In its 75th anniversary, the Colon Free Zone (ZLC) seems to be sailing with a strong wind in its favor after a post-pandemic recovery, mainly due to the significant increase in the importation of raw materials for medicines.
An analysis of the month of July (2023) indicates that the ZLC registered a 158% increase in commercial activity, compared to the previous year, with $6,630.9 million billed, reaching and exceeding the levels of 2014 when there was significant growth , since in seven months the equivalent of 12 was reached.
Imports for the month of July (2023) registered a movement of $5,664.3 million, an increase of 233% compared to July 2022 and 667.7% compared to July 2021.
On the other hand, re-exports closed their commercial activity with $966.6 million, a growth of 11.9% compared to July 2022.
The projections indicate that “the ZLC model is still healthy and that we have a long way to go and other opportunities to explore,” said Giovanni Ferrari, manager of the Colon Free Zone, yesterday in an interview with La Estrella de Panamá.
The ZLC, as Ferrari mentioned in an editorial release last month, “celebrates the diamond jubilee!”, three-quarters of a century in operation since it was created in June 1948.
“This is not another anniversary. It is a special occasion”, notes Ferrari in the statement.
The ZLC has evolved exponentially, since at the beginning it was an area dedicated to the manufacture and distribution of medicines and supplying inputs to ships, and today, in addition to that, being the second largest free trade zone in the world, It is dedicated to all kinds of activities, both basic necessities and luxury products, with more than 2,600 companies spread over 1,064.58 hectares.
“I would say it’s going to be a successful year and we’re always preparing for the future to see what else we can do,” Ferrari said.
Ferrari indicated that delegations from other countries constantly seek to understand the ZLC model, some for academic purposes, others with the aim of copying that model to implement it in their respective countries.
“From South America we receive delegations from Peru, Brazil, Colombia, Chile, Uruguay,” said Ferrari, emphasizing that Uruguay is a country that is very similar to Panama because of its strategic position close to important markets and also because it has a very legal and fiscal structure. similar to that of Panama.
The Asian countries, rather than copying the operating model, are interested in seeing “how they can join the ZLC family”. The People’s Republic of China “continues to be our number one trading partner and we feel that it will continue to be so for many more years”, especially for continuing to add strategic suppliers in countries close to its final market, which Ferrari calls friendly nearshoring, something that China has been doing. for years. Friendly nearshoring has been crucial for the survival of the huge Chinese production machinery since covid-19, since getting closer to the final market through relocation allows you to cut expenses and better assimilate the culture of the country or region to which you want to sell. . The ZLC provides this service to all of Latin America more than any other economic territory in the region.
China remains the FTZ import and re-export giant, with total registered metric tons from January to July 2023 totaling 346,850, compared to 47,281 for the second-placed United States and 14,779 for third-placed India. place.
However, Ferrari said, “we do feel that in the future we are going to have a greater share of other Asian markets, apart from China.”
Budget for 2024
Of the $65 million requested from the State, the ZLC received $65.5 million, but with a different distribution than desired: $51.8 million will go to operating expenses and $13.7 million to investment expenses.
“Let’s start by saying that the ZLC is an important taxpayer for the Panamanian treasury, but it also contributes significant amounts to the economy of both the city of Colón and the province of Colón,” said Ferrari, at the same time assuring that the free zone is a benchmark for activities of social interest.
MANAGER OF THE COLÓN FREE ZONE
For reasons of the pandemic, which has reduced commercial activity globally and locally, the budget for investment expenses is significantly lower than the operating one, although Ferrari is sure that the ZLC can work positively with what has been allocated to it. , “taking into account that next year is an election year and the administration will change during the second half of 2024.”
Although each administration has its different priorities and needs, “in the case of the ZLC there is an established path and plans that we hope can be executed also after July 2024,” said Ferrari.
Bill 620, which is in the second debate in the Assembly, wants to modify Law 8 of 2016, modifying article 1004 of the Fiscal Code.
“It is an ambitious and important bill and we are eager for it to go to the third debate to be taken to the Executive,” Ferrari argued. “The project has important characteristics that want to equate the conditions of the ZLC with other free zones in Panama, mainly Panama Pacifico.”
The EUR1 certificate
The European Union (EU) also does not want to be left behind with the commercial presence in the Latin American region.
“EUR1 is a free trade agreement for market accessibility that the EU has signed with countries on the American continent and especially with Latin American countries,” said Ferrari, adding that it is a very important initiative.
The EUR1 certificate allows a preferential tariff treatment in the export of merchandise produced in the EU, assuming a reduction or sometimes the total exemption of the payment of tariff duties, which benefit both the importer and the exporter.
These benefits only reach those products manufactured within the EU and not those that are re-exported from the EU.
This makes “the European product more competitive”, explained Ferrari, adding that being able to offer this tariff benefit is a crucial tool to make the ZLC a more competitive commercial territory. “And there is a growing number of companies that are taking advantage of this agreement precisely to gain access to the markets.”
Matteo, who preferred not to reveal his real name, is an Italian businessman who has worked in the ZLC since the 1970s and who agreed to speak with La Estrella de Panamá about his 50-year experience as a user.
With the EUR1 certificate, “the end customer, for example in Colombia, receives the merchandise from ZLC, but with the same advantages as if it were imported directly from Europe,” Matteo explained. “Without a doubt, ZLC must adapt to the times to remain competitive.”
When Ferrari was mentioned about the publication of The Guardian, which in January of this year published a defamatory article about the ZLC, Ferrari expressed that according to him “when reading the article it gives the impression that there is a potpourri or a collection of old news that came together in the same article to give an alarmist vision of the activity of the ZLC or to speak of Colón in general in derogatory terms”.
Ferrari emphasized that “Colón is a province that has a great impact on the national economy, being the province with the highest net contribution to the gross domestic product (GDP) of the country.”
The growth of the ZLC demonstrates that the province of Colón contributes and will continue to contribute fundamental value to local and international trade.
“It is true that several administrations have made significant investments in the province (of Colón). The execution of these, which have seen delays in some cases, causes there to be some disagreement and uneasiness, not in the project per se, but in the delay in execution, but it is an undeniable fact that there have been two or three administrations that have made heavy investments in the infrastructure of Colón and its surroundings. This will surely continue to happen ”, emphasized Ferrari.
On the other hand, Matteo does not seem to be of the same opinion.
“The deterioration of the ZLC is visible”, says Matteo. “The infrastructures have not been renewed and neither have the decorations offered by the restaurants, bars, etc. The ZLC, given its importance, deserves to have a more attractive and modern appearance”.