Panama IT Strengths and Weaknesses

Analysis: National IT Strengths and Weaknesses

The IT landscape of Panamá has undergone several important changes in the past five years. Although many significant advances have been made, improvements are still needed in many areas.

Strengths

1. Well Developed Telecommunications Infrastructure: as a result of privatization in 1997, and de-regulation in 2003 the market has changed dramatically. Although there is still a single local service provider, Cable and Wireless, individuals can now choose from different service offerings for their national long distance, and international calling needs. Cable and Wireless has made significant investments in the telecommunications infrastructure since it entered the market in 1997.

2. Increased Government Involvement in ICT Sectors: this year, the government started the introduction of a set of initiatives that intend to improve the ICT landscape of Panamá. The Panamanian government has developed a comprehensive plan, e-panama.gob.pa, that incorporates information and telecommunications technology, focuses on social and economic development, and seeks to increase participation of the population in issues of national importance. The e-panama plan includes e-government, e-education, e-economy, e-health, and e-democracy. This will provide lasting benefits regarding education, infrastructure, and investment incentives.

3. Low Cost of Labor: the cost of labor is much less than in developed countries such as the United States. For example, the monthly salary for a worker in a call center is between $500-600 per month.

4. Incentives for ICT Investments in the Country: the government will soon be formally establishing the Panamá-Pacific Special Economic Area that will provide tax incentives and benefits for ITC companies. Also, special laws have been passed, such as the one regarding call centers, in order to provide incentives for international companies to set up their call centers in Panamá.

5. FDI: FDI figures have increased dramatically in 2003, after experiencing a significant decrease for 2002.

Weaknesses

1. Lack of Trained Workforce: the workforce in Panamá is not trained in ITC specific areas. Also, the lack of individuals that have an advanced command of the English language is a weakness, since the government is trying to attract international companies in the ICT sector, such as call centers and help desks. The government is currently training about 3,000 individuals in advanced English in a time period of three months. This may continue in the future, especially as more companies establish themselves in the Panamá-Pacific Special Economic Area for ICT sector companies.

2. Low Computer and Internet Penetration Rates: Computing and Internet Diffusion are very low, especially when comparing them to countries like Costa Rica. Low computer and internet penetration rates may grow significantly after the e-panama.gob.pa initiatives are implemented.

3. No Domestic Production of Software and Hardware: currently, there is no significant domestic production of software or hardware in Panamá.

4. Legal Environment: there is a general perception of widespread corruption in the country. The legal system is not lacking in laws that protect the business community (such as copyrights and intellectual property), however the judicial system is slow and bureaucratic. Changes in this area are of vital importance if the country wants to be more appealing to international companies seeking to enter a Latin American market.

Source: Cecilia Stoute, INITEB site http://www1.american.edu/academic.depts/ksb/mogit/country.html

Costa Rica provides option for online gaming

Just like in 2008 and 2009, the CR Legislature met in late 2009 to vote on a law to regulate gaming and impose special taxes. No English translations exist of the bill, which is available here in Spanish http://twitdoc.com/c/r5xg5y

The workers of sportbook companies who employ thousands inside CR have a website http://www.empleadosapuestascr.com/ and Facebook page where they posted a call to sensible regulation of gaming which translation we quote below. "Sportsbooks" are call-centers in Costa Rica which hire thousands of Costa Ricans who take in calls for users of betting companies (not necessarily casinos or online gaming).

This legislation would affect mostly brick-and-mortar casinos, where Presidential candidates have made their concern about their relationship with sex tourism. The election in February of Laura Chinchilla has made restrictive regulation of casinos more likely although she has expressed her wishes of not endangering true tourism.

Online gaming have less of a negative effect since they have no physical location. As of now, Costa Rica companies are chartered to conduct online gaming through websites outside of Costa Rica. According to gamingzion.com, "Online gambling in Costa Rica is completely legal. It is so legal, in fact, that the country is home to more than 200 internet gambling organizations. These groups run websites that are licensed and hosted out of Costa Rica, but the sites target players all around the globe. Unlike some other of the world's internet gambling hotspots however, Costa Rica's online gambling scene is quite lacking in government oversight. Licenses are quite easy to obtain, and regulation is basically non-existent".

