How is the relationship between Panama and the UK?
Ambassador Royo: We’ve had a formal bilateral relationship between Panama and the UK for 111 years. Panama only won its independence from Colombia in 1903 but by 1908 we had established relations with the UK and by 1910 we had our Consulate. The UK is currently the seventh-largest foreign direct investor in Panama and there is a lot of potential for more investment opportunities. The new government is very keen to have close relations with the UK, which is why we have already had ministerial visits from both sides. There are many areas that we can work together. For example, the UK has offered to help Panama deliver the Central American and Caribbean Games in 2022. Meanwhile we want the UK to participate in our strategic economic vision of establishing hubs, in particular the digital hub, value-added hub and shared services hub, which are all perfectly-suited to the strengths of the British economy.
Brexit may also improve the relationship between Panama and the UK. Panama is in a fortunate Brexit position compared to many other countries. Along with the other Central American countries, we signed a Continuity Agreement with the UK, which ensures that, regardless of the eventual outcome of Brexit, we will continue to enjoy the same tariff-free access that we have today. In fact, we may even be able to improve upon the existing relationship. The Association Agreement that we signed with the EU is made up of three components: trade, cooperation and political dialogue. At present only the trade component is active between Panama and the EU member states because two EU countries have still not ratified the agreement. I am confident that with the UK we will be able to activate all the components of the agreement, because it is always easier to negotiate with one party than with a block, and thereby deepen the relationship.
Panama saw brief protests at the end of 2019; should investors worry that it will descend into the chaos we’ve seen elsewhere in the region?
AR: There is no need for investors to worry. Of course, there are reasons for protest and social networks have made the region more interconnected so that protests in one country can encourage protestors in another. But the difference with Panama is that protestors were complaining about a very specific subject – the reforms of our constitution.
The president created a working dialogue to establish reform proposals that had genuine consensus from all levels of Panamanian society. When those reforms were presented to the president, he passed them on to congress, our General Assembly, without making any amendments, so there was no intervention of the executive. Unfortunately, the General Assembly then tried to make changes to these proposals, which upset the people and sparked the protests. So, it was a very specific problem that has an achievable solution. Our president understood that from the first moment – he listened to the protestors and invited them to participate in the process and collaborate.
The widespread protests that we’ve seen in other Latin American countries are much more challenging for those governments because the protestors are angry about a range of social and economic issues that won’t be easy to fix. That’s another reason why this government is so focused on reducing inequality. We realise that through education we can cut the inequality of opportunity, which engenders the sense of blatant unfairness that so angers people.
Panama is back in the FATF Gray List; why?
AR: This government is aware that our image was deeply damaged with the Mossack and Fonseca papers. We’ve made a massive effort to adapt our legislation to fit international standards. These changes are not popular or easy in our country with certain interests, but we approved legislation to penalise fiscal evasion and we have created a registry for the final beneficiary. We’ve never been on any of the UK financial blacklists but we are in the EU Grey Lists.
The UK has always been helpful offering technical advice of the changes that we need to make to come off these lists. Even if we sometimes find it hard to understand why the EU publishes lists of other countries but still is missing one of its own members, we will continue making all the changes needed to ensure that we are not in any list. At the moment we are complying with all requirements, it is only a matter of showing proof of implementation and adapting our institutions so that they comply with the rules. There has been some resistance by some sectors of society to the changes that we’re implementing because they feel like every time we meet a standard, some international organisation moves the goalposts. Moreover, the requirements are not applied equally to all countries. Hopefully this will not happen and we are on our way to be out of any list before the end of the year 2020.
Why should British firms move to Panama?
AR: This government is totally open to international investment. We have been one of the fastest growing economies in the world and even at a slower pace we are still growing 4.5 % of GDP this year, according to the World Bank. Panama already has the Multinational Headquarter Law, which has attracted 159 international companies, including 8 from the UK.
But it’s not just about offering fiscal incentives. Panama has a logistics advantage, with access to a market of 700 million Latin Americans. Our most valuable asset is our strategic geographical location and Panamanians have been wise to take advantage of that position to enhance our connectivity. Historically we’ve been an open trading nation and nowadays we have become an aerial and maritime hub in Latin America and developed our platform for international trade and logistics.
Overall, the Canal and the direct and indirect impact of logistics accounts for around one third of our GDP, so we are well aware of our need of having an open economy and good relations with all the countries of the world. This government has created a new agency to facilitate trade and investment under the new brand of ProPanama in close collaboration with the Ministry of Foreign Affairs, all of which should provide more support for British companies coming to Panama.
Panama has seen high-profile corruption cases; is it a challenge for international firms there?
AR: This government is well aware that corruption is a challenge for the country but much of those problems were associated directly with previous administrations. The new government is committed to transparency. Of course, your readers know that there is often a big difference between what governments say and what they actually do, but there are encouraging signs that this government is serious. It recently appointed some Supreme Court Justices and these appointments were notably free of political bias. Moreover, it has committed 2% of the Government’s budget to strengthening the judiciary, which, under the last government, proved unable to successfully prosecute many blatant cases of corruption.
Obviously, we are the first point of contact for UK firms looking at Panama. We’re keen to work closely with British companies, to establish a personal relationship with them and help them make useful connections in Panama.