San José, Costa Rica, since 1956
Panama

Venezuela, Colombia woes drag down Panama's free trade zone

PANAMA CITY – Panama’s free trade zone — the biggest in Latin America — is in crisis in large part because of economic woes sapping major export customers Venezuela and Colombia, Commerce Minister Augusto Arosemena said Wednesday.

“The patient [the Colón Free Trade Zone] is in a coma because re-exports have gone down and some companies have closed,” he told reporters.

“Colombia and Venezuela were the main markets for the free trade zone, and a big part of that [the crisis] can be attributed to the situation they have,” Arosemena said.

The free trade zone is vital to Panama’s economy but has been in decline since 2012, prompting companies located there to demand tax cuts. An association representing firms in the zone says that in January this year 55 companies shut down, following 155 that closed over 2015. Thousands of jobs have been lost in recent years, it said.

Elmer Martínez/AFP

Official figures show that, between January and November 2015, commercial movement through the free trade zone dipped 10 percent to $20.3 billion compared with the same period in 2014.

Venezuelan companies especially have contributed to the downturn. They face big obstacles in paying invoices because of devaluation and rigid currency controls in place in Venezuela for the past 13 years. Some Panamanian sources put their accumulated debt at some $1 billion.

Colombia, meanwhile, has been imposing duties on clothes and shoes — most of them made in Asia, especially China — that come from Panama, particularly from the free trade zone. It brought in the tariff to protect its own textile industry. Panama won a complaint against the tariff before World Trade Organization, but Colombia lodged an appeal in January.

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Paul Schmidt

I visited the Colon Free Trade Zone. I had arrived by bus to the city, got off at a random stop. and only wanted a quick look of the town and a trip by taxi to the bus terminal. I was going to Puerto Bello.The taxi driver assumed I wanted to go to the mercado libre and I could not convince him otherwise. Once I was there i thought check it out. It has to be one of the most grotesque juxtapositions on earth I have seen. The poverty of Colon and the wealth of fortress Colon.

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