There were 1,597 press releases posted in the last 24 hours and 456,236 in the last 365 days.

Potential Repeal of Tourism Investment Laws puts Panama’s International Investment Grade at Great Risk

BUENOS AIRES, BUENOS AIRES, ARGENTINA, August 9, 2022 / -- Panama’s President Laurentino Cortizo ordered the repeal of laws 122 and 314 both tourism based incentives laws that seek foreign investment. These laws were approved twice over the last 2 years by an overwhelming majority at the National Assembly and, each time, they were signed off by the President and members of his cabinet. These laws have created much interest, incentivizing developers and investors from the United States and other countries to invest millions of dollars which now may be at risk.

During the more than two years that the Law 122 “The tourism investment law” has been in place, the tourism authority did road shows not just in the United States but other countries, catching the attention of the international investment community. Foreign investors from all over have dedicated, in good faith, enormous time and economic resources to participate in this investment opportunity that promises to position Panama as one of the top tourism destinations in the region. This investment law has caught so much attention that it is currently referenced in Panama’s Investment Climate Report issued by the U.S. State Department. Panama’s legacy as a country where the security of the law is respected has always differentiated it from the rest and has made it one of the safest places in Latin America for foreigners to invest in. However, economists and financial experts warn that the recent surprising plea by President Laurentino Cortizo to retroactively repeal this law would be a disastrous precedent that would result in skepticism to investment calls that the country might launch in the future. Lawyers in Panama are scrambling because that is not only against Panama’s own Constitution but calls into questions treaties between the United States and Panama protecting foreign investment. Furthermore, such a move would set an alarm at the international level that could potentially impact the fragile investment grade that Panama still enjoys.

This unfortunate turn of events is the result of misinformation by the media which politicized the law. As a result, less than two months ago, the original Law 122 was modified in the National Assembly by the new Law 314, which lowered fiscal incentives to almost half and further regulated the legislation, "even more in favor of the State". Even though the tax collections far exceed the incentives that would be granted to investors which could only be redeemed 15% per year starting after the second year of the investment, ill-disposed media pressure continued. A false perception was created that there was a blank check for the participating developers, which is not the case. Experts and businessmen in the sector explain that the developers do not collect the tax incentives; it is the opposite, these incentives benefit the investors who must first fund 100% of the value of the bond or shares of eligible project listed in the Panama Stock Exchange. It is projected that the direct and indirect jobs that will be generated as a result of this law, on the outskirts of the capital could reach more than 80,000. "The country is expected to gain a complete tourism offering, where it is needed the most, positioning Panama among the top touristic destinations in the region," pointed out another businessman from the tourism sector.

Many have come out proposing that, if there are specific development groups not complying with the norms established in the law, then better and more rigorous regulations should be exercised, “but that neither the investors who have in good faith secured the money to invest in Panama, neither the projects that are complying with everything required by the Tourism Authority of Panama and by the Superintendence of Securities, should be harmed”.

The consulting firm Virtú Atelier Legal explained in one of its reports that, under law 122, investors would be granted with tax credit equaling to 100% of their investment. This incentive would be granted to the natural person or legal entity, who, at the Panamanian Stock Market, is the first purchaser of the securities issued by the tourism company or real estate investment company. The first acquirer must submit a sworn statement certifying that, immediately before acquiring the securities, neither he nor his directors, officers, shareholders or beneficial owners were directors, officers, shareholders or beneficial owners of the tourism company or investment company, real estate, nor any subsidiaries of the tourist projects in which they invested. Furthermore, other restrictions are in place to ensure that there are no links with the developer of the project.

Law 122 was approved by the National Assembly and sanctioned by President Cortizo on December 31, 2019. Later was fully regulated under decree 364 in July 2020, signed again by President Cortizo and Minister of Finance Hector Alexander. Recently, Law 122 was modified onto Law 314 by National Assembly and signed again by President Cortizo and Minister of Finance Hector Alexander on June 21, 2022. The world keeps a close eye on the important work of Panama’s National Assembly where the faith of Panama’s promising tourism future and Foreign Investment Climate will be defined.

Felipe Bauerle
Enfasis Corporativo
email us here