Panama as a Hub for Call Centers and BPOs: Nearshoring and Connectivity

Panama center for business process outsourcing

Among several keen to become nearshore suppliers including Colombia, Costa Rica, Uruguay, the Dominican Republic is the address of the world’s other major commercial waterway, Panama. There are perennial obstacles to overcome first however in many Central American nations, such as prohibitively expensive transportation costs and infrastructure in insufficiency, as well as off-putting bureaucracy. Fortunately, this is not the case for Panama.

As Nearshore Americas reveals Panama economy saw a annual growth rate of 5.6% over the five years to 2019, sprinting to the higher echelons of the global league, and as an English speaking nation, it is a prime nearshore destination, and…

Nearshoring is also a model very much applicable in the services sectors, notably taking the form of Business Process Outsourcing (BPO) – where call centers boast multi-lingual staff as capable as a more costly workforce on US soil. Indeed, Panama has excelled in the international services market, and services overall account for around 70% of GDP.

Panama has also made notable inroads higher up the services value chain, giving the more familiar global offshore addresses of India.

The term “Nearshoring” has become a trendy name for a practice of outsourcing or moving business processes to a nearby country. It is important to understand that COVID-19 disrupted the way the supply chain was designed, whereby most companies had all their “eggs in one basket” and manufactured in one single place. Reality struck when a limited capability to produce goods in other parts of the world (nearer) to the end consumer had not been foreseen, hence making nearshoring a new solution to possible future crises.

In this sense, finding alternatives to make global commerce flow is not new to Panama, By nature, we are a service-driven economy and from historic times we have been facilitators in doing business. We are also not new logistics; on the contrary, we have a history and key role from the Spanish colonization of the Americas, where goods converged for transfers to Europe, to the railroad constructions that provided a secure and alternate path from the west coast to the east coast of the US for both gold and mail; and afterwards. Panama Canal constructions, a megaproject that has enabled Panama to offer continuous global services moving, all sorts of products quickly and efficiently to boost trade.

Furthermore, we have matured to become a multimodal logistics center. We are currently the leading Logistics and Maritime Hub of the Americas with 5 major shipping ports, 3 on the Atlantic and 2 on the Pacific. The geographical location of Panama together with the continuous development of large infrastructures motivates both nationals and foreigners to look at Panama a great potential distribution center for the markets of the US. Canada, and Latin America through cargo transshipment and as a great consolidation center. Panama’s high level of connectivity attracts investors and multinational companies to the country.

Law No. 52 of 2018 provides fiscal, migratory and employment benefits to call centers established in Panama for commercial operations. The application for a concession to provide call center services must be delivered to and approved by the Public Services National Authority (ASEP, by its Spanish acronym). In addition to the following incentives, special labor provisions are more flexible than those for other types of businesses that operate in the rest of the Panamanian territory.

Fiscal Incentives

  • Exemption from direct and indirect taxes, fees, contributions, and charges, (with the exception of those established in this Law and the fees charged the ASEP) relating to the services covered by the concession.
  • Exemption from income tax for the provided services (subject to the compliance of certain conditions).
  • A 5% dividend tax rate decreased to a 2% complementary tax in case there is no distribution of profits.
  • A yearly tax equal to 0.5% of the company’s capital (up to a maximum of US$50,000).

Immigration Incentives

  • Permanent Resident Permit for a Call Center Investor - issued to individuals who have invested a minimum of US$250,000 into a call center. Valid for 2 years (subject to the investment conditions), after which the investor may apply for a permanent stay.
  • Temporal Resident Permit - foreign personnel hired in trust, executive, expert and/or technical positions will have the right to request such permit. Valid for the duration of the work contract.
  • Short Stay Visa for Businesspeople and Investors by Special Laws - issued to foreigners who wish to come to evaluate the possibilities of investments or to carry out transactions or business related to call centers. Valid for 9 months (subject to the requirements established by the migratory regulations).

LatAm Player

The shift to higher-value services has greatly benefitted Panama. Many Panamanian firms now offer so-called Knowledge Process Outsourcing (KPO) functions, in which more skilled professionals can assist in knowledge-based areas of work on behalf of finance, insurance or banking companies. While developing economies have struggled to acquire investments from client nations, Panama has continued to show signs of evolution and maturity. Today the sector employs thousands of people, and Panama is a top nearshoring center for the Americas.

Constantly Evolving

The largest BPO providers in Panama today are US company Dell (computer hardware) and Sitel, an international call and contact-center. Both also source a significant volume of contracts from the local market. Boasting large numbers of accounting firms, including boutique practices and the ‘Big Four’, accountancy is the biggest outsourcing sector. Companies are also offering foreign clients back-office services, such as the processing and recording of invoices and sales transactions, accounts management, and information reporting. In the area of shared services, Panama is differentiating itself from traditional outsourcing locations by viewing shared services as a high performance business, and many entities are now expanding to deliver high-value services, including business analysis and decision support to their parent companies, in areas such as finance and accounting, IT, HR, customer service, procurement, payroll, real estate and marketing.

Laws Discussed

Law No. 52, October 17th, 2018, Which Regulates Call Centers and Dictates Other Provisions 

If you want to set up a BPO, the BusinessPanama Group together can provide you our well-known One Stop Shop services to assist you on all your business needs.

  • Setting up a company or branch
  • Locating office and living premises in Panama City for the company and its executives
  • Legal services for setting up all operations, contracts, permits, etc.
  • Accessing special tax incentives
  • Applying for visas, work and residence permits
  • Relocation services
  • Others

For more information, please contact us.

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