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Panama Colón Free Zone
The CFZ has grown rapidly to become the second largest free
zone in the world, after Hong Kong. The CFZ, in existence since
1953, was a base for 460 companies in the late 1980s. Goods from
foreign countries were landed and stored or repackaged there and
shipped onward without being subject to Panama's customs duties.
Among the CFZ services offered were commercial intermediation,
break bulk, warehousing, assembly, and transshipment. In addition
to its excellent location, foreign firms were attracted to the CFZ
because of good transport, communications, and banking services. A
state-owned corporation operated the free zone, providing the
necessary infrastructure and services.
The CFZ has contributed greatly to Panama's economy. In 1983
the CFZ provided direct employment for 6,000 workers. CFZ earnings
in export services were second only to the canal. In 1985 CFZ
imports and re-exports totalled US$3.3 billion, down from a peak of
US$4.3 billion in 1981; value added in the CFZ made a net
contribution of 2.8 percent to GDP. The declining figures reflected
the Latin American recession and the concomitant fall in regional
trade. The CFZ linked producers in industrialized countries, which
in 1984 supplied 60 percent of CFZ imports, primarily with Latin
American countries, and accounted for 59 percent of CFZ exports.
Since 1983 Japan's exports to the CFZ have surpassed those of the
United States; in that year, Japan exported 21 percent of the goods
entering the CFZ, followed by the United States (15.5 percent),
Taiwan (10 percent), and Hong Kong (9.3 percent).
Observers believed that dependence on the Latin American
markets might limit the growth potential of the CFZ. Other
constraints to growth included competition from Miami and the
tendency of Latin American countries to circumvent the CFZ through
bilateral transactions. The greatest potential for CFZ growth lay
in expanding manufactured exports, especially to the United States,
under the terms of the Caribbean Basin Initiative (CBI). Until the
mid-1980s, the value added for manufacturing in the CFZ was rather
small; transport, storage, and warehousing contributed the largest
share. CFZ activities declined between 1982 and 1984, but
stabilized in 1985 and expanded by 15 percent in 1986.
Data as of December 1987
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