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Panama 2014 | ECONOMY | INTERVIEW

TBY talks to Leopoldo Benedetti, Former General Manager of Colón Free Trade Zone (FTZ), on employment, growth in the zone, and foreign entities.

Leopoldo Benedetti
BIOGRAPHY
Leopoldo Benedetti studied chemical engineering at the Instituto Tecnológico y Estudios Superiores de Monterrey in Mexico. From 1968 to 1971 he worked as a process engineer at Refinería Panamá, and then as General Manager at Bienes Raíces del Pacífico until 1976. Other professional experience includes the position of General Manager at Constructora R.H. Leon until 1985, at Inversiones Benedetti until 2009, and at Constructora 2000, and Reciclajes de Colón from the 1990s to 2004. He is also a Lieutenant Colonel in the Colón firefighters and an industrial security inspector. Over the past four decades he has been head of the Colón Chamber of Commerce, and the Mayor and Governor of Colón district and province, respectively.

How was the free zone established, and with which initial objectives?

Colón was initially called the “Golden Cup," because the US army was stationed in the city, resulting in a range of employment opportunities. However, the withdrawal of troops from the region left it with a chronic unemployment problem. The initial idea behind a free zone in Panama, therefore, was employment creation, and a feasibility study was carried out to establish its optimum location. And with its port, rail links, airport, and access to the Panama Canal, the choice was made to establish it in Colón. The Canal now generates over 10,000 jobs, while the free zone generates work for 32,000 people.

How did the zone grow from 10 original companies to around 3,000 today?

The Colón Free Trade Zone (FTZ), as a purely commercial zone, is the largest FTZ in the world. We have gone from a free zone of 30 hectares and 10 companies to one housing 3,200 companies on 1,000 hectares of land, and the Colón FTZ has, therefore, seen impressive growth. In 2009, re-exports and imports were in the range of $19 billion, while 2012 closed on $30.6 billion. In 2013, we saw a decline to $27 billion, due to the problems of Colombia and Venezuela. This year is seeing further decline due to the woes of the global markets, and again, especially due to problems between Venezuela and Colombia.

How does the Colón FTZ contribute to national development, particularly in terms of job creation?

The contribution is substantial, as it represents 7.6% of GDP, which amounts to around $1.8 billion annually. Aside from the 32,000 direct jobs at the FTZ, indirect jobs number around 60,000. Most of the properties in Paitilla, Marbella, and Costa del Este are users of Colón FTZ, and each has had great success here. The Colón FTZ has contributed greatly to the growth of Panama, not only in terms of GDP, but also for the banking sector. The owners of most banks in Panama are from abroad.

What are the requirements for a company to open an office at the Colón FTZ?

It is a simple process that begins with the company meeting with our legal department. We also do a background check on the company's directors through Interpol, to be sure of their credentials, and to curb any potential money laundering. Once approved, a key-number is assigned to the company, which allows it to import and export. If the company does anything extraordinary, the key number is suspended and no longer provides access to the free zone. The operations of every company must also create at least five jobs.

What impact will the expansion of the Panama Canal have on the Colón FTZ?

Actually, the FTZ will not be particularly impacted by the expansion of the Panama Canal, as we will continue to receive our shipments in large or short vessels. The benefit will be for those who manage the shipping due to the significant savings to be made by working with larger ships and ports, and thus due to the handling of a greater volume of containers. There is also the potential for increased tourism as a result of the expansion, which would of course positively impact Colón.

Do US and European companies have a strong presence at the Colón FTZ?

Our US operations represent around 7%, and Europe represents around 4%. Our commercial activity is mainly with South America, the Caribbean, and Central America. However, 70% of the merchandise that is re-exported and imported to the Colón FTZ comes from Asia. All appliances and electronics arrive from Malaysia, Taiwan, and Japan. We receive extensive merchandise from mainland China and Vietnam, which are also expanding.