic or consular authorities accred ited to the country of origin and by Panama's 
Foreign Ministry.  The various technical and professional associations are also empowered to set a revalidation examination in order to  evaluate the applicant's knowledge. 
155. If a qualification or diploma has been obtained fro m a university with which the University of 
Panama or the Technological Institute has an intern ational agreement, no reva lidation examination is 
required and revalidation is automa tic.  In mid-2007, the two aforem entioned Panamanian institutions 
had agreements on mutual recogniti on of university qualifications (international agreement) with 
universities in Brazil, Colombia, Cuba, Ecuador, El  Salvador, Mexico, Nicaragua, Peru, Spain and 
Venezuela. 
                                                     
 
88 AON Enterprise Risk Management (2005). WT/TPR/S/186 Trade Policy Review 
Page 104 
 
 
(b) Legal services 
156. A certificate of competence issued by the Supreme Court of Justice is required in order to act 
as an attorney.  The following requirements must be  met in order to obtain the certificate:  the 
applicant must be a Panamanian national and ha ve a professional law qualification awarded by a 
university recognized and established in Panama or by a foreign university whose diploma has already 
been revalidated by the University of Panama.  Th e Supreme Court of Justice has 15 days in which to 
issue or refuse the certificate.  Under the specific terms of international agreements, however, foreign 
attorneys may provide consultancy services exclusivel y in relation to international law, and in the 
legislation of the jurisdiction in which the foreign attorney is qualified.  Consultancy services may not 
include appearance before the tribunals, c ourts or judicial authorities in Panama.89 
157. Law may not be practised through public limited companies.  Legal companies must be in the 
form of a partnership and establishe d by qualified attorneys in Panama. 
158. Under the GATS, Panama made full specific commitments guaranteeing market access and 
national treatment for the supply of consultancy ser vices on international law, although it did not bind 
commitments on the supply of such services through the presence of natural persons in Panama.  It 
did not accept commitments relating to legal service s other than consultancy on international law.90 
(c) Accounting services 
159. Law No. 57 of 1 September 1978 regulates the profession of certified public accountant in 
Panama.  In order to engage in this profession, a licence issued by the Junta Técnica de Contabilidad 
– JTC (Accountancy Technical Council), appointed by the Executive, is required.  The following 
criteria must be met in order to obtain a licence:  the applicant must be a Panamanian national and be 
in possession of a university qualification with  specialization in accountancy awarded by a 
Panamanian university authorized by the State or by a foreign university recogn ized by the University 
of Panama.  The JTC must grant a licence within a maximum term of 30 days or reject the application giving the reasons.  A request for review of the d ecision may be made to the JTC itself and an appeal 
lodged with the Ministry of Trade and Industry. 
160. The JTC may grant special permits for the pur pose of carrying out professional acts, except 
the power to attest to the authenticity of documents , to foreign professionals in the following cases:  a 
professional from a country that gives Panamanian nati onals reciprocal treatment;  internal auditors 
employed by foreign companies with subsidiaries est ablished in Panama or international organizations 
under public international law;  if  it can be proved that no Panamanian  professionals were available at 
that particular time;  or professionals married to  Panamanian nationals or with over ten years' 
residence in Panama.
91 
161. Only certified public accountants properly licensed in Panama may set up companies to 
provide accounting services.  Such companies are allo wed to enter into part nerships with foreign 
firms.92 
162. Under the GATS, Panama undertook to allow Pana manian companies to conclude agreements 
in order to coordinate practice of the profession of certified public accountant at the international level 
and to add the name of foreign firms to their lette rheads.  Professional acts that include the power to 
                                                      
