WORLD TRADE  
ORGANIZATION   
G/SCM/N/226/PAN 
10 October 2011  
 
(11-4925) 
Committee on Subsidies and  Original:   Spanish 
Countervailing Measures  
 
 
 
SUBSIDIES 
 
Continuation of Extension under SCM Article 27.4 of the Transition Period for the 
Elimination of Export Subsidies Pursuant to the Procedures Contained in the 
General Council Decision in Document WT/L/691 
 
PANAMA 
  
 The following communication, dated 7 October 2011, is being circulated at the request of the 
delegation of Panama.  
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 The Republic of Panama hereby submits the following notification pursuant to 
subparagraph 1(d) and para graphs 3 and 4 of the Procedures for extensions under Article 27.4 of the 
SCM Agreement for certain developing country Members (G/SCM/39), subparagraph 1(c) and 
paragraphs 2 and 3 of the Decision adoptin g procedures for the continuation of such 
extensions (WT/L/691), and the Decisions of 22 November 2002 on Export Processing 
Zones (G/SCM/85) and on the Official Industry Register (G/SCM/84). 
  In accordance with its rights and obligati ons under the procedures for extending programmes 
that comprise subsidies classified as prohibited under Article 3.1 of the Agreement on Subsidies and 
Countervailing Measures (SCM) of the World Trade Or ganization (WTO), the Republic of Panama is 
submitting the following notification for the Comm ittee's consideration in order to meet its 
obligations in respect of the extension of the tr ansition period for programmes subject to renewal. 
  Panama confirms that its programmes subject  to extension comply with the standstill, 
favourability and transparency requirements under the procedures for extensions (G/SCM/39) and the 
General Council Decision (WT/L/691) in that neither pr ogramme has been modified  so as to make it 
more favourable than it was at 1 September 2001. G/SCM/N/226/PAN 
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  Programmes  
 
I. EXPORT PROCESSING ZONES 
1. Description of the Programme 
 See paragraph II.1 of document G/SCM/N/95/PAN. 
 
2. Period of notification 
 2010 
3. Objective of the programme 
 See paragraph II.3 of document G/SCM/N/95/PAN. 
 
4. Background and authority 
 See paragraph B.4 of document G/SCM/N/71/PAN. 
 
5. Form of the subsidy 
 See paragraph II.5 of document G/SCM/N/95/PAN. 
 
6. Beneficiaries and mechanism 
 See paragraph II.6 of document G/ SCM/N/95/PAN and paragraph I.6 of 
document G/SCM/N/160/PAN.  7. Estimated amount of the subsidy 
 No estimate available.  However, paragr aph I.9 provides updated information, which 
represents an attempt to establish an or der of magnitude under the EPZ programme. 
 
8. Duration of the subsidy 
 Not specified in Law No. 25 of 1992, which has, however, been repealed by Law No. 32 
of 2011.  
9. Statistical data permitting an assessment of the trade effects of the subsidy 
Table No. 1.  PANAMA:  VALU E OF EXPORTS FROM FREE ZONES 
2010 and January to August 2011 
Year No. of enterprises f.o.b. value (US$ million) 
2010 89 93.3 
2011 94 69.9 
Source : Auditor-General of the Republic and Vice-Ministry of Foreign Trade of the Ministry of Trade and Industry. 
  G/SCM/N/226/PAN 
 Page 3 
 
 
  Table No. 2.  PANAMA:  EXISTING FREE ZONES AND 
NUMBER OF ENTERPR ISES REGISTERED 
AS AT AUGUST 2011 
No. Free Zones No. of enterprises registered 
1 Panaexport, Ojo de Agua 22 
2 Proinexport 2 
3 Marpesca, S.A. 28 
4 Rail Road Export Processing Zone 2 
5 Zona Procesadora de Davis 9 6 Colón Maritime Investor 5 
7 Eurofusión 1 
8 Isla Margarita Development 8 9 Espanam Iberoamérica 0 
10 Zona Procesadora de Albrook 16 
11 Zona Procesadora de Chilibre 0 12 Proexport 0 
13 Export Pacific Panamá, S.A. 0 
14 Hewlett Packard Global Services Panama, S.A. 
Most of the enterprises located in Free Zones are 
engaged in international trade services activities.1 
TOTAL  94 
Source : Vice-Ministry of Foreign Trade, Ministry of Trade and Industry. 
 
10. Adoption of internal measures 
(a) Panama has taken the following steps with a view to eliminating the export subsidies under 
the programme: 
 
- Following the consultations planned with the relevant sectors, in December 2010 the 
Institutional Technical Commission of the Ministry of Trade and Industry completed 
the preparation of a preliminary draft law for the development of Free Zones, aimed at 
strengthening the domestic market and crea ting a secure and transparent environment 
in order to raise producer and investor confidence and reduce unemployment levels, 
while meeting Panama's obligations in r espect of the time-limits established for 
bringing into conformity programmes comprising export subsidies that are inconsistent with the multilateral trade rules. 
 
- In January 2011, the draft law was approved by the Vice-Ministers of Foreign Trade 
and International Trade Negotiations, with th e endorsement of the Minister of Trade 
and Industry, and was referred to the Cabi net Council for subsequent submission to 
the National Assembly of Deputies. 
 
- In April 2011, the draft law was ap proved by the Executive as Law No. 32 of 
5 April 2011 and published in Electronic Official Journal No. 26757-B. 
 
