Although the Panama Stock Exchange (PSE) is still in its infancy by global comparisons, in recent years it has made good on its international expansion aspirations. The PSE has internationalized its market by making it accessible to both foreign investors and companies.
While Panama provides a fully-fledged and regulated market, at its inception over 20 years ago trading took place only in government bonds. This has since expanded to include services to domestic and international companies. Traditionally, the Exchange mainly serves the Panamanian market: local companies tap the market for equity, and investors tend to be domestic institutions or the general public. Many of Panama’s largest corporations are third or fourth-generation family businesses, and they have come to appreciate the possibilities that a listing offers them, such as providing an exit route for dormant family shareholders. However, the Exchange has recognized that future growth has to be driven by international expansion. Although government bonds remain the PSE’s most active segments, Panama’s drive to maintain low operating costs has led international investment funds to choose the PSE as their venue for listings. This new international business is a result of the strong regulatory structure, professionalism, cost-effectiveness and reputation that the PSE enjoys overseas.
As is the case with many other sectors of Panama’s economy, the PSE is presenting itself as an ideal place to accommodate specialist services, providing small and medium-cap companies a step towards eventual listing on the main international exchanges. The small and intimate character of the PSE allows for greater flexibility when accommodating these companies, as well as providing a faster and more efficient service than they might receive elsewhere.
Panama registered funds can be formed in a number of possible vehicles, including open-ended and closed-ended corporate entities, contractual funds and limited partnerships. Asset management companies in Panama have already launched fund platforms exclusively open to family offices and third-party managers to provide them with an efficient and cost-effective solution to enter the market. The platforms are usually registered while clients can choose their own service provider for the management of their segregated sub-funds.
High-Profile Service Providers
Funds registered in Panama, while requiring at least one resident director, are not required to appoint a local administrator. In general, Panama regulation allows service providers to be based anywhere in the world as long as it is in a jurisdiction recognized by the Panamanian financial authorities. Along with the strong network of fund administrators, a number of other prominent service providers have moved to the island and together with local players they have built up a comprehensive industry cluster. Around 20 fund management companies have set up in Panama – most of them are foreign owned. Custody service providers, as well as the Big Four accounting firms have a presence in Panama, adding extra weight to the industry of small and medium-sized accountancy firms that have flourished in tandem with the growth of the fund sector. Most of the country’s legal firms are part of international networks such as the International Business Law Network, and are regularly ranked on Corporate 100, Who´s Who and Martindale-Hubbell. The firms are well-versed in setting up corporate vehicles, preparing offering documents and regulatory procedures for licensing.
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