89 Law No. 9 of 18 April 1984, as amended by Law No. 8 of 16 April 1993. 
90 WTO document GATS/SC/124 of 1 October 1997. 
91 Law No. 57 of 1 September 1978. 
92 Idem, Articles 9 and 10. Panama WT/TPR/S/186 
 Page 105 
 
 
attest to the authenticity of documents are rest ricted to Panamanian cer tified public accountants.  
Panama did not bind commitments on any m ode of supply other than commercial presence.93 
(d) Engineering and architectural services 
163. A certificate of competence issued by the Junta Técnica de Ingeniería y Arquitectura 
(Engineering and Architecture Technical Council), chaired by the President of the Sociedad 
Panameña de Ingenieros y Arquitectos – SPIA (Panamanian Society of Engineers and Architects) is 
required in order to exercise the profession of engineer or architect.  The following criteria must be met in order to obtain a certificate:  the applicant must be a Panamanian national or a foreign national 
married to a Panamanian or with children of Panama nian nationality, or the national of a country that 
allows the profession to be exercised by Panamanian nationals on a reciprocal basis:
94  a qualification 
in the area concerned awarded by a Panamanian uni versity or by a foreign university whose academic 
competence has been recognized by the University of Panama.95  Law No. 15 of 26 January 1959, 
which regulates the profession, does not lay down any time-limit for issuing a certificate of competence, but the authorities have  indicated that in practice the procedure takes approximately one 
month. 
164. Unless they are the subject of international tr eaties signed by the Executive, engineering and 
architectural works can only be carried out by co mpanies domiciled in Panama and duly registered 
with the Technical Council and those responsible fo r the works must be professionals licensed in 
Panama.
96 
165. Under the GATS, Panama made commitments on the supply of engineering and architectural 
services, including urban planning and landscape architecture.  It did not bind commitments for 
modes of supply 1 and 2, but undertook to a llow the commercial presence of foreign companies 
provided that the persons responsible for the wo rks were properly licensed professionals.  Panama 
also undertook to allow the employment of forei gn architects provided that it was proven to the 
Technical Council that no suitable Panamanian professi onals were available to provide the service.  If 
a foreign architect is employed for a period exceed ing 12 months, the hiring company must train a 
Panamanian professional to replace the foreigner at the end of his contract.97 
(vii) Retail trade 
166. The retail trade sector accounts for 3.9 per cent of the GDP.  The sector's GDP grew at an 
average rate of 4.9 per cent during the period 2002-2006.98 
167. Article 293 of Panama's Constitution provides that only Panamanian citizens, including 
foreigners naturalized as Panamanian citizens thre e years after they have received their definitive 
permit, may engage in retail trade.  Law No. 25 of  26 August 1994 defines retail trade as the activity 
involving the direct sale of goods to the consumer or acting as the agent of trading companies.  
Foreigners not authorized to engage in retail tr ade may, however, possess a share of the capital of 
companies that sell the products they manufacture directly to consumers.  Farmers or persons 
manufacturing handicrafts and selling their own pr oducts constitute an exception to this rule. 
                                                      
93 WTO document GATS/SC/124 of 1 October 1997. 
94 Resolution of the Engineering and Ar chitecture Technical Council of 2004. 
95 Chapter I of Law No. 15 of 26 January 1959, as amended by Law No. 53 of 1963. 
96 Idem, Chapter IV. 
97 WTO document GATS/SC/124 of 1 October 1997. 
98 Comptroller General of the Republic.  For statistical purposes, the sector includes the retail sale of 
foodstuffs, beverages and tobacco in shops,  as well as the sale of motor vehicles. WT/TPR/S/186 Trade Policy Review 
Page 106 
 
 
168. The authorities have pointed out that Panama ne gotiated increased liberalization of retail trade 
in the free-trade agreement negotiated with the Unite d States of America, but by mid-2007 it had still 
not been ratified.  As a result, a new draft law is being prepared with the objective of incorporating the 
provisions negotiated bilaterally w ith the United States through an even  more limited definition of the 
types of retail trade to which restrictions  on foreign presence will continue to apply. 
169. Foreigners may be directly involved or partic ipate in companies engaged in wholesale trade.99 
170. Panama did not adopt any specific commitments on retail trade under the GATS.100 
                                                      
99 Article 289 of Panama's Constitution. 
100 WTO document GATS/SC/124 of 1 October 1997. Panama WT/TPR/S/186 
 Page 107 
 
 
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