This makes Costa Rica an option when compared to high licensing fees in Malta, Panama or Belize. However, shortcomings in the Costa Rica banking system means that bets placed through credit cards (such as U.S.-based Visa) may be routed through processors in places such as Cyprus and Israel. The existence of legal restrictions in the Costa Rica itself, U.S. and other countries mean that online gaming websites must install appropriate filters to exclude users from those jurisdictions.

Costa Rica companies are subject to payment of income tax on their local income. This means that companies which conduct online gaming from foreign websites are not required to pay Costa Rica income tax, but still have to pay the Education and Culture Stamp Tax ( Ley del timbre de educación y cultura, N° 5923 de 18 de agosto de 1976) and pay a resident agent fee for filing form D-110 of said tax based on the net capital of the company.

Costa Rica companies can be Corporations or Limited Liability Companies. Their formation can take around 2 months (unlike 1-3 days in Panama) and shareholder meetings must be written every year into hard-bound ledgers. Nominees may be appointed as directors or shareholders.

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A few of our coworkers at several bet processing centers have requested us to post our pledge in English as they wish to support us and join our fight. Their jobs are also at risk but they understand that, in reality, the majority of the jobs in danger are from Costa Rican citizens.

Dear Colleagues,

We urge the Congressmen and Government of Costa Rica to make a detailed review of the Regulation Law for Gambling and Casinos.

As employees of the SportsBooks we propose:

• Creating a law that would regulate the sportsbooks in a different way than land based Casinos.
• Reasonable fees or operating licenses rather than miscalculated taxes.
• Consider the Laws of other countries like Panama and Antigua as a base to make a new local rule.

The approval of this Bill, in its current 17, 551 way, will irreversibly cause the exit of the sportsbooks from Costa Rica and, therefore, the lost of thousands of jobs.

Learn more, Participate, and comment on www.empleadosapuestascr.com

We need your support!

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Costa Rica's President-Elect is a Good Bet for Online Gambling
Tuesday, February 23rd, 2010
Costa Rica is a country where gamblers of all denominations can feel right at home. Gambling is explicitly legal and proves to be a booming business within the country. The small nation is home to 30 large casinos and hundreds of other gambling establishments.

Costa Rican gambling law permits just about every form of gambling. Though the gambling industry seemed to be bounding on without limits, the government has started putting more energy into regulating it over the past few years.

Through gambling, the government has a great opportunity to raise revenue and through different regulations they can adjust their intake. Up until this point, the industry's only concern was whether or not the government will raise its taxes on gambling.

A new president, Laura Chinchilla, has been elected in Costa Rica, but has a few months before she will take office. President-Elect Chinchilla is the first woman to be elected president. Land-based casino operators are not happy with the President-Elect due to her open dislike of gambling facilities due to their unfortunate relationship with prostitution. Land-based casino can expect stricter rulings and regulations from this point on, through the new government.

Online gambling sites in Costa Rica, however, have nothing to worry about. President-Elect Chinchilla is highly supportive of the online gambling industry and all of the business that it brings to the nation.

Online Casinos in Costa Rica are obviously much cleaner than their land-based counterparts when it comes to prostitution due to the lack of a physical location. Many online gambling havens are based in Costa Rica and are accessed from all over the world. Brick and mortar casinos also cater to an international scene being that new laws require casinos to be attached to large hotels.
Source: Top10CostaRica.com

Panama law firm Advises in Securing Remittance License

Panama attorneys Lombardi Aguilar & Garcia advised a company in securing a license granted by the Panamanian government to operate a remittance agent.

Panama City, Panama, November 12, 2008 --(PR.com)-- Lombardi Aguilar & Garcia (www.laglex.com) attorneys advised a U.S.-owned subsidiary, in the process of obtaining a remittance agent license from the Directorate of Financial Enterprises of the Panama Ministry of Commerce and Industries (www.mici.gob.pa).

Although Panama hosts a financial center which has no limits on the repatriation of funds and use of foreign curencies, its government has enacted Law 48 of 2003 which requires that non-bank companies receiving funds on a regular basis for their remittance abroad through systems for transfer or tranmission of funds, settlement of funds or any other means, obtain a special license from the Directorate. This ensures that operators receiving funds for electronic transactions systems have information on their ownership, financial solvency and anti-money laundering measures subject to regular review and supervision by a government authority. The Directorate also provides special licenses for lending companies.

