Manufacturing in Panama could become a real alternative for companies that sell into the United States. Certain products manufactured or processed in the country may enter the U.S. market with a 0% base tariff, provided they comply with the specific rules of origin established for each product. The benefit is not automatic, but for the right product it changes the answer to an expensive question: where should production be located?
Panama could become increasingly attractive as a manufacturing and processing platform for companies looking to serve the U.S. market. The opportunity rests on three things the country already has in place: preferential access under a bilateral trade agreement, a logistics platform connecting ports and airports, and special regimes designed for productive operations.
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Where Is the Opportunity for Manufacturing in Panama?
A recent publication by Nexo highlights that certain products manufactured or processed in Panama could enter the United States with a 0% base tariff, provided they comply with the specific rules of origin established for each product.
This is particularly relevant because the United States has begun applying new surcharges to products from various economies, while Panama was excluded from this measure. In addition, the Trade Promotion Agreement between Panama and the United States, in force since October 31, 2012, provides preferential access for products that meet its rules of origin requirements.
However, there is one fundamental condition: the benefit is not automatic.
The Transformation Must Be Substantial
It is not enough to import a product, change its packaging, or perform a minimal operation in Panama.
For a product to acquire Panamanian origin, it must undergo a substantial transformation in accordance with the applicable rule of origin. This transformation must also be supported by proper documentation.
In practice, that analysis begins with the product tariff classification under the Harmonized System, the code that determines which rule applies. Many rules of origin are written as a required change in tariff classification: the inputs enter under one heading and the finished product must leave under another. Others add a regional value content requirement that the operation has to meet.
Therefore, before establishing a manufacturing facility, it is essential to analyze the product, its tariff classification, the production process, and the corresponding rule of origin. In other words, not all products qualify for a 0% tariff, and each operation must be evaluated on a case-by-case basis.
Why Could Panama Be Attractive? Panama Pacifico, Free Zones and EMMA
The opportunity goes beyond tariffs. Panama offers a strategic location and a logistics platform connecting ports, airports, and international markets. Air connectivity is part of that equation, and the continued growth of Tocumen as an international hub is one of the clearest signals of how that platform keeps expanding.
In addition, the country provides various regimes and platforms for business and productive activities, depending on the type of operation:
- Panama Pacifico Special Economic Area: created by Law 41 of July 20, 2004, in the district of Arraijan, Panama province, on the grounds of the former Howard Air Force Base, west of the Panama Canal.
- Free trade zones: including the Colon Free Trade Zone, in operation since 1948 and now expanding with a US$250 million investment.
- EMMA regime: Multinational Companies for the Provision of Services Related to Manufacturing, created by Law 159 of August 31, 2020, which applies a 5% income tax rate on the net taxable income derived from the services provided.
This makes it possible to consider a different business model: not simply moving goods through Panama, but manufacturing, processing, or assembling certain products in the country before exporting them.
Manufacturing Also Creates Demand for Infrastructure
If more companies decide to manufacture or process products in Panama to serve international markets, the impact could extend far beyond the factories themselves.
These operations require industrial land, manufacturing facilities, warehouses, distribution centers, logistics parks, office space, business services, and connectivity.
For a real estate market, that is a different kind of demand than housing or retail. Industrial land, warehouse space inside established industrial parks, and sites along the corridors that feed them are the assets these operations look for first, and they are evaluated on access and permitting rather than on views or amenities.
As these activities expand, new development hubs could also emerge around the main logistics and industrial corridors of the country.
An Opportunity for Industrial Development
The potential goes beyond a tariff advantage. The ability to combine the connectivity of Panama with manufacturing and processing operations aimed at the U.S. market could open a new chapter in the industrial development of the country.
For a company considering establishing a manufacturing facility in Panama, this scenario represents a strategic opportunity worth studying carefully before deciding where to locate production.
The question is no longer simply what can pass through Panama, but what products could start being manufactured here to reach the world.
Key Facts
- 0% base tariff: certain products manufactured or processed in Panama may enter the United States duty-free, subject to the applicable rule of origin.
- United States and Panama Trade Promotion Agreement (TPA): in force since October 31, 2012.
- Panama Pacifico Special Economic Area: created by Law 41 of July 20, 2004, district of Arraijan, on the site of the former Howard Air Force Base.
- EMMA regime: created by Law 159 of August 31, 2020; qualifying manufacturing-related services are taxed at 5% on net taxable income.
- Colon Free Trade Zone: operating since 1948 and currently expanding with a US$250 million investment.
- Substantial transformation: repackaging or minimal operations do not confer Panamanian origin; qualification is assessed product by product, starting from its Harmonized System (HS) tariff classification.
- Regulator: the Ministry of Commerce and Industries (MICI) administers the free zone and multinational company regimes of Panama.
Frequently Asked Questions
Can products manufactured in Panama enter the United States with a 0% tariff?
Certain products can. The benefit applies to goods manufactured or processed in Panama that comply with the specific rule of origin established for their tariff classification, under the Trade Promotion Agreement in force since October 31, 2012. It is not automatic and has to be evaluated product by product.
What does substantial transformation mean in this context?
It means the product must be genuinely transformed in Panama according to the applicable rule of origin, not merely imported, repackaged, or subjected to a minimal operation. The transformation must also be supported by proper documentation.
Is it Panama Pacifico or Panama-Pacifico?
Both refer to the same place. The official name is Area Economica Especial Panama-Pacifico, or Panama Pacifico Special Economic Area, created by Law 41 of 2004 in the district of Arraijan, on the grounds of the former Howard Air Force Base. In Panama it is most often searched simply as Panama Pacifico.
Which regimes can a manufacturing operation use in Panama?
Depending on the type of operation, a company can consider the Panama Pacifico Special Economic Area, the free trade zone regime including the Colon Free Trade Zone, or the EMMA regime created by Law 159 of 2020 for multinational companies providing manufacturing-related services.
How could manufacturing growth affect the real estate market in Panama?
Manufacturing and processing operations create demand for industrial land, warehouses, distribution centers, logistics parks, and office space. As these activities expand, new development hubs could emerge around the main logistics and industrial corridors of the country.