- The changes introduced in Law No. 32 of 2011, which repeals  Law No. 25 of 
30 November 1992, are consistent with the provisions of the World Trade 
Organization (WTO). G/SCM/N/226/PAN 
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II. OFFICIAL INDUSTRY REGISTER 
1. Description of the subsidy 
 
 See paragraph III.1 of document G/SCM/N/95/PAN. 
 
2. Period of notification 
 
 2010  3. Objective of the programme 
 
 See paragraph III.3 of document G/SCM/N/95/PAN.  
4. Background and authority 
 
 See paragraph C.4 of document G/SCM/N/71/PAN.  See also Resolution No. 32 of 31 December 2002 of the Ministry of Trade a nd Industry, notified in Annex 1 to document 
G/SCM/N/95/PAN and Law No. 11 of 4 January 2008.  
5. Form of the subsidy 
 
 See paragraph III.5 of document G/SCM/N/95/PAN.  
6. Beneficiaries and mechanism 
  See paragraph III.6 of document G/SCM/N/95/ PAN.  In addition, the following table 
indicates the number of beneficiary enterprises in th e Official Industry Register, according to type 
of activity.  
Table No. 3.  OFFICIAL INDUSTRY REGISTER: 
NUMBER OF ENTERPRIS ES ACCORDING TO  
TYPE OF ACTIVITY/PRODUCT  
AS AT OCTOBER 2011 
No. Activity/Product No. of Enterprises 
 TOTAL  99 
1 Animal feed 2 
2 Sugar cane 4 
3 Manufacture of clothing 3 
4 Poultry breeding 3 5 Milk by-products 3 
6 Detergents and other chemical products 6 
7 Manufacture of footwear 0 8 Brewing of beer 2 
9 Manufacture of mattresses 0 
10 Manufacture of brooms and mops 0 11 Manufacture of furniture 2 
12 Wood and wood articles 0  G/SCM/N/226/PAN 
 Page 5 
 
 
  No. Activity/Product No. of Enterprises 
13 Articles of aluminium and other metals 9 
14 Cement articles 1 
15 Paper and paperboard and articles thereof 11 16 Coffee processing 4 
17 Processing of hides and skins 2 
18 Food products 20 19 Marine products 10 20 Pharmaceuticals 1 
21 Plastic products 8 
22 Printing 2 23 Other products 6 
Note: Only covers enterprises listed in the Official Industry Register as exporting all or part of their production. 
Source : Directorate-General of Industry of the Ministry of Trade and Industry. 
 
 
7. Estimated amount of the subsidy 
 
Table No. 4.  VALUE OF TAX INCENTIVES GRANTED UNDER 
THE OFFICIAL INDUSTRY REGISTER 
2008-2010 
(US$ million) 
TYPE OF BENEFIT YEAR 
2008 2009 2010 
Import tax exemption or rebate 31.0 23.2 34.3 
Income tax exemption or rebate for reinvestment 11.2 16.1 11.4 
Other incentives* 5.3 10.8 5.3 
Total 47.5 50.1 51.0 
* Exemption from income tax only. 
Source : Fiscal Studies Department, Direct orate-General of Revenue, Minist ry of the Economy and Finance. 
8. Duration of the subsidy 
 
 See paragraph III.8 of document G/SCM/N/95/PAN. 
 
9. Statistical data permitting an assessment of the trade effects of the subsidy 
 
 No statistical information is available to assess the trade effects of the programme.  10. Adoption of internal measures 
 
 The following steps have been taken with a vi ew to eliminating the export subsidies under the 
programme:   Adoption of Law No. 11 of 4 January 2008: 
 G/SCM/N/226/PAN 
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  (a) Law No. 3 of 1986, which regulated the programme and granted the tax benefits 
deemed to constitute export subsidies, was repealed pursuant to Law No. 28 of 1995.  
The benefits granted under the former Law w ill continue to exist only for the rest of 
the period during which the registration or contract, as applicable, is effective.  Programme benefits have been extended a nd remain in effect under the extension 
granted by the WTO. 
 
(b) Enterprises which benefited under the pr ogramme may only continue to benefit upon 
request.  The request must be submitted prior to the expiry of the respective 
registration and the extension may onl y be granted up to, but not beyond, 
31 December 2015. 
 
(c) The Republic of Panama enacted La w No. 76 of 2009 on the promotion and 
development of industry, regulated by Ex ecutive Decree of 15 January 2010, with 
a view to encouraging the growth  and sustainable development of 
Panamanian industry through the granting of benefits aimed at promoting investment 
and improving the competitiven ess of domestic production. 
 
 The same Law promotes investment in activities such as human resource training, 
while encouraging research and development in respect of new products or processes 
and promoting the implementation of qualit y systems, the generation of employment, 
the improvement of management system s, quality assurance, and environmental 
conservation. 
 
 It also provides for a system of incentiv es, through the issuing of an industrial 
promotion certificate (CFI) which is non-t ransferable and valid for eight years. 
 
 When applying for a CFI, an enterprise must provide copies of its payroll to prove 
that new jobs have been generated.  En terprises established following the entry into 
force of the present Law may apply for a CFI two years after the start of their operations.  Enterprises benefiting from the Official Industry Register programme 
may not avail themselves of the present La w until their registration or the respective 
extension expires. 
 
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