The participation of the law firm consisted in the filing, preparation and coordination of the process for obtaining the license to operate a remittance agent. The clients of the law firm are dedicated to offering innovative solutions, payment methods and transactional processing environments for financial entities, banking, government, merchants and consumers. The license holder also markets a variety of solutions oriented to the transactional processing and electronic payment methods environments applied to several technological platforms and markets, for local as well as regional use.

According to statistics of the Directorate of Financial Enterprises, Panama received US$81.4 million in remittances (largely US$46.8 million from the US) during the first half of 2007. US$66.3 million are sent to other countries (mostly US$26.3 million to Colombia by migrants of said country). Already a dozen companies are authorized by the DEF to provide remittance services.

About Lombardi Aguilar & Garcia
Lombardi Aguilar & Garcia was created as an alternative for clients worldwide who seek fast, innovative and effective solutions to their legal problems. The firm currently provides services to individual and corporate clients in Panama as well in the Americas, Europe and Asia. Its partners maintain a commitment with professional ethics and social responsibility by participating in the board of directors of groups such as the Panama Bar Association, the German and the American Chambers of Commerce (AMCHAM) of Panama, and the Association of Chinese-Panamanian Professionals (APROCHIPA).

The firm centers its law practice in private client services and asset protection (Private Interest Foundations, Trusts), business structures (Offshore Corporations), tax planning, real estate and e-commerce. It also advices in areas of Law such as Corporate, Commercial, Intellectual Property, Maritime, Tax, and Immigration Law as well as related litigation that may arise.

For more information, contact +507 340-6444, e-mail aaguilar (at) nysbar.com, or see: Lombardi Aguilar & Garcia http://www.laglex.com/

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Panama Online Gambling Regulation

After being shut out of the U.S. market last year with the Unlawful Internet Gambling Enforcement Act (UIGEA), companies such as UK's Partygaming (PRTY.L) and Austria's Bwin (BWIN.BE) continue operating legally, even getting funds from investors in the London Stock Exchange and looking forward to customers in emerging markets of China and India. Representatives Barney Frank and Ron Paul introduced H.R.5767 which would stop its implementation but approval will not discourage others doing business outside of the U.S.

The Inter-American Trade Report, October 2003, has a short summary of the regulation for online games in Panama.

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PANAMA: Online Gambling Regulation

Panama regulated online gambling operations this past February via Resolution 065 of the Games Control Board (Junta de Control de Juegos). Although under the Constitution gambling is a state monopoly, local jurisprudence has upheld the power of the State to grant concessions to operate said activities on its behalf to private companies. Online casinos would be exempt from Panama income taxes, since Panama taxes only local-source income and the Regulation allows online transactions only with users from outside of Panama.

Online gambling operations must prove economic solvency and previous related experience, and upon granting of the license must pay a US$10,000 fee and a yearly US$20,000 license.

Operators must comply with money-laundering regulations and notify the Financial Analysis Unit of any suspicious transactions above US$10,000. An account must be maintained to guarantee payment to winners. Infringements are subject to a fine ranging from US$1,000 to US$50,000.

By Alvaro Aguilar
Gaceta Oficial, Feb. 3, 2003
http://www.natlaw.com/panama/topical/ec/ecomm.htm

Keywords: online gaming, casino, gambling

Setting up an e-business in Panama

http://www.panama980.com/issue04_05.php
http://www.panama980.com/products1.asp?step=25&id=58&catid=4&pstring=58

>> setting up an e-business in panama
by Alvaro Aguilar


In this day and age of connectivity, modern technology allows many individuals to run their business from wherever they are. When considering where to relocate, Panama provides excellent opportunities to continue managing a business and tend to customers worldwide from your new tropical location.

High bandwidth increases connectivity
The central location of Panama, right in the middle of the Americas, makes it the place where submarine fiber-optic communications circuits between North and South America converge. This allows users in Panama to enjoy extraordinarily ultra-high-speed bandwidth intensive applications such as multimedia and digital video, enabling fast and reliable connections for B2B, banking, ecommerce and other businesses as well as additional high-speed consumer activity units. Currently, Panama has the same bandwidth capability as New York City, with the difference that Panama uses 3% of its capability as opposed to 70% in New York.

