Panama has committed itself to adopting globally accepted standards and renewing its image as a safe and transparent financial hub.

As a result of the recently expanded canal and the government's investment in impactful infrastructure projects, Panama seeks to retake the crown as the fastest-growing economy in Latin America. The IMF has predicted global growth in the order of 3.1% for 2016, which is considered a moderate product of the deceleration in world trade. Meanwhile, the Latin American region and the Caribbean as a whole recorded an economic recession (-0.7%). Despite this, Panama recorded GDP growth of 4.9% for 2016, according to official figures of the National Institute of Statistics and Census, making it the second-fastest growing country in the Americas in terms of economic growth and one of the highest in the world.

In order to achieve its growth target, the government is investing and promoting Panama as a reliable and transparent platform. 2016 will be remember as the year of the “Panama Papers,” which significantly impacted the country's reputation in the international arena. Local institutions, however, promptly reacted to boost and renew the image of the country as a safe and transparent financial hub.

Elizabeth L. Heurtematte de Alfaro, Partner at Lovill, confirmed to TBY the immediate impact of the Panama Papers scandal on the international community of investors: “The Panama Papers affected the general perception of the country; however, companies and individuals seeking to do business have not been that concerned by it. They are more concerned about the state of the market, the opportunities, the legal framework, and how they can grow their business.”

Rolando J. de Leon de Alba, General Manager at Banco Nacional de Panama, stressed that “Panama has taken many steps to promote transparency, fairness, and comply with the standards set by the International Financial Action Task Force (FATF) and the OEC. That is where the country made the biggest improvement this year (…). When something like this happens, it threatens the system.”

The World Bank supports the ambitious reform program promoted by Panama's government in terms of transparency; it approved a USD300 million loan to support the country's efforts toward strengthening and consolidating international tax transparency, financial integrity, and fiscal management. Furthermore, the loan seeks to improve social programs, among other services, to ensure that 60% of the population living in extreme poverty benefit from at least one welfare program.

In order to improve the exchange of international tax information, Panama has committed itself, through this operation, to adopt globally accepted standards for the exchange of financial information with other countries, namely the Common Reporting Standard for Automatic Exchange of Financial Account Information in Tax Matters (CRS). In other words, ownership and identity of information, including sensitive accounting records, if needed, will be available to all related institutions.

According to international organization, improvements in fiscal management will also underpin the continuity of the robust growth that Panama has been enjoying over the last decade, as they promote “a stable macroeconomic framework and sound debt management based on fiscal prudence.” In that regard, Dulcidio de la Guardia, Minister of Economy and Finance, commented: “The transparency of Panama and its financial system is the key to attracting investors for the country. Therefore, the country has been subject to the evaluations of financial regulators such as FATF to ensure our commitment to the fight against money laundering and terrorism.

In this regard, Panama has complied with the recommendations of the FATF and in 2015 was removed from the agency's gray list, since it has the regulatory and institutional framework defined in an action plan for the prevention of money laundering, terrorism, and the proliferation of weapons of mass destruction. In order to increase financial transparency and improve the country's reputation, the government adapted the legislation of the country in a short time to changing international standards and expanded its network of treaties and tax and trade agreements. The real challenge for Panama now is to not only implement the changes but to evolve into a financial hub where transparency becomes an opportunity rather than a risk for the expansion of the sector and its contribution to growth.