Panama's Colon Free Zone

By Juan Carlos Martinez


Panama's destiny since the discovery of the Pacific Ocean has been linked to logistics or essentially the transport of goods to customers. Panama's logistics industry began with the discovery of the Pacific Ocean and the subsequent transfer of coffers full of gold from Peru through Panama on the way to Spain. This required loading, unloading, storage, packaging, repackaging and transport of goods.

The second logistics boom came with the California Gold Rush where people thought it safer to sail from the East Coast of the US down to Panama, travel across the isthmus and sail up to California rather than crossing the US. A few decades later the Canal construction started and other logistics booms ensued with World War I and World War II.

Both these wars had also brought economic prosperity to Colon. Panama City is the port city on the Pacific while Colon is the port city on the Atlantic. After World War II Colon began to decline economically and the government at the time, in 1948, created the Colon Free Zone to facilitate international trade and at the same time generate jobs for Colon and stimulate its economic recovery.

Today the Colon Free Zone is a vital cog in the Panama logistics hub. It closed 2010 with $21 billion in exports, it currently has approximately 3,000 companies established within it and for the first five months of the year to date has exported $10 billion and projections indicate it might close 2011 with $24 billion in exports. It is located in an area of 725 hectares and generates 30,000 direct jobs. Last year the Colon Free Zone received about 160,000 visitors. The Colon Free Zone started with 30 hectares and 10 companies established in it. Of these 725 hectares 400 are occupied and 300 plus hectares are almost totally developed and they are mostly occupied as well.

The Colon Free Zone is a very important link in the Panamanian logistics hub. The Colon Free Zone serves as a reexporting agent for all of Central America and various countries in South America. Its main partners are Venezuela, Colombia, Panama and Dominican Republic. Most of its imports come from Mainland China, Singapore, USA and Hong Kong. The merchandise handled in the Colon Free Zone is mostly electronics, apparel, footwear, pharmaceutical products, perfumes and cosmetics. This merchandise arrives at the importer's warehouse where it is stored and repackaged according to the client's order and shipped out tax free. There are no taxes levied upon entry into the Colon Free Zone nor any upon exit. The only taxes levied on merchandise are entry taxes into the destination country. The Colon Free Zone is very important in the sense that it buys big and can ship small through its storage and repackaging capabilities. The companies in the Colon Free Zone negotiate with suppliers in China, the US, India, among others and then through the showrooms and sales staff of the companies they resell to small and large buyers throughout Central and South America and the Caribbean. They are able to ship container loads as well as several dozen pieces of various articles.

The Colon Free Zone is the second largest free zone in the world and the most important in the American Continent. The steady growth and resilience of the Colon Free Zone has shown that it is an important and solid partner in the America's logistic hub that Panama is consolidating. To that end there are several infrastructure projects being carried out in the Colon Free Zone and the surrounding areas. Some are private investments others are government investments. Among the biggest investments by the government are the improvement of the Colon Airport for a sum of $50 million, a building for the Regional Customs Authority for a value of $280,000, a fire station for a value of $1 million, and the expansion of the highway to Colon to four lanes for a value of $12 million.

If you are a foreigner you can enter the Colon Free Zone with just your passport. Be sure not to miss it.





Copyright© 2011, Pan Am Publishing S.A., Republic of Panama