Several local companies have set up data warehousing facilities in the Panama Canal area, where these circuits converge. These companies provide large and small online businesses with the use of their servers or can host their servers in special secure rooms
dedicated to providing rack-mount space.

The increased connectivity has encouraged 20 call center companies to employ around 5,000 workers, available for customer service. Currently, most centers serve businesses in the United States, especially Hispanic customers. The Government has increased the availability of English-speaking personnel for these centers with special education programs. An expatriate who only needs a single person for customer service can retain one of the many small virtual office services which provide a receptionist and a dedicated telephone line.

Special laws for online activities
Larger online businesses may have their office in Export Processing Zones, which allows them to claim benefits such as duty-free importation of equipment, low taxation and more flexible labor conditions. Offshore services, such as international marketing, financing, management, consulting and all services related to information technologies for data processing and technological research for clients abroad, may be set up at these Zones.

Additional benefits are provided to businesses set up in the City of Knowledge, a special technology park zone located next to the Miraflores Locks of the Panama Canal. Businesses have a 25-year income tax exemption and are exempt from limits on hiring of foreign staff.

The government grants online gaming licenses to operations whose owners provide full background information and pay a S$20,000 yearly license fee. In addition, they must maintain a bank account in Panama to ensure payment of prizes.

Tax and Financial Framework to Ensure Success
Once the hardware and logistic issues are dealt with, there are many advantages when setting up a business in Panama. A Panamanian corporation can be set up in a few days and its activities are not subject to Panamanian taxes as long as it sells to clients located outside of Panama. With proper legal advice, shareholders can arrange the structure of the corporation to defer or reduce the taxes they have to pay in their home country. In most countries, online transaction tax is based on the nationality of the corporation owning the domain of the business or on the location of its server, which further favors choosing a Panamanian corporation with Panamanian servers to conduct business.

A foreigner who qualifies for a retiree visa but wishes to maintain an active lifestyle can run a business online without the need of a work permit if he or she maintains a minimal business presence.

Alternatively, an expatriate owning a business with physical offices in Panama, 3 full-time employees and US$40,000 in investment can apply for a small investor visa. Other visa options are available when higher amounts are invested.

Panama has around 100 banks, out of which several actively seek out clients for e-commerce services. Prospective businesses must provide all due diligence information on the background
of their owners. Basic information on the structure of the online transactions must be provided to the bank to ensure that no unlawful activities will be conducted through the bank. Once the
bank official is acquainted with the purpose of the e-commerce activities, transactions are conducted in a secure manner under Panama’s confidentiality laws. Alternatively, micro payments can be routed through non-bank “digital cash” online services, some of which are incorporated in Panama but do business though banks elsewhere.

This combination of advantages makes Panama the ideal location for an e-commerce operation. º

lombardi aguilar & garcia Tel. ( 507) 340-6444

http://www.laglex.com/

Processing Zones and City of Knowledge provide business opportunities

Panama hopes processing zones mimic maquiladoras' export success

BY LARRY LUXNER
JOURNAL OF COMMERCE STAFF

WASHINGTON -- When people talk about free- trade zones in Panama, they usually mean the Colon Free Zone -- a heavily guarded, merchandise-packed city within a city, which last year imported and re-exported $10.6 billion worth of electronics, clothing, liquor and other luxury goods.

But now, Panamanian officials are promoting a different animal, called Export Processing Zones. These sprawling industrial parks -- housed in former U.S. military buildings now being turned over to the Panamanian government -- hope to copy the success of Mexico's border-area maquiladoras, nurtured by preferential tax and duty treatment.

Speaking Wednesday to 100 potential investors at a conference in Washington, Nicolas Ardito-Barletta, administrator of Panama's Interoceanic Regional Authority, outlined his government's plans to boost the relative importance of manufacturing in Panama's service-oriented economy.

Alvaro Aguilar, a Panama City attorney attending the conference, said EPZs could also offer data-processing and database maintenance services under a draft law that Panama's Ministry of Foreign Affairs is preparing.

"It's not just apparel and sweatshops. Under this law, they'll get all the same incentives and benefits as if they were doing apparel," he said, noting that "now, with Y2K (Year 2000 computer) problems, they're hiring tons of programmers from India. Our idea is that Panama can do that, too."

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